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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 automatically
identify objects or items. The tags can be attached or embedded in objects, animals, or humans. RFID readers use radio waves to interact
with the tags. The radio waves enable the unique identification and location of the objects, transmission of data, and/or storage of
information about the object. Some tags can be read from several meters away and beyond the line of sight of the reader.
Most RFID tags have at least two parts. One part is an
integrated circuit for storing and processing information,
modulating and demodulating a (RF) signal, and performing
other specialized functions. The second part is an antenna for
receiving and transmitting the signal. Tags can be active or
passive. Active tags have an internal power supply, passive ones
do not. Passive tags collect power from the incoming signal.
Active tags are more reliable because they have their own power
supply 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 read
from a much greater distance (about 30 feet with passive tags;
500 to 1,500 feet with active tags) and no line of sight is
required. 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 efficiency
of inventory tracking.
RFID implementation has been slow due to privacy and
security concerns, especially when it involves consumers
(see Chapter 6). However, an increasing number of companies
are using the technology internally in combination with other
IT systems, as is done by Nokia.
RFID at Nokia. Security guards employed at Nokia carry
mobile phone handsets with an attached RFID tag and RFID
reader, and RFID tags are also installed at various points around
the facility. At the start of a shift, guards use the phone to read
their RFID-enabled name badges. Then, security guards do their
rounds, and opening the handset to read the various tags as they
pass by them. Details of the phone number and RFID tag just
read are transmitted over the cell phone network. Supervisors are
thus given accurate information as to when a particular guard
started and finished a shift, whether the guard patrolled all the
required locations, and where the guard was at a particular point
in time. In addition, supervisors can use the text and phone
function to ask guards to recheck an area, vary their route, and
the like.
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Application Case
DELL—USING E-COMMERCE FOR SUCCESS
The Problem/Opportunity
Founded in 1985 by Michael Dell, Dell Computer Corp.
(now known as Dell) was the first company to offer personal
computers (PCs) via mail order. Dell designed its own PC system
(with an Intel 8088 processor running at 8 MHz) and allowed
customers to configure their own customized systems using
the build-to-order concept (see Chapter 2, Appendix 2A). This
concept was, and is still, Dell’s cornerstone business model.
By 1993, Dell had become one of the top five computer makers
worldwide, threatening Compaq, which started a price war.
At that time, Dell was taking orders by fax and snail mail and
losing money. Losses reached over $100 million by 1994. The
company was in trouble.
The Solution
The commercialization of the Internet in the early 1990s and
the introduction of the World Wide Web in 1993 provided
Dell with an opportunity to expand rapidly. Dell implemented
aggressive online order-taking and opened subsidiaries in
Europe and Asia. Dell also started to offer additional products on its Web site. This enabled Dell to batter Compaq,
and in 2000 Dell became number one in worldwide PC shipments. At that time, Internet sales topped $50 million per
day (about $18 billion per year). Today, Dell (dell.com)
sells about $62 billion a year in computer-related products
online, from network switches to printers, employing over
88,000 people.
Direct online marketing is Dell’s major electronic
commerce (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-toconsumer (B2C). Sales to the other three groups are
classified as business-to-business (B2B). Consumers shop
at dell.com using an electronic catalog. The sales are
completed using mechanisms described in Chapters 2 and 3.
In addition, Dell auctions refurbished Dell computers
and other products at dellauction.com. As will be discussed in
Chapters 2 and 10, online auctions are an important sales
channel. In 2006, Dell opened physical stores, mainly in
reaction to customer demands.
Business-to-Business EC. Most of Dell’s sales are to businesses. Whereas B2C sales are facilitated by standard shopping
aids (e.g., catalogs, shopping carts, credit card payments;
see Chapters 2 and 3), B2B customers obtain additional help
from Dell. Dell provides each of its nearly 100,000 business
customers with Premier Dell service.
For example, British Airways (BA) considers Dell to be
a strategic supplier. Dell provides notebooks and desktops
to 25,000 BA users. Dell offers two e-procurement services
to BA purchasing agents. The more basic service, Premier Dell,
allows BA (and other businesses) to browse, buy, and
track orders on a Dell Web site customized for the user’s
requirements. The site enables authorized users to select
preconfigured PCs for their business unit or department.
