Most RFID tags have at least two parts. One part is anintegrated circuit for storing and processing information,modulating and demodulating a (RF) signal, and performingother specialized functions. The second part is an antenna forreceiving and transmitting the signal. Tags can be active orpassive. Active tags have an internal power supply, passive onesdo not. Passive tags collect power from the incoming signal.Active tags are more reliable because they have their own powersupply and because they have a longer range (500 to 1,500 feet).For details on RFID technology, see en.wikipedia.org/wiki/Rfid.

The major benefits of RFID are:

◗ Fast, real-time tracking of an item’s location

◗ Ability to store extensive information about an item

◗ Speeding of the inventory-taking process

In contrast with a barcode, the information can be readfrom a much greater distance (about 30 feet with passive tags;500 to 1,500 feet with active tags) and no line of sight isrequired. The technology is in extensive use in transportation,hospitals, libraries, and the like (see en.wikipedia.org/wiki/Rfid).Its most promising use is in enterprise supply chain

management, where it can be used to improve the efficiencyof inventory tracking.

RFID implementation has been slow due to privacy andsecurity concerns, especially when it involves consumers(see Chapter 6). However, an increasing number of companiesare using the technology internally in combination with otherIT systems, as is done by Nokia.

RFID at Nokia. Security guards employed at Nokia carrymobile phone handsets with an attached RFID tag and RFIDreader, and RFID tags are also installed at various points aroundthe facility. At the start of a shift, guards use the phone to readtheir RFID-enabled name badges. Then, security guards do theirrounds, and opening the handset to read the various tags as theypass by them. Details of the phone number and RFID tag justread are transmitted over the cell phone network. Supervisors arethus given accurate information as to when a particular guardstarted and finished a shift, whether the guard patrolled all therequired locations, and where the guard was at a particular pointin time. In addition, supervisors can use the text and phonefunction to ask guards to recheck an area, vary their route, andthe like.

ONLINE FILE W1.1 WHAT IS A RADIO FREQUENCY IDENTIFICATION

(RFID) SYSTEM?

Radio frequency identification (RFID) is a technology that uses electronic tags (or transponders), instead of bar codes, to automaticallyidentify objects or items. The tags can be attached or embedded in objects, animals, or humans. RFID readers use radio waves to interactwith the tags. The radio waves enable the unique identification and location of the objects, transmission of data, and/or storage ofinformation about the object. Some tags can be read from several meters away and beyond the line of sight of the reader.

ONLINE FILE W1.2Application Case

DELL—USING E-COMMERCE FOR SUCCESSThe Problem/OpportunityFounded in 1985 by Michael Dell, Dell Computer Corp.(now known as Dell) was the first company to offer personalcomputers (PCs) via mail order. Dell designed its own PC system(with an Intel 8088 processor running at 8 MHz) and allowedcustomers to configure their own customized systems usingthe build-to-order concept (see Chapter 2, Appendix 2A). Thisconcept was, and is still, Dell’s cornerstone business model.By 1993, Dell had become one of the top five computer makersworldwide, threatening Compaq, which started a price war.At that time, Dell was taking orders by fax and snail mail andlosing money. Losses reached over $100 million by 1994. Thecompany was in trouble.

The SolutionThe commercialization of the Internet in the early 1990s andthe introduction of the World Wide Web in 1993 providedDell with an opportunity to expand rapidly. Dell implementedaggressive online order-taking and opened subsidiaries inEurope and Asia. Dell also started to offer additional prod-ucts on its Web site. This enabled Dell to batter Compaq,and in 2000 Dell became number one in worldwide PC ship-ments. At that time, Internet sales topped $50 million perday (about $18 billion per year). Today, Dell (dell.com)sells about $62 billion a year in computer-related productsonline, from network switches to printers, employing over88,000 people.

Direct online marketing is Dell’s major electroniccommerce (EC) activity. Dell sells to the following groups:

◗ Individuals for their homes and home offices◗ Small businesses (up to 200 employees)◗ Medium and large businesses (over 200 employees)◗ Government, education, and health-care organizations

Sales to the first group are classified as business-to-consumer (B2C). Sales to the other three groups areclassified as business-to-business (B2B). Consumers shopat dell.com using an electronic catalog. The sales arecompleted using mechanisms described in Chapters 2 and 3.

In addition, Dell auctions refurbished Dell computersand other products at dellauction.com. As will be discussed inChapters 2 and 10, online auctions are an important saleschannel. In 2006, Dell opened physical stores, mainly inreaction to customer demands.

Business-to-Business EC. Most of Dell’s sales are to busi-nesses. Whereas B2C sales are facilitated by standard shoppingaids (e.g., catalogs, shopping carts, credit card payments;see Chapters 2 and 3), B2B customers obtain additional helpfrom Dell. Dell provides each of its nearly 100,000 businesscustomers with Premier Dell service.

For example, British Airways (BA) considers Dell to bea strategic supplier. Dell provides notebooks and desktopsto 25,000 BA users. Dell offers two e-procurement servicesto BA purchasing agents. The more basic service, Premier Dell,

allows BA (and other businesses) to browse, buy, andtrack orders on a Dell Web site customized for the user’srequirements. The site enables authorized users to selectpreconfigured PCs for their business unit or department.A more advanced version, Premier B2B, supports e-procurementsystems, such as from Ariba. This provides automaticrequisition and order fulfillment once an authorized user haschosen to buy a PC from Dell. BA has placed the e-procurementtools on its E-Working intranet. This allows authorized staffto purchase PCs through a portal that connects directly intoDell’s systems.

In addition to supporting its business customers withe-procurement tools, Dell also is using EC in its own procure-ment. Dell developed an e-procurement model that it shareswith its business partners, such as BA. One aspect of thismodel is the use of electronic tendering to conduct bids(see Chapter 5). Dell uses electronic tendering when it buysthe components for its products.

In 2000, Dell created an online B2B exchange. This ven-ture was a failure, like most other exchanges (see Chapter 5).

