E-commerce 2023, 17e (Laudon/Traver)
Chapter 2 E-commerce Business Models and Concepts
1) Which of the following is at the very heart of a company's business model?
A) Market strategy
B) Value proposition
C) Competitive advantage
D) Revenue model
Answer: B
Difficulty: Moderate
AACSB: Application of knowledge
Learning Objective: 2.1: Identify the key components of e-commerce business models.
2) Which of the following uses a subscription revenue model for e-books?
A) Spotify
B) Scribd
C) eHarmony
D) Ancestry
Answer: B
Difficulty: Moderate
AACSB: Application of knowledge
Learning Objective: 2.1: Identify the key components of e-commerce business models.
3) Which element of the business model defines how a company's product or service fulfills the
needs of customers?
A) competitive environment
B) competitive advantage
C) market strategy
D) value proposition
Answer: D
Difficulty: Moderate
AACSB: Application of knowledge
Learning Objective: 2.1: Identify the key components of e-commerce business models.
4) Which element of the business model refers to the power of customers and suppliers over a
business?
A) value proposition
B) competitive environment
C) competitive advantage
D) market opportunity
Answer: B
Difficulty: Moderate
AACSB: Application of knowledge
Learning Objective: 2.1: Identify the key components of e-commerce business models.
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5) Which of the following are Amazon's primary value propositions?
A) personalization and customization
B) selection and convenience
C) reduction of price discovery cost
D) management of product delivery
Answer: B
Difficulty: Easy
AACSB: Analytical thinking
Learning Objective: 2.1: Identify the key components of e-commerce business models.
6) A firm's ________ describes how a firm will produce a superior return on invested capital.
A) value proposition
B) revenue model
C) market strategy
D) competitive advantage
Answer: B
Difficulty: Moderate
AACSB: Application of knowledge
Learning Objective: 2.1: Identify the key components of e-commerce business models.
7) A firm's competitive environment refers to all of the following except:
A) other business selling similar products in the same marketspace
B) the presence of substitute products
C) potential new entrants to the market
D) the plan a business develops to attract customers
Answer: D
Difficulty: Moderate
AACSB: Application of knowledge
Learning Objective: 2.1: Identify the key components of e-commerce business models.
8) Stickiness is an important attribute for which of the following revenue models?
A) advertising revenue model
B) subscription revenue model
C) sales revenue model
D) affiliate revenue model
Answer: A
Difficulty: Moderate
AACSB: Application of knowledge
Learning Objective: 2.1: Identify the key components of e-commerce business models.
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9) Which of the following companies uses a transaction fee revenue model?
A) Yahoo
B) E*Trade
C) Twitter
D) Amazon Kindle Unlimited
Answer: B
Difficulty: Moderate
AACSB: Application of knowledge
Learning Objective: 2.1: Identify the key components of e-commerce business models.
10) Which of the following is an example of the affiliate revenue model?
A) Yahoo
B) eBay
C) Netflix
D) MyPoints
Answer: D
Difficulty: Moderate
AACSB: Application of knowledge
Learning Objective: 2.1: Identify the key components of e-commerce business models.
11) Which of the following involves a company giving away a certain level of product or service
without charge, but then charging a fee for premium levels of the product or service?
A) advertising revenue model
B) subscription revenue model
C) freemium strategy
D) premium strategy
Answer: C
Difficulty: Moderate
AACSB: Analytical thinking
Learning Objective: 2.1: Identify the key components of e-commerce business models.
12) Which of the following factors is not a significant influence on a company's competitive
environment?
A) how many competitors are active
B) what the market share of each competitor is
C) the availability of supportive organizational structures
D) how profitable competitors are
Answer: C
Difficulty: Difficult
AACSB: Application of knowledge
Learning Objective: 2.1: Identify the key components of e-commerce business models.
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13) Which of the following statements is not true?
A) Priceline and Expedia are direct competitors.
B) CNN and ESPN are indirect competitors.
C) Automobile manufacturers and airline industries are direct competitors.
D) CNN and ESPN both compete for consumers' time online.
Answer: C
Difficulty: Easy
AACSB: Analytical thinking
Learning Objective: 2.1: Identify the key components of e-commerce business models.
14) The existence of many competitors in any one market segment may indicate:
A) an untapped market niche.
B) the market is saturated.
C) no one firm has differentiated itself within that market.
D) a market that has already been tried without success.
Answer: B
Difficulty: Moderate
AACSB: Application of knowledge
Learning Objective: 2.1: Identify the key components of e-commerce business models.