A more advanced version, Premier B2B, supports e-procurement
systems, such as from Ariba. This provides automatic
requisition and order fulfillment once an authorized user has
chosen to buy a PC from Dell. BA has placed the e-procurement
tools on its E-Working intranet. This allows authorized staff
to purchase PCs through a portal that connects directly into
Dell’s systems.
In addition to supporting its business customers with
e-procurement tools, Dell also is using EC in its own procurement. Dell developed an e-procurement model that it shares
with its business partners, such as BA. One aspect of this
model is the use of electronic tendering to conduct bids
(see Chapter 5). Dell uses electronic tendering when it buys
the components for its products.
In 2000, Dell created an online B2B exchange. This venture was a failure, like most other exchanges (see Chapter 5).
E-Collaboration. Dell has many business partners with
whom it needs to communicate and collaborate. For example,
Dell uses shippers, such as UPS and FedEx, to deliver its
computers to individuals. It also uses third-party logistics
companies to collect, maintain, and deliver components from
its suppliers, and it has many other partners. Dell is using
Web Services, an EC technology, to facilitate communication
and reduce inventories. Web Services facilitate B2B integration. Integration efforts began in 2000 with other technologies when Dell encouraged its customers to buy online.
The B2B integration offer combines Dell PowerEdge servers
based on Intel architecture and WebMethods B2B integration
software to link customers’ existing ERP (enterprise resource
planning) or procurement systems directly with Dell
and other trading partners. In addition, Dell can provide
e-procurement applications and consulting services. Dell
also educates customers in its technologies and offers
suggestions on how to use them. This is particularly true
for emerging technologies such as wireless.
Finally, Dell has a superb communication system with
its over 15,000 service providers around the globe.
E-Customer Service. Dell uses a number of different tools
to provide superb customer service around the clock. To
leverage customer relationship management (CRM)—a
customer service approach that is customer centered for
lasting relationships—Dell provides a virtual help desk for
self-diagnosis and service as well as direct access to technical support data. In addition, a phone-based help desk is
open 24/7. Customers can also arrange for a live chat with
a customer care agent. Product support includes troubleshooting, user guides, upgrades, downloads, news
and press releases, FAQs, order status information, a “my
account” page, a community forum (to exchange ideas,
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(continued)
information, and experiences), bulletin boards and other
customer-to-customer interaction features, training books
(at a discount), and much more. Dell also offers educational
programs at learndell.com.
Dell keeps a large customer database. Using data mining
tools, it learns a great deal about its customers and attempts to
make them happy. The database is used to improve marketing
as well.
Intrabusiness EC. To support its build-to-order capabilities,
significantly improve its demand-planning and factory
execution accuracy, reduce order-to-delivery time, and
enhance customer service, Dell partnered with Accenture
to create a new, high-performance supply chain planning
solution. Now in place in Dell’s plants around the world, the
program, which paid for itself five times over during
the first 12 months of operation, enables Dell to adapt more
quickly to rapidly changing technologies and the business
environment, maintaining its position as a high-performance
business. Dell also has automated its factory scheduling,
demand-planning capabilities, and inventory management
using information technology and e-supply chain models.
Affiliate Program. Dell provides affiliate partners the
opportunity to link from their Web sites to dell.com. Dell
pays 2 to 4 percent on any qualified sale made from clicking
on Dell’s link at the partners’ sites (referring buyers).
The Results
Dell has been one of Fortune’s top five “Most Admired”
companies since 1999, and it continuously advances in the
rankings of the Fortune 500 and the Fortune Global 500.
Dell has over 100 country-oriented Web sites, and profits
are nearing $3 billion a year. If you had invested $10,000
in Dell’s initial public offering (IPO) in 1987, you would be
a millionaire just from that investment.