E-Collaboration. Dell has many business partners withwhom it needs to communicate and collaborate. For example,Dell uses shippers, such as UPS and FedEx, to deliver itscomputers to individuals. It also uses third-party logisticscompanies to collect, maintain, and deliver components fromits suppliers, and it has many other partners. Dell is usingWeb Services, an EC technology, to facilitate communicationand reduce inventories. Web Services facilitate B2B integra-tion. Integration efforts began in 2000 with other tech-nologies when Dell encouraged its customers to buy online.The B2B integration offer combines Dell PowerEdge serversbased on Intel architecture and WebMethods B2B integrationsoftware to link customers’ existing ERP (enterprise resourceplanning) or procurement systems directly with Delland other trading partners. In addition, Dell can providee-procurement applications and consulting services. Dellalso educates customers in its technologies and offerssuggestions on how to use them. This is particularly truefor emerging technologies such as wireless.

Finally, Dell has a superb communication system withits over 15,000 service providers around the globe.

E-Customer Service. Dell uses a number of different toolsto provide superb customer service around the clock. Toleverage customer relationship management (CRM)—acustomer service approach that is customer centered forlasting relationships—Dell provides a virtual help desk forself-diagnosis and service as well as direct access to techni-cal support data. In addition, a phone-based help desk isopen 24/7. Customers can also arrange for a live chat witha customer care agent. Product support includes trou-bleshooting, user guides, upgrades, downloads, newsand press releases, FAQs, order status information, a “myaccount” page, a community forum (to exchange ideas,

(continued)

1-2 Part 1: Introduction to E-Commerce and E-Marketplaces

Chapter One: Overview of Electronic Commerce 1-3

ONLINE FILE W1.2 (continued)

information, and experiences), bulletin boards and othercustomer-to-customer interaction features, training books(at a discount), and much more. Dell also offers educationalprograms at learndell.com.

Dell keeps a large customer database. Using data miningtools, it learns a great deal about its customers and attempts tomake them happy. The database is used to improve marketingas well.

Intrabusiness EC. To support its build-to-order capabilities,significantly improve its demand-planning and factoryexecution accuracy, reduce order-to-delivery time, andenhance customer service, Dell partnered with Accentureto create a new, high-performance supply chain planningsolution. Now in place in Dell’s plants around the world, theprogram, which paid for itself five times over duringthe first 12 months of operation, enables Dell to adapt morequickly to rapidly changing technologies and the businessenvironment, maintaining its position as a high-performancebusiness. Dell also has automated its factory scheduling,demand-planning capabilities, and inventory managementusing information technology and e-supply chain models.

Affiliate Program. Dell provides affiliate partners theopportunity to link from their Web sites to dell.com. Dellpays 2 to 4 percent on any qualified sale made from clickingon Dell’s link at the partners’ sites (referring buyers).

The ResultsDell has been one of Fortune’s top five “Most Admired”companies since 1999, and it continuously advances in therankings of the Fortune 500 and the Fortune Global 500.Dell has over 100 country-oriented Web sites, and profitsare nearing $3 billion a year. If you had invested $10,000in Dell’s initial public offering (IPO) in 1987, you would bea millionaire just from that investment.

Dell actively supports EC research at the University ofTexas in Austin (Dell’s headquarters also are in Austin). Italso contributes heavily to charity. Dell has partnered withthe National Cristina Foundation (NCF) to provide computertechnology to people with disabilities, students at risk,and economically disadvantaged persons. Paired with the

company’s recycling program, used computers are refurbishedand then distributed through NCF. Through Dell’s TechKnowProgram, the company donates computers to urban middleschools. The students learn about computers by taking themapart and reassembling them, loading software, setting upand running printers, upgrading hardware, diagnosing andcorrecting basic hardware problems, and using the Internet.Upon completion of the program, students take home thecomputers they build and receive a year of free Internetaccess. Dell also awards grants each year to governmentaland educational institutions to organize, promote, stage, andrecycle computer equipment in a free “No Computer ShouldGo to Waste” collection event in their communities.Refurbished machines are dispersed through local charities.

In 2006, Dell opened physical stores to match its com-petitors and customer demands. Dell’s major competitor, HP,regained its “top PC maker” position in 2006, leaving Dell insecond place, and stayed in the lead through 2008.

Rapidly changing business conditions (Section 1.5)have forced Dell to restructure its operations. Michael Dellreturned to the CEO position in 2006, and a restructuring ofthe company began shortly thereafter. All sales to businessesare now managed centrally, rather than from three regionalheadquarters around the globe. In addition, in 2008 thecompany cut its workforce by 8,000. It also launched a blogcalled Direct2Dell (direct2dell.com). Dell also is expandingits business not only in the computer industry. but also inconsumer electronics.

Despite these challenges, Dell is clearly an example ofEC success.

Questions1. List all the types of EC transactions used by Dell.

2. Identify the business models used by Dell.

3. List the competitive advantages Dell has over its brick-and-mortar competitors.

4. Review the capabilities of dell.com/delldirect. Write asummary.

Finkle, J. “Top Dell Execs Leave as PC Maker Restructures.”Reuters, December 31, 2008. reuters.com/article/businessNews/idUSWNAB624720081231?feedType=RSS&feedName=businessNews (accessed April 2009).

dell.com (accessed February 2009).dellauction.com (accessed February 2009).National Cristina Foundation. “Dell Recycling.” Cristina.org.

cristina.org/dell.html (accessed January 2009).

REFERENCES FOR ONLINE FILE W1.2

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ONLINE FILE W1.3Application Case

BOEING USES E-COMMERCE FOR COLLABORATIONBoeing, the world largest aerospace company, has been amajor player in the global economy for almost a century.The company undertook a far-reaching transformation as itused cutting-edge materials and electronics and high-leveltechnology for the design and assembly process of its newpassenger plane—the Boeing 787. The new plane is Boeing’sbid for market leadership in competition with Airbus. The newmidsize passenger jet has an outer shell and about half of itsparts made of carbon-fiber-reinforced plastic, which makes itlighter and gives it better fuel economy. In September 2008,the company had over 700 firm orders for the new 787, whichseats from 250 to 330 passengers in varying configurations.The list price is about $150 million per plane.

The previous state of the art in aviation manufacturingwas to have global partners work from a common blueprintto produce parts—actually, whole sections of the airplane—that were then shipped to a Boeing assembly plant nearSeattle to see if they fit together. Prior to the 787, woodmock-ups of planes would be constructed to see if parts builtby partners around the world would really fit together. Whena fit failed, the cost in time, money, and delays was extreme.