15) Which of the following statements about equity crowdfunding is not true?
A) Only wealthy accredited investors can participate in equity crowdfunding.
B) Regulation crowdfunding is another name for equity crowdfunding.
C) Currently, a company can crowdfund up to $5 million over a 12-month period.
D) Equity crowdfunding allows companies to solicit investors to invest in small and early stage
startups in exchange for stock.
Answer: A
Difficulty: Moderate
AACSB: Analytical thinking
Learning Objective: 2.1: Identify the key components of e-commerce business models.
16) A perfect market is one in which:
A) there are no competitive advantages or asymmetries because all firms have equal access to all
the factors to production.
B) one firm develops an advantage based on a factor of production that other firms cannot
purchase.
C) one participant in the market has more resources than the others.
D) competition is at a minimum, as each niche market within an industry is served by the
company with the greatest competitive advantage.
Answer: A
Difficulty: Difficult
AACSB: Application of knowledge
Learning Objective: 2.1: Identify the key components of e-commerce business models.
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17) Organizations that typically provide an array of services to startup companies along with a
small amount of funding are referred to as:
A) angel investors.
B) crowdfunders.
C) incubators.
D) venture capital investors.
Answer: C
Difficulty: Moderate
AACSB: Application of knowledge
Learning Objective: 2.1: Identify the key components of e-commerce business models.
18) A ________ specifically details how you plan to find customers and to sell your product.
A) sales analysis
B) business plan
C) competitive strategy
D) market strategy
Answer: D
Difficulty: Easy
AACSB: Application of knowledge
Learning Objective: 2.1: Identify the key components of e-commerce business models.
19) Which of the following uses a subscription-based sales revenue model?
A) Yahoo
B) eBay
C) MyPoints
D) Dollar Shave Club
Answer: D
Difficulty: Moderate
AACSB: Application of knowledge
Learning Objective: 2.1: Identify the key components of e-commerce business models.
20) All of the following may lead to a competitive advantage except:
A) less expensive suppliers.
B) better employees.
C) fewer products.
D) superior products.
Answer: C
Difficulty: Moderate
AACSB: Application of knowledge
Learning Objective: 2.1: Identify the key components of e-commerce business models.
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21) Which of the following is an unfair competitive advantage?
A) brand name
B) access to global markets
C) lower product prices
D) superior technology
Answer: A
Difficulty: Moderate
AACSB: Application of knowledge
Learning Objective: 2.1: Identify the key components of e-commerce business models.
22) Which of the following gives a business model the most credibility with outside
investors?
A) the firm's management team
B) the firm's value proposition
C) the firm's market opportunity
D) the firm's market strategy
Answer: A
Difficulty: Moderate
AACSB: Application of knowledge
Learning Objective: 2.1: Identify the key components of e-commerce business models.
23) Which of the following statements about Foursquare is not true?
A) Foursquare is one of the Internet's largest location data tracking firms.
B) Foursquare's initial business model focused on its social mobile app.
C) Sự tăng trưởng doanh thu của Foursquare chủ yếu nhờ vào sự gia tăng người dùng ứng dụng
Swarm.
D) Foursquare characterizes itself as a leader on privacy issues.
Answer: C
Difficulty: Moderate
AACSB: Analytical thinking
Learning Objective: 2.1: Identify the key components of e-commerce business models.
24) Loại hình nhà đầu tư nào thường quan tâm đến một công ty khởi nghiệp sau khi nó đã
bắt đầu tạo ra doanh thu?
A) Vườn ươm (incubators). Thường hỗ trợ startup khi mới chỉ là một ý tưởng hoặc bản mẫu
(Prototype). Họ cung cấp chỗ ngồi làm việc, tư vấn và một ít vốn mồi.
B) Nhà đầu tư thiên thần (angel investors). Thường là các cá nhân dùng tiền túi để đầu tư ở
giai đoạn cực sớm (Seed stage). Họ chấp nhận rủi ro cực cao khi công ty thậm chí chưa có sản
phẩm hoàn thiện, chưa nói đến doanh thu.
C) Nhà đầu tư cộng đồng (crowdfunders). Thường diễn ra khi startup ra mắt sản phẩm đầu
tiên trên các nền tảng như Kickstarter. Đây giống như hình thức "đặt hàng trước" hơn là một nhà
đầu tư chiến lược quan tâm đến doanh thu dài hạn.
D) Nhà đầu tư mạo hiểm (venture capital investors).
Answer: D
Difficulty: Moderate
AACSB: Application of knowledge
Learning Objective: 2.1: Identify the keyggs components of e-commerce business models.