Dell actively supports EC research at the University of
Texas in Austin (Dell’s headquarters also are in Austin). It
also contributes heavily to charity. Dell has partnered with
the National Cristina Foundation (NCF) to provide computer
technology to people with disabilities, students at risk,
and economically disadvantaged persons. Paired with the
company’s recycling program, used computers are refurbished
and then distributed through NCF. Through Dell’s TechKnow
Program, the company donates computers to urban middle
schools. The students learn about computers by taking them
apart and reassembling them, loading software, setting up
and running printers, upgrading hardware, diagnosing and
correcting basic hardware problems, and using the Internet.
Upon completion of the program, students take home the
computers they build and receive a year of free Internet
access. Dell also awards grants each year to governmental
and educational institutions to organize, promote, stage, and
recycle computer equipment in a free “No Computer Should
Go to Waste” collection event in their communities.
Refurbished machines are dispersed through local charities.
In 2006, Dell opened physical stores to match its competitors and customer demands. Dell’s major competitor, HP,
regained its “top PC maker” position in 2006, leaving Dell in
second place, and stayed in the lead through 2008.
Rapidly changing business conditions (Section 1.5)
have forced Dell to restructure its operations. Michael Dell
returned to the CEO position in 2006, and a restructuring of
the company began shortly thereafter. All sales to businesses
are now managed centrally, rather than from three regional
headquarters around the globe. In addition, in 2008 the
company cut its workforce by 8,000. It also launched a blog
called Direct2Dell (direct2dell.com). Dell also is expanding
its business not only in the computer industry. but also in
consumer electronics.
Despite these challenges, Dell is clearly an example of
EC success.
Questions
1. 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 brickand-mortar competitors.
4. Review the capabilities of dell.com/delldirect. Write a
summary.
REFERENCES FOR ONLINE FILE W1.2
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).
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Application Case
BOEING USES E-COMMERCE FOR COLLABORATION
Boeing, the world largest aerospace company, has been a
major player in the global economy for almost a century.
The company undertook a far-reaching transformation as it
used cutting-edge materials and electronics and high-level
technology for the design and assembly process of its new
passenger plane—the Boeing 787. The new plane is Boeing’s
bid for market leadership in competition with Airbus. The new
midsize passenger jet has an outer shell and about half of its
parts made of carbon-fiber-reinforced plastic, which makes it
lighter and gives it better fuel economy. In September 2008,
the company had over 700 firm orders for the new 787, which
seats 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 manufacturing
was to have global partners work from a common blueprint
to produce parts—actually, whole sections of the airplane—
that were then shipped to a Boeing assembly plant near
Seattle to see if they fit together. Prior to the 787, wood
mock-ups of planes would be constructed to see if parts built
by partners around the world would really fit together. When
a fit failed, the cost in time, money, and delays was extreme.
In 2004, Boeing’s IT systems people were consolidated
into the Boeing Technology Group. Now parts are designed
from concept to production concurrently by partners (including companies in Japan, Russia, and Italy) and “assembled”
in a computer model maintained by Boeing outside its
corporate 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 is
no fit and the planes deliveries are late, but the actual
cost of development and manufacturing is spread across its
network of collaborators. The biggest savings are in the time
saved through the online collaboration process (from 33%
to 50%), creating a huge competitive advantage.
Boeing’s changes go beyond making planes faster and
cheaper. The new business model transforms Boeing from a
manufacturer to a high-end technology systems integrator.
Collaboration is a necessity for Boeing for several
reasons. Airplanes are huge and enormously complex. In
addition, building global relationships may help the company
sell its planes overseas. Politically, sales of a “global product”
are enhanced when people in other countries are building
parts of the airplane. Companies in these countries may then
buy from Boeing.
Basic collaboration is done through information
management tools such as Microsoft SharePoint. Boeing
and its partners also use Dassault Systemes 3D and Product
Lifecycle Management solutions. Other IT tools used are a
product suite from Exostar LLC, with which Boeing can share
two-dimensional drawings, conduct forward and reverse
auctions (Chapter 2), and respond to RFPs (Chapter 5). The
plane is designed at Global Collaboration Environment, a
special online site maintained by Boeing.
Three levels of collaboration are facilitated between teams
and companies. In the first level—design collaboration—all
parties involved log in and make their changes electronically
in the blueprints, and the team works together. Quality is
improved because the computer finds the mistakes. The next
level involves suppliers working with their supply chains. The
third level is real-time collaboration, which involves a considerable amount of product lifecycle management across multiple
countries enabled by technology that differentiates Boeing’s
new model from the previous kinds of global relationships.