In 2004, Boeing’s IT systems people were consolidatedinto the Boeing Technology Group. Now parts are designedfrom concept to production concurrently by partners (includ-ing companies in Japan, Russia, and Italy) and “assembled”in a computer model maintained by Boeing outside itscorporate firewall.

Boeing’s role is integrator and interface to the airlines,while the partners take responsibility for the major pieces,including their design. Boeing still takes the hit if there isno fit and the planes deliveries are late, but the actualcost of development and manufacturing is spread across itsnetwork of collaborators. The biggest savings are in the timesaved through the online collaboration process (from 33%to 50%), creating a huge competitive advantage.

Boeing’s changes go beyond making planes faster andcheaper. The new business model transforms Boeing from amanufacturer to a high-end technology systems integrator.

Collaboration is a necessity for Boeing for severalreasons. Airplanes are huge and enormously complex. Inaddition, building global relationships may help the companysell its planes overseas. Politically, sales of a “global product”are enhanced when people in other countries are buildingparts of the airplane. Companies in these countries may thenbuy from Boeing.

Basic collaboration is done through informationmanagement tools such as Microsoft SharePoint. Boeingand its partners also use Dassault Systemes 3D and ProductLifecycle Management solutions. Other IT tools used are aproduct suite from Exostar LLC, with which Boeing can share

two-dimensional drawings, conduct forward and reverseauctions (Chapter 2), and respond to RFPs (Chapter 5). Theplane is designed at Global Collaboration Environment, aspecial online site maintained by Boeing.

Three levels of collaboration are facilitated between teamsand companies. In the first level—design collaboration—allparties involved log in and make their changes electronicallyin the blueprints, and the team works together. Quality isimproved because the computer finds the mistakes. The nextlevel involves suppliers working with their supply chains. Thethird level is real-time collaboration, which involves a consider-able amount of product lifecycle management across multiplecountries enabled by technology that differentiates Boeing’snew model from the previous kinds of global relationships.Boeing also uses the new partnership to solicit ideas of howto improve designs, integration, and so on. This results incost-cutting.

Boeing maintains 10 multimedia rooms at its Everett,Washington, complex for use by collaboration teams. Theseare open 365 days a year, 24 hours a day. A visualizationapplication developed by Boeing allows the teams to doreal-time design reviews of complex geometry without anylag time as the models load. Meetings are conducted inEnglish, with sidebar conversations, as needed, in a teammember’s native language. Collaborative design also speedsthe design process, helping Boeing to avoid expensive penal-ties from its customers if the plane is not delivered on time,and it gives the company more flexibility in simultaneouslydesigning multiple versions of the 787 that are part of itswide-ranging appeal in the marketplace.

Finished designs are stored in another Dassault product,Enovia, which is also maintained by Boeing. The storagehas become an enormous data-management task. The issueof security has also been a concern; however, securitytechnology has developed to the point that the securityof the information is assured.

All these tools and strategies helped Boeing to acceler-ate the design and overcome some unforeseen problems sothat it was able to start delivering the 787 to customers infall 2007.

Questions1. Describe online collaboration and its benefits to

Boeing.

2. List the levels of collaboration and the partiesinvolved.

3. How does technology facilitate collaboration?

Chapter One: Overview of Electronic Commerce 1-5

Berstein, M. “Boeing Shrinks Supply Chain to FacilitateRisk Sharing.” World Trade, April 1, 2006. boeing.com(accessed January 2009).

Cone, E. “Flying in Formation.” CIO Insights, March2006.

Workforce-Performance. “Boeing 787 Global DesignTeam Benefits from Collaboration Solution Incorpo-rating Simulation.” Tech Horizon, May 22, 2006,techlearnnewsline.com/News/05-22-06a.html(accessed January 2009).

REFERENCES FOR ONLINE FILE W1.3

1-6 Part 1: Introduction to E-Commerce and E-Marketplaces

ONLINE FILE W1.4Application Case

GOOGLE IS CHANGING EVERYTHINGGoogle’s Evolving Application SetOf all the companies associated with EC, probably no othercompany has impacted our work and life as much as Googlehas. More than that, according to Carr (2006), Google’sunconventional IT and EC management strategy is botheffective and efficient, and it offers a glimpse into how orga-nizations might deploy technology in the future. Google runson close to 500,000 servers. Google has grown more quicklythan any other EC company, and it started to generate profitfaster than most startups. By 2008, its revenue had reached$22 billion.

Google’s goal is to deliver technologies to organize theworld’s information and make it universally accessible anduseful. Google is known primarily for its search engine and itsrelated targeted-advertising tools. Google delivers its adver-tisers far more revenue per click in search results than itscompetitors (mainly Microsoft and Yahoo!) do. In Chapter 4,we will explain Google’s ad-matching strategy. However,Google is doing many other things. Let’s examine some ofGoogle’s many EC activities.

◗ Google Product Search (google.com/products) is a product-comparison search engine for online shopping. A similarsearch tool is Google Catalogs (catalogs.google.com),which searches a database of mail-order catalogs. GoogleProduct Search uses Google’s collaborative ranking para-digm, which applies the Google PageRank in order todetermine a best-match for a given product entry.

◗ Google News (news.google.com) searches news-orientedWeb sites and displays stories according to a computeralgorithm that rates stories based on how many news sitesare publishing the stories, how recently the articles werepublished, and, for searches, keyword occurrence.

◗ Google Earth (earth.google.com) is a collection of zoomableaerial and satellite 3D photos of the earth that enablesusers to find information linked to a geographic location.It is one of Google’s most notable desktop applications.

◗ Google Maps (maps.google.com) and Google Maps forMobile (google.com/gmm) present countless maps of citiesand streets around the globe. Users can use it to getdriving instructions from one location to another.

◗ Google Scholar (scholar.google.com) searches the scholarlyliterature, including peer-reviewed papers, theses, books,preprints, abstracts, and technical reports. Many hits areabstracts or citations, not full articles, and some are“cloaked” behind subscription-only journal subscriptions.

◗ Google also has introduced Google Wireless (google.com/mobile), which offers maps, Gmail, SMS, GOOG411(find local businesses), and YouTube for mobile devices.

◗ Google Groups (groups.google.com) allows users to discussissues online via e-mail and create custom pages with richformats.