Boeing also uses the new partnership to solicit ideas of how
to improve designs, integration, and so on. This results in
cost-cutting.
Boeing maintains 10 multimedia rooms at its Everett,
Washington, complex for use by collaboration teams. These
are open 365 days a year, 24 hours a day. A visualization
application developed by Boeing allows the teams to do
real-time design reviews of complex geometry without any
lag time as the models load. Meetings are conducted in
English, with sidebar conversations, as needed, in a team
member’s native language. Collaborative design also speeds
the design process, helping Boeing to avoid expensive penalties from its customers if the plane is not delivered on time,
and it gives the company more flexibility in simultaneously
designing multiple versions of the 787 that are part of its
wide-ranging appeal in the marketplace.
Finished designs are stored in another Dassault product,
Enovia, which is also maintained by Boeing. The storage
has become an enormous data-management task. The issue
of security has also been a concern; however, security
technology has developed to the point that the security
of the information is assured.
All these tools and strategies helped Boeing to accelerate the design and overcome some unforeseen problems so
that it was able to start delivering the 787 to customers in
fall 2007.
Questions
1. Describe online collaboration and its benefits to
Boeing.
2. List the levels of collaboration and the parties
involved.
3. How does technology facilitate collaboration?
Chapter One: Overview of Electronic Commerce
1-5
REFERENCES FOR ONLINE FILE W1.3
Berstein, M. “Boeing Shrinks Supply Chain to Facilitate
Risk Sharing.” World Trade, April 1, 2006. boeing.com
(accessed January 2009).
Cone, E. “Flying in Formation.” CIO Insights, March
2006.
Workforce-Performance. “Boeing 787 Global Design
Team Benefits from Collaboration Solution Incorporating Simulation.” Tech Horizon, May 22, 2006,
techlearnnewsline.com/News/05-22-06a.html
(accessed January 2009).
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Application Case
GOOGLE IS CHANGING EVERYTHING
Google’s Evolving Application Set
Of all the companies associated with EC, probably no other
company has impacted our work and life as much as Google
has. More than that, according to Carr (2006), Google’s
unconventional IT and EC management strategy is both
effective and efficient, and it offers a glimpse into how organizations might deploy technology in the future. Google runs
on close to 500,000 servers. Google has grown more quickly
than any other EC company, and it started to generate profit
faster than most startups. By 2008, its revenue had reached
$22 billion.
Google’s goal is to deliver technologies to organize the
world’s information and make it universally accessible and
useful. Google is known primarily for its search engine and its
related targeted-advertising tools. Google delivers its advertisers far more revenue per click in search results than its
competitors (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 of
Google’s many EC activities.
◗ Google Product Search (google.com/products) is a productcomparison search engine for online shopping. A similar
search tool is Google Catalogs (catalogs.google.com),
which searches a database of mail-order catalogs. Google
Product Search uses Google’s collaborative ranking paradigm, which applies the Google PageRank in order to
determine a best-match for a given product entry.
◗ Google News (news.google.com) searches news-oriented
Web sites and displays stories according to a computer
algorithm that rates stories based on how many news sites
are publishing the stories, how recently the articles were
published, and, for searches, keyword occurrence.
◗ Google Earth (earth.google.com) is a collection of zoomable
aerial and satellite 3D photos of the earth that enables
users 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 for
Mobile (google.com/gmm) present countless maps of cities
and streets around the globe. Users can use it to get
driving instructions from one location to another.
◗ Google Scholar (scholar.google.com) searches the scholarly
literature, including peer-reviewed papers, theses, books,
preprints, abstracts, and technical reports. Many hits are
abstracts 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 discuss
issues online via e-mail and create custom pages with rich
formats.
Strategically, Google is leveraging its widely recognized
brand name and search technology expertise into areas
beyond Web searching. Sometimes these projects bring Google
into direct competition with Microsoft and other IT giants. For
example, consider the following applications:
◗ Google has developed a Web-based office suite that makes
it simple for users to input and share data in word processing and spreadsheet files. Google Docs (docs.google.com) is
a free Web-based application that can be shared with up to
10 users simultaneously, overcoming a key limitation of
Microsoft’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 keyword (e.g., “books about Nelson Mandela”) and then search
for keywords or phrases within the books.
◗ Gmail (gmail.google.com) is Google’s offering in the huge
Web-based e-mail market that is currently dominated by
Microsoft’s Hotmail and Yahoo! Mail. Gmail offers new
services such as grouping related messages together and
keyword searching through e-mail messages.
◗ Google Mini (google.com/mini) is a cost-effective appliance
businesses can use to deploy corporate searches that mimic
the main Google Web search engine.
◗ Google Desktop (desktop.google.com) searches the contents
of computer files, e-mail messages, books, and even recently
viewed Web pages. This is a dramatic improvement on the
Windows “Find” feature, which only searches computer files,
and then mostly by file name. Google Desktop preempts
technology that Microsoft is intending to put into Longhorn,
and it is part of its enterprise search.
◗ Google Labs (googlelabs.com) is a collection of incomplete
applications that are still being tested for use by the
company and the general public.
◗ Orkut (orkut.com) is a social-networking service that competes in one of the fastest-growing Internet markets—Web
sites that connect people through networks of friends or
business contacts to find new friends or contacts. In order
to 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 business
listings, movie show times, and information by sending
an SMS.
◗ In an attempt to compete with Wikipedia, Google launched
its Google Knol in 2007. This endeavor is still in testing.
Google offers many other products. For example, Google
Video allows users to search and view freely available videos
and also offers users and media publishers the ability to
publish videos’ contents, including television shows on CBS,
NBA basketball games, and music videos. In August 2007,
Google announced that it would shut down its accompanying
video rental and sales program and offer refunds and Google
Checkout credits to consumers who had purchased videos
to own.
In 2007, some reports surfaced that Google was
planning the release of its own mobile phone, possibly
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(continued)
a competitor to Apple’s iPhone. The project, called
Android, provides a standard development kit that will
allow any “Android” phone to run software developed for
the Android SDK, no matter the phone manufacturer. By
June 2008, the Android Development Challenge was in its
second round.
In 2008, Google began offering Google Checkout Trends.
This e-commerce tool aggregates useful sales data from
Google Checkout merchants and charts the data for the user
to see, showing users important trend data about who is
buying and selling what from Checkout. The tool is used very
much like the search engine, except that when a user types
a keyword or phrase into the search bar a chart is built.
A mouse-over the chart shows the results for the requested
items. The tool also works for comparing brands (e.g., iPod
compared to Zune).
For more on Google’s products, visit google.com/options.
The strategic moves Google is making are all in line with its
mission statement: “To organize the world’s information and
make it universally useful and accessible.”
Enterprise Search
An enterprise search (also known as a desktop search) identifies and enables specific content across the enterprise to be
indexed, searched, and displayed to authorized users. Google
partnered with BearingPoint, an IT consulting firm, to supply
enterprise search capabilities. BearingPoint has experience
in extending Google to provide search services to specific
industries. A crucial enterprise search issue is programming
search engines to crawl through all the various data sources
at a company and index their contents. Enterprise searches
can be integrated with other applications to improve performance. For example, Cognos Go! Search Service is a BI
(business intelligence) search utility. It offers a familiar
search interface for accessing strategic enterprise information, such as reports, metrics, analyses, and business events,
that answer critical business questions with a simple
keyword search. Oracle offers a search engine for enterprise
systems, 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 available medical knowledge doubles about every 7 years, so
keeping up with new knowledge is an important aspect of
good caregiving by HMOs.
When Kaiser Permanente developed a clinical knowledge
corporate portal for its 50,000 doctors, nurses, and other
caregivers, enterprise search was a part of the plan. The
Permanente Knowledge Connection, available from anywhere
in the Kaiser wide area network, gives medical staff access to
diagnostic information, best practices, publications, educational material, and other clinical resources. The portal’s
resources are distributed across the entire United States.
Putting the right information quickly and easily into caregivers’ hands is essential to the clinical portal’s success.