Strategically, Google is leveraging its widely recognizedbrand name and search technology expertise into areas

beyond Web searching. Sometimes these projects bring Googleinto direct competition with Microsoft and other IT giants. Forexample, consider the following applications:

◗ Google has developed a Web-based office suite that makesit simple for users to input and share data in word process-ing and spreadsheet files. Google Docs (docs.google.com) isa free Web-based application that can be shared with up to10 users simultaneously, overcoming a key limitation ofMicrosoft’s Excel and Word products.

◗ Google Print (books.google.com) is similar to Amazon.com’s“search inside the book” feature. Users can search by key-word (e.g., “books about Nelson Mandela”) and then searchfor keywords or phrases within the books.

◗ Gmail (gmail.google.com) is Google’s offering in the hugeWeb-based e-mail market that is currently dominated byMicrosoft’s Hotmail and Yahoo! Mail. Gmail offers newservices such as grouping related messages together andkeyword searching through e-mail messages.

◗ Google Mini (google.com/mini) is a cost-effective appliancebusinesses can use to deploy corporate searches that mimicthe main Google Web search engine.

◗ Google Desktop (desktop.google.com) searches the contentsof computer files, e-mail messages, books, and even recentlyviewed Web pages. This is a dramatic improvement on theWindows “Find” feature, which only searches computer files,and then mostly by file name. Google Desktop preemptstechnology that Microsoft is intending to put into Longhorn,and it is part of its enterprise search.

◗ Google Labs (googlelabs.com) is a collection of incompleteapplications that are still being tested for use by thecompany and the general public.

◗ Orkut (orkut.com) is a social-networking service that com-petes in one of the fastest-growing Internet markets—Websites that connect people through networks of friends orbusiness contacts to find new friends or contacts. In orderto sign in at Orkut, a user must have a Google account.

◗ In October 2007, the Google SMS Service (google.com/sms)was launched in India allowing users to get businesslistings, movie show times, and information by sendingan SMS.

◗ In an attempt to compete with Wikipedia, Google launchedits Google Knol in 2007. This endeavor is still in testing.

Google offers many other products. For example, GoogleVideo allows users to search and view freely available videosand also offers users and media publishers the ability topublish videos’ contents, including television shows on CBS,NBA basketball games, and music videos. In August 2007,Google announced that it would shut down its accompanyingvideo rental and sales program and offer refunds and GoogleCheckout credits to consumers who had purchased videosto own.

In 2007, some reports surfaced that Google wasplanning the release of its own mobile phone, possibly

(continued)

Chapter One: Overview of Electronic Commerce 1-7

a competitor to Apple’s iPhone. The project, calledAndroid, provides a standard development kit that willallow any “Android” phone to run software developed forthe Android SDK, no matter the phone manufacturer. ByJune 2008, the Android Development Challenge was in itssecond round.

In 2008, Google began offering Google Checkout Trends.This e-commerce tool aggregates useful sales data fromGoogle Checkout merchants and charts the data for the userto see, showing users important trend data about who isbuying and selling what from Checkout. The tool is used verymuch like the search engine, except that when a user typesa keyword or phrase into the search bar a chart is built.A mouse-over the chart shows the results for the requesteditems. The tool also works for comparing brands (e.g., iPodcompared to Zune).

For more on Google’s products, visit google.com/options.The strategic moves Google is making are all in line with itsmission statement: “To organize the world’s information andmake it universally useful and accessible.”

Enterprise SearchAn enterprise search (also known as a desktop search) identi-fies and enables specific content across the enterprise to beindexed, searched, and displayed to authorized users. Googlepartnered with BearingPoint, an IT consulting firm, to supplyenterprise search capabilities. BearingPoint has experiencein extending Google to provide search services to specificindustries. A crucial enterprise search issue is programmingsearch engines to crawl through all the various data sourcesat a company and index their contents. Enterprise searchescan be integrated with other applications to improve perfor-mance. For example, Cognos Go! Search Service is a BI(business intelligence) search utility. It offers a familiarsearch interface for accessing strategic enterprise informa-tion, such as reports, metrics, analyses, and business events,that answer critical business questions with a simplekeyword search. Oracle offers a search engine for enterprisesystems, such as ERP and CRM.

Example. Kaiser Permanente (kaiserpermanente.org),America’s largest nonprofit health maintenance organization(HMO), has almost 9 million members. The amount of avail-able medical knowledge doubles about every 7 years, sokeeping up with new knowledge is an important aspect ofgood caregiving by HMOs.

When Kaiser Permanente developed a clinical knowledgecorporate portal for its 50,000 doctors, nurses, and othercaregivers, enterprise search was a part of the plan. ThePermanente Knowledge Connection, available from anywherein the Kaiser wide area network, gives medical staff access todiagnostic information, best practices, publications, educa-tional material, and other clinical resources. The portal’sresources are distributed across the entire United States.Putting the right information quickly and easily into care-givers’ hands is essential to the clinical portal’s success.

Kaiser turned to the Google Search Appliance, whichenabled the HMO to index 150,000 documents across theKaiser network. Clinicians now search the site in situationsthat range from leisurely research to urgent care, from theexam room to the emergency room. Doctors and nurses usethe search engine to help them reach diagnoses and specifytreatments, check the side effects of new medications, andconsult clinical research studies and other medical publica-tions. Google’s spell-checking capability is especially usefulin the medical profession: Doctors’ handwriting can be prob-lematic and pharmaceutical product names are difficult.

Questions1. What is Google trying to do with word processing

documents and spreadsheets?

2. What is an enterprise search?

3. Identify potential revenue models in Google’s activities,as described here and on its Web site.

4. How do Google’s services benefit a company such asKaiser?

ONLINE FILE W1.4 (continued)

REFERENCES FOR ONLINE FILE W1.4Brown, M. C. “Hacking Google Maps: A Conceptual

Approach.” ExtremeTech.com, August 31, 2006.extremetech.com/article2/0,1558,2011239,00.asp(accessed February 2009).

Carr, D. F. “How Google Works.” Baseline, July 2006.eCommerce Optimization. “New E-Commerce Trends

Tool: Get Google Checkout Merchant TrendData.” 2008. ecommerceoptimization.com/articles/new-ecommerce-trends-tool-get-google-checkout-merchant-trend-data (accessed April 2009).