Kaiser turned to the Google Search Appliance, which
enabled the HMO to index 150,000 documents across the
Kaiser network. Clinicians now search the site in situations
that range from leisurely research to urgent care, from the
exam room to the emergency room. Doctors and nurses use
the search engine to help them reach diagnoses and specify
treatments, check the side effects of new medications, and
consult clinical research studies and other medical publications. Google’s spell-checking capability is especially useful
in the medical profession: Doctors’ handwriting can be problematic and pharmaceutical product names are difficult.
Questions
1. 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 as
Kaiser?
REFERENCES FOR ONLINE FILE W1.4
Brown, 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 Trend
Data.” 2008. ecommerceoptimization.com/articles/
new-ecommerce-trends-tool-get-google-checkoutmerchant-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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Application Case
CAMPUS FOOD—STUDENT ENTREPRENEURS
Campusfood.com’s recipe for success was a simple one: Provide
interactive menus to college students, using the power of the
Internet to replace and/or facilitate the traditional telephone
ordering of meals. Launched at the University of Pennsylvania
(Penn), the company takes thousands of orders each month for
local restaurants, bringing pizzas, hoagies, and wings to the
Penn 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. With
the help of some classmates, Saunders launched the site in
1998. After graduation, he began building the company’s
customer base. This involved expanding to other universities,
attracting students, and generating a list of restaurants from
which students could order food for delivery. Currently, some
of these activities are outsourced to a marketing firm, enabling
the addition of dozens of schools nationwide. In 2004, the
company served 200 schools linked to over 1,000 restaurants.
Financed through private investors, friends, and family
members, the site was built on an investment of less than
$1 million. (For comparison, another company with
services also reaching the college-student market invested
$100 million.) Campusfood.com’s revenue is generated
through transaction fees—the site takes a 5 percent
commission on each order from the sellers (the restaurants).
When you visit Campusfood.com, you can:
an electronic menu that lists every topping, every
special, and every drink offered, along with the latest
prices.
◗ Bypass “busy” telephone signals to place an order online,
and in so doing, avoid miscommunications.
◗ Get access to special foods, promotions, and restaurant
giveaways. The company is working to set up meal deals
that are available online exclusively for Campusfood.com
customers.
◗ Arrange for electronic payment of an order.
◗ Navigate through a list of local restaurants, their hours of
operation, addresses, phone numbers, and other information.
◗ Browse an interactive menu. The company takes a
restaurant’s standard print menu and converts it to
4. How does the outsourcing of the marketing activities
contribute to the business?
University students who signed up at Titan Poker with a
special bonus code provided by Campusfood.com were eligible to play in a series of exclusive online poker tournaments
(in April 2006). Winners received special Campusfood.com
Cash coupons valued at $20,000, redeemable for food orders
at participating restaurants.
Questions
1. Classify this application by EC transaction type.
2. Explain the benefits of Campusfood.com for its student
customers and for the restaurants it represents.
3. Trace the flow of digitized information in this venture.
5. What is the benefit of the Titan Poker contest to the
company?
REFERENCES FOR ONLINE FILE W1.5
Campusfood.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
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 reasonably priced, customized textbooks for their classes by compiling material from thousands of Pearson’s publications and the
instructors’ 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 in
a 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 a
ticket from a local travel agent or by phone directly from the airline. In large airports, travelers can get their boarding
passes 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 government
event 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 of
the owner’s hand is compared with a prestored template of the vein stored on the smart card. When the owner inserts the
card 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 plastic
band strapped to the wrist. Each time a patient passes an RFID reader, the patient’s location is transmitted in real time to
the responsible staff member. The RFID is linked to the hospital’s computer network, connecting the patient’s records to
labs, billing, and the pharmacy.
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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 million
volunteers registered at my.barackobama.com. These volunteers mobilized supporters and organized communities. Through
the 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 on
voter registration efforts and then shifted them to a get-out-the-vote campaign as the election drew near. Through the
site, 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 to
supporters 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 about
13 million addresses. Over the course of the campaign, aides sent more than 7,000 different messages; many of them
targeted to specific donation-level participants.
Because social media facilitates direct engagement and communication among friends, contacts, and families, the
sharing 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 so
much time with him.
Obama’s campaign integrated online marketing methods with a viral campaign using word-of-mouth advertising and
marketing 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 his
MySpace friends. In January 2008, MySpace users selected Obama as the winner of the presidential election, garnering
46 percent of the vote.
◗ YouTube. Barack Obama’s speeches, events, and TV ads are still available at the official Obama–Biden Campaign YouTube
channel. Obama campaign-related videos received 14.5 million hours of viewing time on YouTube. This time would have
cost $47 million to buy on television. Obama’s 38-minute speech on race had more than 2 million views on YouTube in
just 2 days after posting. In November 2008, President-elect Obama chose YouTube as the media stream for his “Saturday
Fireside 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 became
president-elect.
◗ Facebook. Obama supporters on Facebook found it impossible to be on the site at any given time and not see an Obama
ad driving them to BarackObama.com. His Facebook friend count was over 31 million. Facebook cofounder Chris Hughes
quit 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 following
them. This sent the message they wanted to communicate, and it encouraged feedback from the user. This built a sense
of community. Obama’s posts were filled with words like “encourage” and “friends,” and every post was a clear call
to 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 nomination
and then the 2008 presidential election.
Chapter One: Overview of Electronic Commerce
1-11
REFERENCES FOR ONLINE FILE W1.8
Carr, 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 Elections
on the Ground.” CIO Insight, September 29, 2008.
blogs.cioinsight.com/knowitall/content001/all_politi
cking_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 Democrats
Built Their Network.” CIO Insight, September 29, 2008.
blogs.cioinsight.com/knowitall/content001/connect
ing_the_compaign_how_the_democrats_built_their_
network.html (accessed March 2009).
Cone, E. “Local Area Networks: How the Obama
Campaign 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 (accessed
March 2009).
The Guardian. “Barack Obama’s Flickr Page Shows Family
as Their Lives Changed Forever.” November 7, 2008.
guardian.co.uk/world/deadlineusa/2008/nov/07/bar
ackobama-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 (accessed
March 2009).
McCarthy, C. “Surprise! Barack Obama, Ron Paul Win
MySpace ‘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 Social
Networking.” OpenSourceMarketer.com, February 27, 2008.
opensourcemarketer.com/marketing-tools/obamaand-hillary-use-twitter-for-social-networking (accessed
March 2009).
Needle, D. “Huffington: ‘Obama Not Elected Without
Internet.’” 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).
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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 their
market share, better negotiate with their suppliers, or prevent competitors from entering into their territory. There are a
variety of EC-supported strategic systems. One example is FedEx’s tracking system, which allows FedEx to identify the
status of every individual package, anywhere in the system. Most of FedEx’s competitors have already copied the FedEx
system. 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 of
change. To create business agility, organizations use IT in general and EC in particular. The solution provided by EC enables
capitalizing on changing industry, government, and business requirements; assimilating required resources and business
processes quickly to meet demand; promptly adapting technology to fit new or modified business processes; leveraging
existing resources to do the above; and doing it all economically.
Continuous Improvement Efforts and Business Process Restructuring and Management. Many companies continuously
conduct programs to improve their productivity, quality, and customer service. Two examples of how EC can help are Dell and
Intel. Dell takes its orders electronically and immediately moves them via enterprise resource planning (ERP) software (see
Online 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 and
deliveries.
However, continuous improvement programs may not be a sufficient solution for some business problems. Strong business
pressures 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 EC
initiatives such as e-procurement.
Customer and Partner Relationship Management. One of the major symptoms of the digital revolution is that the
bargaining power of customers is stronger than ever, and that power is growing. The availability of information and the
ability 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 accomplished
through 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 of
EC. Such support is done by multiple technologies, ranging from computerized call centers to intelligent agents. Some of
the 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. For
example, General Motors, Ford, and others in the automotive industry created a huge B2B e-marketplace called Covisint (see
Chapter 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 members
to compete globally. Most electronic markets require the collaboration of different companies, sometimes even
competitors, 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 complete 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 those
who are first on the market with a product or who can provide customers with a service faster than their competitors, enjoy a
distinct competitive advantage. Extranet-based applications can expedite the various steps in the process of product or service
development, testing, and implementation.