Goldberg, M. “Market Wrap Up.” Financial Sense Online,December 13, 2006. financialsense.com/Market/goldberg/2006/1214.html (accessed March 2009).

Hicks, M. “Google’s Next Step: Banner Ads,” eWeek.com,May 13, 2004. eweek.com/article2/0,1895,1592027,00.asp (accessed January 2009).

McNichol, T. “Building a Wiki World (Wikia vs.Wikipedia).” Business 2.0, March 2007.

Sloan, P. “The Quest for the Perfect Online Ad.” Business 2.0,March 2007.

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ONLINE FILE W1.5Application Case

CAMPUS FOOD—STUDENT ENTREPRENEURSCampusfood.com’s recipe for success was a simple one: Provideinteractive menus to college students, using the power of theInternet to replace and/or facilitate the traditional telephoneordering of meals. Launched at the University of Pennsylvania(Penn), the company takes thousands of orders each month forlocal restaurants, bringing pizzas, hoagies, and wings to thePenn community and to dozens of other universities.

Founder Michael Saunders began developing the site(campusfood.com) in 1997 while he was a junior at Penn. Withthe help of some classmates, Saunders launched the site in1998. After graduation, he began building the company’scustomer base. This involved expanding to other universities,attracting students, and generating a list of restaurants fromwhich students could order food for delivery. Currently, someof these activities are outsourced to a marketing firm, enablingthe addition of dozens of schools nationwide. In 2004, thecompany served 200 schools linked to over 1,000 restaurants.

Financed through private investors, friends, and familymembers, the site was built on an investment of less than$1 million. (For comparison, another company withservices also reaching the college-student market invested$100 million.) Campusfood.com’s revenue is generatedthrough transaction fees—the site takes a 5 percentcommission on each order from the sellers (the restaurants).

When you visit Campusfood.com, you can:

◗ Navigate through a list of local restaurants, their hours ofoperation, addresses, phone numbers, and other information.

◗ Browse an interactive menu. The company takes arestaurant’s standard print menu and converts it to

an electronic menu that lists every topping, everyspecial, and every drink offered, along with the latestprices.

◗ Bypass “busy” telephone signals to place an order online,and in so doing, avoid miscommunications.

◗ Get access to special foods, promotions, and restaurantgiveaways. The company is working to set up meal dealsthat are available online exclusively for Campusfood.comcustomers.

◗ Arrange for electronic payment of an order.

University students who signed up at Titan Poker with aspecial bonus code provided by Campusfood.com were eligi-ble to play in a series of exclusive online poker tournaments(in April 2006). Winners received special Campusfood.comCash coupons valued at $20,000, redeemable for food ordersat participating restaurants.

Questions1. Classify this application by EC transaction type.

2. Explain the benefits of Campusfood.com for its studentcustomers and for the restaurants it represents.

3. Trace the flow of digitized information in this venture.

4. How does the outsourcing of the marketing activitiescontribute to the business?

5. What is the benefit of the Titan Poker contest to thecompany?

REFERENCES FOR ONLINE FILE W1.5Campusfood.com. campusfood.com (accessed February

2009).eMediaWire. “Titan Poker Teams Up With Campusfood for

Tournaments Aimed at College Students.” February 16,

2006. emediawire.com/releases/2006/2/emw346598.htm(accessed February 2009).

Chapter One: Overview of Electronic Commerce 1-9

Online File W1.6 Major Characteristics of Web 2.0

The following are representative characteristics of Web 2.0:

◗ User-created content (self-publishing).◗ The ability to tap into the collective intelligence of users. The more users contribute to the site, the more popular and

valuable a Web 2.0 site becomes.◗ Unique communication and collaborative environment.◗ Making data available in new or never-intended ways. Web 2.0 data can be remixed or “mashed up,” often through Web Service

interfaces, much the way a dance-club DJ mixes music.◗ The presence of lightweight programming techniques and tools that enable nearly anyone to act as a developer (e.g., wikis,

blogs, RSS, and podcasting).◗ The virtual elimination of software-upgrade cycles makes everything a perpetual beta or work in progress and allows rapid

prototyping, using the Web as a platform.◗ Unique sharing of content or all media.◗ Networks as platforms, delivering applications entirely through a browser.◗ Open source architecture makes connectivity to computing resource simple.◗ Users own the data on the site and exercise control over that data.◗ An architecture of participation and digital democracy encourages users to add value to the application as they use it.◗ New business models are created.◗ A major emphasis on social networks.◗ A rich interactive, user-friendly interface based on Ajax or similar frameworks. Ajax (Asynchronous JavaScript and XML)

is a Web development technique for creating interactive Web applications.◗ More productive organizational communication due to improved search, links, user authority, etc.◗ Global spread of innovation. As soon as a successful idea is deployed as a Web site in one country, similar sites appear

around the globe.

Online File W1.7 Examples of Innovative EC Applications

◗ Pearson Education, Inc., the publisher of this book, in collaboration with O’Reilly & Associates, offers professors reason-ably priced, customized textbooks for their classes by compiling material from thousands of Pearson’s publications and theinstructors’ own materials. The customized books are either electronic (Chapter 7) or more expensive hard copies.

◗ In Japan, a person can wave a Casio watch over a scanner to purchase products from a vending machine, pay for food ina cafeteria, or pay for gasoline.

◗ More than 60 percent of all airline tickets sold in the United States are electronic tickets. It costs more to purchase aticket from a local travel agent or by phone directly from the airline. In large airports, travelers can get their boardingpasses from a machine. Most airlines allow travelers to print their boarding passes at home.

◗ In January 2004, NASA’s Web site received more than 6.5 billion hits in a few days—the biggest Internet governmentevent to date—because people were interested in viewing the Mars Exploration Rover’s landing on Mars.

◗ Several banks in Japan issue smart cards that can be used only by their owners. When using the cards, the palm vein ofthe owner’s hand is compared with a prestored template of the vein stored on the smart card. When the owner inserts thecard into ATM or vendors’ card readers that are equipped with the system, it will dispense the card owner’s money.The police are alerted if anyone other than the card’s owner tries to use it.

◗ Jacobi Medical Center in New York tracks the whereabouts of patients in the hospital. Each patient has an RFID in a plasticband strapped to the wrist. Each time a patient passes an RFID reader, the patient’s location is transmitted in real time tothe responsible staff member. The RFID is linked to the hospital’s computer network, connecting the patient’s records tolabs, billing, and the pharmacy.

1-10 Part 1: Introduction to E-Commerce and E-Marketplaces

Online File W1.8 How Obama Used EC to Win

Obama’s campaign team was everywhere on the Internet: MySpace, YouTube, Flickr, Facebook, and Twitter. Over 1.5 millionvolunteers registered at my.barackobama.com. These volunteers mobilized supporters and organized communities. Throughthe site, the campaign was able to train a large number of volunteers, arm them with up-to-date targeted information,and provide potential voters’ contact names, addresses, and voting histories. The campaign focused the volunteers onvoter registration efforts and then shifted them to a get-out-the-vote campaign as the election drew near. Through thesite, the campaign was able to direct the energy of social networkers to specific, campaign-oriented tasks. In addition,the site raised $600 million from just 3 million people.

The campaign also built a consensual database of 3 million mobile numbers by promising to get campaign news tosupporters before it was released to the news media. On average, supporters received 5 to 20 text messages per month,depending on where they lived and what kind of messages they opted to receive. Obama’s e-mail list contained about13 million addresses. Over the course of the campaign, aides sent more than 7,000 different messages; many of themtargeted to specific donation-level participants.

Because social media facilitates direct engagement and communication among friends, contacts, and families, thesharing of ideas, opinions, and information made Obama’s supporters feel that they were part of a close, trusted network.Social networking brought Obama into the homes and hearts of millions who felt they knew him because they spent somuch time with him.

Obama’s campaign integrated online marketing methods with a viral campaign using word-of-mouth advertising andmarketing techniques to create a real buzz about him. For example, a viral video on YouTube was instrumental in raising$300,000 in a week. The word-of-mouth advertising helped Obama raise enormous amounts of money and build his brand.

Obama made extensive use of the following social networking sites:

◗ MySpace. The official profile page for Barack Obama included a blog, blurbs, news clips, videos, and comments from hisMySpace friends. In January 2008, MySpace users selected Obama as the winner of the presidential election, garnering46 percent of the vote.

◗ YouTube. Barack Obama’s speeches, events, and TV ads are still available at the official Obama–Biden Campaign YouTubechannel. Obama campaign-related videos received 14.5 million hours of viewing time on YouTube. This time would havecost $47 million to buy on television. Obama’s 38-minute speech on race had more than 2 million views on YouTube injust 2 days after posting. In November 2008, President-elect Obama chose YouTube as the media stream for his “SaturdayFireside Chats” in both video and audio forms.

◗ Flickr. On Flickr, photos of the president were organized by sets and tags, including archives, favorites, and his profile.The campaign posted intimate photographs from a Chicago hotel room showing the minutes before Obama becamepresident-elect.

◗ Facebook. Obama supporters on Facebook found it impossible to be on the site at any given time and not see an Obamaad driving them to BarackObama.com. His Facebook friend count was over 31 million. Facebook cofounder Chris Hughesquit the company in early 2007 to help run the Obama campaign’s Web operations.

◗ Twitter. On Twitter, the campaign used an automated script that let users know that the Obama folks were followingthem. This sent the message they wanted to communicate, and it encouraged feedback from the user. This built a senseof community. Obama’s posts were filled with words like “encourage” and “friends,” and every post was a clear callto action.

By using social networking applications, the Obama campaign created a powerful way to raise money, organize locally,fight smear campaigns, and get out the vote, which was instrumental in helping Obama win the Democratic nominationand then the 2008 presidential election.

Chapter One: Overview of Electronic Commerce 1-11

REFERENCES FOR ONLINE FILE W1.8Carr, D. “How Obama Tapped into Social Networks’

Power.” New York Times, November 9, 2008.Cone, E. “All Politicking Is Local: How the Obama

Campaign Is Using Technology to Change Electionson the Ground.” CIO Insight, September 29, 2008.blogs.cioinsight.com/knowitall/content001/all_politicking_is_local_how_the_obama_campaign_is_using_technology_to_change_elections_on_the_ground.html (accessed March 2009).

Cone, E. “Connecting the Campaign: How the DemocratsBuilt Their Network.” CIO Insight, September 29, 2008.blogs.cioinsight.com/knowitall/content001/connecting_the_compaign_how_the_democrats_built_their_network.html (accessed March 2009).

Cone, E. “Local Area Networks: How the ObamaCampaign Works on the Ground.” CIO Insight,September 29, 2008. blogs.cioinsight.com/knowitall/content001/local_area_networks_how_the_obama_campaign_works_on_the_ground.html (accessedMarch 2009).

The Guardian. “Barack Obama’s Flickr Page Shows Familyas Their Lives Changed Forever.” November 7, 2008.guardian.co.uk/world/deadlineusa/2008/nov/07/barackobama-uselections2008 (accessed March 2009).

Kiss, J. “Why Everyone’s a Winner.” The Guardian,November 10, 2008. guardian.co.uk/media/2008/nov/10/obama-online-strategy (accessed March 2009).

Learmonth, M. “How Barack Obama Won Facebook.”BusinessInsider.com, July 7, 2008. businessinsider.com/2008/7/how-barack-obama-won-facebook (accessedMarch 2009).

McCarthy, C. “Surprise! Barack Obama, Ron Paul WinMySpace ‘primaries.’” CNET.com, January 3, 2008.news.cnet.com/8301-13577_3-9839328-36.html(accessed March 2009).

McKeever, C. “Obama and Hillary Use Twitter for SocialNetworking.” OpenSourceMarketer.com, February 27, 2008.opensourcemarketer.com/marketing-tools/obama-and-hillary-use-twitter-for-social-networking (accessedMarch 2009).

Needle, D. “Huffington: ‘Obama Not Elected WithoutInternet.’” InternetNews.com, November 7, 2008.internetnews.com/webcontent/article.php/3783741(accessed March 2009).

Tumulty, K. “Obama’s Viral Marketing Campaign.”Time.com, July 5, 2007. time.com/time/magazine/article/0,9171,1640402,00.html (accessed March 2009).