Empowerment of Employees. Giving employees the authority to act and make decisions on their own is a strategy used
by many organizations as part of productivity improvement programs. Management delegates authority to individuals
or 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 it
quickly, helping to increase customer loyalty. EC allows the decentralization of decision making and authority via empowerment and distributed systems, but simultaneously supports a centralized control. Empowerment can also be achieved by
using automated decision systems (see Davenport 2006).
(continued)
Chapter One: Overview of Electronic Commerce
1-13
Online File W1.9 (continued)
Supply Chain Improvements. EC, as is shown throughout the book, and especially in Chapters 5 and 12, can help reduce
supply chain delays, reduce inventories, and eliminate other inefficiencies. The use of e-supply chain models to automate factory 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 changing
manufacturing processes from mass production to mass customization (Anderson 2002). In mass production, a company produces a large quantity of identical items. In mass customization, items are produced in a large quantity but are customized
to fit the desires of each customer. EC is an ideal facilitator of mass customization, for example, by enabling interactive
communication 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 in
supporting organizational responses is applications inside the business. The support can be provided to field representatives, warehouse employees, designers, researchers, and office workers. The improvements in productivity for these
kinds of employees were fairly slow until the introduction of EC.
Knowledge Management. Knowledge management (KM) refers to the process of creating or capturing knowledge, storing
and protecting it, updating and maintaining it, and using it whenever necessary. Knowledge management programs and software are frequently associated with EC. For example, knowledge is delivered via corporate portals to assist users or to teach
employees. Also, EC implementation requires knowledge, and EC activities such as market research create knowledge. For more
on the EC–KM connection, see Chapter 7.
REFERENCES FOR ONLINE FILE W1.9
Anderson, D. Build-to-Order and Mass Customization: The
Ultimate Supply Chain Management and Lean Manufacturing Strategy for Low-Cost On-Demand Production
Without Forecasts or Inventory. Los Angeles: CIM Press,
2004.
Davenport, T. H. “Competing on Analytics.” Harvard
Business Review ( January 2006).
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Part 1: Introduction to E-Commerce and E-Marketplaces
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 price
they are willing to pay for a specific product or service. Priceline.com will try to match a customer’s request with a
supplier 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 and
then 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 or
reject the offer. A variation of this model is available for purchasing insurance: A consumer can submit a request for
insurance to InsWeb (insweb.com) and receive several quotes. Many companies employ similar models to show price
comparisons and find the lowest price. For example, consumers can go to E-LOAN (eloan.com) to find the best interest
rate for auto or home loans. A well-known company in this area is Shopping.com, which is described with similar
companies in Chapter 3.
3. Affiliate marketing. Affiliate marketing is an arrangement whereby a marketing partner (a business, an organization, or
even an individual) refers consumers to a selling company’s Web site (see Chapter 4). The referral is done by placing a
banner ad or the logo of the selling company on the affiliated company’s Web site. Whenever a customer who was referred
to the selling company’s Web site makes a purchase there, the affiliated partner receives a commission (which may range
from 3% to 15%) of the purchase price. In other words, by using affiliate marketing, a selling company creates a virtual
commissioned 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 organizations
the 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-tomedium 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 discount. This model, also known as the volume-buying model, is described in Chapter 5. Leading aggregators for the
health-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 other
companies, 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 auctioned. E-auctions come in different shapes and use different models. For example, eBay is using about 40,000 “assistants” 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’s
specifications. Customization is not a new model, but what is new is the ability to quickly configure customized
products online for consumers at costs not much higher than their noncustomized counterparts (see Chapters 3 and
5). 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 that
they 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 as
50 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 complete
package 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 at
ups.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 or
improve supply chain management (e.g., Dell). Most interesting is the conversion of a linear supply chain, which can
be 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
REFERENCE FOR ONLINE FILE W1.10
Bandyopadhyay, S. “A Critical Review of Pricing Strategies
for Online Business Model.” Quarterly Journal of
Electronic Commerce 2, no. 1 (2001).
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
Conferences
Many 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 Sources
Many 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)
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