1-12 Part 1: Introduction to E-Commerce and E-Marketplaces

Online File W1.9 Response Activities by Organizations

Some representative EC-supported response activities follow:

Strategic Systems. Strategic systems provide organizations with strategic advantages, enabling them to increase theirmarket share, better negotiate with their suppliers, or prevent competitors from entering into their territory. There are avariety of EC-supported strategic systems. One example is FedEx’s tracking system, which allows FedEx to identify thestatus of every individual package, anywhere in the system. Most of FedEx’s competitors have already copied the FedExsystem. In response, FedEx has been forced to continuously introduce EC innovations, but so are its competitors,especially UPS.

Agile Systems. Agile organizations have the ability to consistently improve productivity—especially during periods ofchange. To create business agility, organizations use IT in general and EC in particular. The solution provided by EC enablescapitalizing on changing industry, government, and business requirements; assimilating required resources and businessprocesses quickly to meet demand; promptly adapting technology to fit new or modified business processes; leveragingexisting resources to do the above; and doing it all economically.

Continuous Improvement Efforts and Business Process Restructuring and Management. Many companies continuouslyconduct programs to improve their productivity, quality, and customer service. Two examples of how EC can help are Dell andIntel. Dell takes its orders electronically and immediately moves them via enterprise resource planning (ERP) software (seeOnline Tutorial T1) into the just-in-time assembly operation. Using an almost real-time extranet-based monitoring system,Intel tracks the consumption of its products by a dozen of its largest customers in order to plan production schedules anddeliveries.

However, continuous improvement programs may not be a sufficient solution for some business problems. Strong businesspressures may require a radical structural change. Such an effort is referred to as business process restructuring or reengineering(BPR). E-commerce is frequently interrelated with process restructuring that may be needed for implementation of ECinitiatives such as e-procurement.

Customer and Partner Relationship Management. One of the major symptoms of the digital revolution is that thebargaining power of customers is stronger than ever, and that power is growing. The availability of information and theability to make quick comparisons online (e.g., google .com/products) increases this trend. Customers are called “kings”and “queens,” and organizations must make their customers happy in order to keep them. This may be accomplishedthrough customer relationship management (CRM).

EC is not just about buying and selling. Supporting CRM, as we will see throughout the book, is a major function ofEC. Such support is done by multiple technologies, ranging from computerized call centers to intelligent agents. Some ofthe e-CRM topics highlighted in this book are sales force automation; call center tools and operations; personalization;empowerment of customers and frontline employees; support of mobile employees; and partner relationship management.

Business Alliances. Many companies realize that alliances with other companies, even competitors, can be beneficial. Forexample, General Motors, Ford, and others in the automotive industry created a huge B2B e-marketplace called Covisint (seeChapter 6). Other types of business alliances include resource-sharing partnerships, permanent supplier–company relationships,and joint design and research efforts.

Electronic Markets. Electronic markets, private or public, can optimize trading efficiency, enabling their membersto compete globally. Most electronic markets require the collaboration of different companies, sometimes evencompetitors, as will be shown in Chapters 6 and 7.

Reductions in Cycle Time and Time-to-Market. Cycle time reduction—shortening the time it takes for a business to com-plete a productive activity from its beginning to end—is extremely important for increasing productivity and competitiveness.Similarly, reducing the time from the inception of an idea to its implementation (time-to-market) is important, because thosewho are first on the market with a product or who can provide customers with a service faster than their competitors, enjoy adistinct competitive advantage. Extranet-based applications can expedite the various steps in the process of product or servicedevelopment, testing, and implementation.

Empowerment of Employees. Giving employees the authority to act and make decisions on their own is a strategy usedby many organizations as part of productivity improvement programs. Management delegates authority to individualsor teams who can then execute the work faster and with fewer delays. Empowerment of employees may also be part of e-CRM. Empowered salespeople and customer service employees are given the authority to make customers happy and do itquickly, helping to increase customer loyalty. EC allows the decentralization of decision making and authority via empow-erment and distributed systems, but simultaneously supports a centralized control. Empowerment can also be achieved byusing automated decision systems (see Davenport 2006).

(continued)

Chapter One: Overview of Electronic Commerce 1-13

Supply Chain Improvements. EC, as is shown throughout the book, and especially in Chapters 5 and 12, can help reducesupply chain delays, reduce inventories, and eliminate other inefficiencies. The use of e-supply chain models to automate fac-tory scheduling reduces response time and inventory management.

Mass Customization: Make-to-Order in Large Quantities. Today’s customers demand customized products and services;the business problem is how to provide customization and do it efficiently. This can be done, in part, by changingmanufacturing processes from mass production to mass customization (Anderson 2002). In mass production, a company pro-duces a large quantity of identical items. In mass customization, items are produced in a large quantity but are customizedto fit the desires of each customer. EC is an ideal facilitator of mass customization, for example, by enabling interactivecommunication between buyers and designers so customers can quickly and correctly configure the products they want.Also, orders placed online can reach production facilities in minutes. Note that mass customization is not easy to achieve;however, EC can help. Mass customization requires a build-to-order process, as described in Appendix 2A in Chapter 2.

Intrabusiness: From Sales Force Automation to Inventory Control. One area where EC has made major progress insupporting organizational responses is applications inside the business. The support can be provided to field represen-tatives, warehouse employees, designers, researchers, and office workers. The improvements in productivity for thesekinds of employees were fairly slow until the introduction of EC.

Knowledge Management. Knowledge management (KM) refers to the process of creating or capturing knowledge, storingand protecting it, updating and maintaining it, and using it whenever necessary. Knowledge management programs and soft-ware are frequently associated with EC. For example, knowledge is delivered via corporate portals to assist users or to teachemployees. Also, EC implementation requires knowledge, and EC activities such as market research create knowledge. For moreon the EC–KM connection, see Chapter 7.

Online File W1.9 (continued)

REFERENCES FOR ONLINE FILE W1.9Anderson, D. Build-to-Order and Mass Customization: The

Ultimate Supply Chain Management and Lean Manufac-turing Strategy for Low-Cost On-Demand ProductionWithout Forecasts or Inventory. Los Angeles: CIM Press,2004.

Davenport, T. H. “Competing on Analytics.” HarvardBusiness Review ( January 2006).

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Online File W1.10 Representatives EC Business Models

1. Name your own price. Pioneered by Priceline.com, the name-your-own-price model allows buyers to set the pricethey are willing to pay for a specific product or service. Priceline.com will try to match a customer’s request with asupplier willing to sell the product or service at that price. This model is also known as a demand-collection model(see Chapter 16).

2. Find the best price. According to this model, also known as a search engine model, a customer specifies a need andthen an intermediate company, such as Hotwire (hotwire.com), matches the customer’s need against a database,locates the lowest price, and submits it to the consumer. The potential buyer then has 30 to 60 minutes to accept orreject the offer. A variation of this model is available for purchasing insurance: A consumer can submit a request forinsurance to InsWeb (insweb.com) and receive several quotes. Many companies employ similar models to show pricecomparisons and find the lowest price. For example, consumers can go to E-LOAN (eloan.com) to find the best interestrate for auto or home loans. A well-known company in this area is Shopping.com, which is described with similarcompanies in Chapter 3.

3. Affiliate marketing. Affiliate marketing is an arrangement whereby a marketing partner (a business, an organization, oreven an individual) refers consumers to a selling company’s Web site (see Chapter 4). The referral is done by placing abanner ad or the logo of the selling company on the affiliated company’s Web site. Whenever a customer who was referredto the selling company’s Web site makes a purchase there, the affiliated partner receives a commission (which may rangefrom 3% to 15%) of the purchase price. In other words, by using affiliate marketing, a selling company creates a virtualcommissioned sales force. Pioneered by CDNow, the concept is now employed by thousands of retailers and manufacturers.For example, Amazon.com has over 1,000,000 affiliates, and even tiny Cattoys.com offers individuals and organizationsthe opportunity to put its logo and link on their Web sites to generate commissions.

4. Group purchasing. In the offline world of commerce, discounts are usually available for purchasing large quantities. So,too, EC has spawned the concept of demand aggregation, wherein a third party finds individuals or SMEs (small-to-medium enterprises), aggregates their small orders to attain a large quantity, and then negotiates (or conducts a tender)for the best deal. Thus, using the concept of group purchasing, a small business, or even an individual, can get a dis-count. This model, also known as the volume-buying model, is described in Chapter 5. Leading aggregators for thehealth-care industry are HIGPA.org and HealthTrustCorp.com. Online purchasing groups are also called e-co-ops.

5. Online auctions. Almost everyone has heard of eBay, the world’s largest online auction site. Several hundred othercompanies, including Amazon.com and Yahoo!, also conduct online auctions. In the most popular type of auction,online shoppers make consecutive bids for various goods and services, and the highest bidders get the items auc-tioned. E-auctions come in different shapes and use different models. For example, eBay is using about 40,000 “assis-tants” in a model where the assistants perform the order fulfillment function (see Chapter 2).

6. Product and service customization. With customization, a product or service is created according to the buyer’sspecifications. Customization is not a new model, but what is new is the ability to quickly configure customizedproducts online for consumers at costs not much higher than their noncustomized counterparts (see Chapters 3 and5). Dell is a good example of a company that customizes PCs for its customers.

7. Information brokers (informediaries). Information brokers (see Chapters 3 through 8) provide privacy, trust,matching, search, content, and other services (e.g., BizRate at bizrate.com and Google Products at google.com/products).

8. Bartering. Companies use bartering (see Chapters 2 and 10) to exchange surpluses they do not need for things thatthey do need. A market maker (e.g., webbarter.com or tradeaway.com) arranges such exchanges.

9. Deep discounting. Companies such as Half.com (half.com) offer products and services at deep discounts, as much as50 percent off the retail price (see Chapter 3).

10. Membership. A popular offline model, in which only members get a discount, also is being offered online(e.g., netmarket.com and nytimes.com) (for details, see Bandyopadhyay 2001).

11. Value-chain integrators. This model offers services that aggregate information-rich products into a more completepackage for customers, thus adding value. For example, Autos.MSN.com provides several car-buying–related services,such as financing and insurance.

12. Value-chain service providers. These providers specialize in a supply chain function such as logistics (UPS atups.com) or payments (PayPal at paypal.com) (see Chapters 7, 12, and 13).

13. Supply chain improvers. One of the major contributions of EC is in the creation of new models that change orimprove supply chain management (e.g., Dell). Most interesting is the conversion of a linear supply chain, which canbe slow, expensive, and error prone, into a hub.

14. Negotiation. The Internet offers negotiation capabilities between individuals (e.g., ioffer.com) or between companies(e.g., in exchanges, Chapter 6). Negotiation can also be facilitated by intelligent agents.

Chapter One: Overview of Electronic Commerce 1-15

Online File W1.11 Resources for E-Commerce

The following are representative sources of information on EC:

Vendors, News, EC Statistics, and More◗ articles.com◗ cio.com/research/ec/◗ ecommerce.internet.com◗ ecommercetimes.com◗ electronicmarkets.org◗ forrester.com◗ reuters.com/ecommerce◗ searchcio.techtarget.com◗ whitepapers.com◗ wikipedia.org/wiki/e-commerce

ConferencesMany conferences are dedicated to e-commerce. Well-known conferences are:

◗ The Annual Bled Conference (bledconference.org)◗ The Annual Conference of ICEC (see icec.net)◗ The Congress on the Management of E-Business (eworldcongress.smu.ca)

Other SourcesMany other sources are provided within the chapters and in the chapters’ Online Files.

Journals◗ Electronic Commerce Research (jecr.com)◗ International Journal of Electronic Commerce (gvsu.edu/ssb/ijec)◗ Journal of Organizational Computing and Electronic Commerce (leaonline.com/loi/joce)◗ Electronic Markets Journal (electronicmarkets.org)◗ Journal of Electronic Commerce Research (online csul6.edu/business/ijec)◗ Journal of Electronic Commerce in Organization (ISSN: 1539-2937)◗ International Journal of Web Services Research (ISSN: 15398-3062)◗ International Journal of E-Business Research (ISSN: 1548-1131)◗ International Journal of Electronic Government Research (ISSN: 1548-3886)◗ Journal of Cases on Electronic Commerce (ISSN: 1548-0623)

Bandyopadhyay, S. “A Critical Review of Pricing Strategiesfor Online Business Model.” Quarterly Journal ofElectronic Commerce 2, no. 1 (2001).

REFERENCE FOR ONLINE FILE W1.10