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25) Which of the following is another name for a revenue model?
A) business model
B) business strategy
C) financial model
D) financial statements
Answer: C
Difficulty: Easy
AACSB: Application of knowledge
Learning Objective: 2.1: Identify the key components of e-commerce business models.
26) Việc Amazon lấn sân sang mảng kinh doanh tạp hóa trực tuyến (online grocery) là một
ví dụ về điều nào sau đây?
A) Lợi thế của người đi đầu (first-mover advantage).
B) Sự khác biệt hóa (differentiation).
C) Đòn bẩy (leverage). sử dụng các nguồn lực, năng lực cốt lõi hoặc tài sản sẵn có của mình
để thâm nhập vào một lĩnh vực mới một cách hiệu quả và ít tốn kém hơn so với đối thủ.
D) Sự tập trung (focus). là khi doanh nghiệp chỉ nhắm vào một phân khúc hẹp
Answer: C
Difficulty: Moderate
AACSB: Application of knowledge
Learning Objective: 2.1: Identify the key components of e-commerce business models.
27) A wealthy individual who invests personal funds in a startup in exchange for an equity
share in the business is referred to as a(n):
A) incubator.
B) angel investor.
C) venture capital investor.
D) crowdfunder.
Answer: B
Difficulty: Moderate
AACSB: Application of knowledge
Learning Objective: 2.1: Identify the key components of e-commerce business models.
28) Which of the following is not a key element of bài kêu gọi đầu tư?
A) Chiến lược thoát vốn (exit strategy).
B) Các chỉ số tăng trưởng (growth metrics).
C) Cấu trúc pháp lý (legal structure).
D) Cơ hội thị trường (market opportunity).
Answer: C
Difficulty: Moderate
AACSB: Application of knowledge
Learning Objective: 2.1: Identify the key components of e-commerce business models.
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29) First movers often fail because:
A) their competitive advantage is unfair.
B) they lack complementary resources needed to sustain their advantages.
C) they are operating in a perfect market.
D) they fail to leverage their competitive assets.
Answer: B
Difficulty: Moderate
AACSB: Analytical thinking
Learning Objective: 2.1: Identify the key components of e-commerce business models.
30) Loại hình gọi vốn cộng đồng nào sau đây bao gồm việc mọi người đóng góp cho người
khác mà không có kỳ vọng nhận lại bất kỳ lợi ích nào?
A) Gọi vốn dựa trên quyên góp (donor-based).
B) Gọi vốn dựa trên phần thưởng (rewards-based).
C) Gọi vốn dựa trên cổ phần (equity).
D) Gọi vốn theo quy định (regulation).
Answer: A
Difficulty: Easy
AACSB: Application of knowledge
Learning Objective: 2.1: Identify the key components of e-commerce business models.
31) A value proposition defines how a company's product or service will generate revenue
for the firm.
Answer: FALSE
Difficulty: Easy
AACSB: Application of knowledge
Learning Objective: 2.1: Identify the key components of e-commerce business models.
32) Real markets are imperfect.
Answer: TRUE
Difficulty: Easy
AACSB: Application of knowledge
Learning Objective: 2.1: Identify the key components of e-commerce business models.
33) Information asymmetries enable some firms to have an edge over others.
Answer: TRUE
Difficulty: Moderate
AACSB: Application of knowledge
Learning Objective: 2.1: Identify the key components of e-commerce business models.
34) Google is an example of first-mover advantage.
Answer: FALSE
Difficulty: Moderate
AACSB: Application of knowledge
Learning Objective: 2.1: Identify the key components of e-commerce business models.
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35) M-commerce (Thương mại di động) là một mô hình kinh doanh riêng biệt.
Answer: FALSE M-commerce chỉ là một nhánh hoặc một nền tảng thực thi của E-commerce
Difficulty: Easy
AACSB: Application of knowledge
Learning Objective: 2.1: Identify the key components of e-commerce business models.
36) GoFundMe is a prominent example of a rewards-based crowdfunding site.
Answer: FALSE
Difficulty: Moderate
AACSB: Application of knowledge
Learning Objective: 2.1: Identify the key components of e-commerce business models.
37) Why is the management team such an important element of a business model?
Answer: A strong management team gives a model instant credibility to outside investors,
immediate market-specific knowledge, and experience in implementing business plans. A strong
management team may not be able to salvage a weak business model, but the team should be
able to change the model and redefine the business as it becomes necessary.
Difficulty: Moderate
AACSB: Application of knowledge; Written and oral communication
Learning Objective: 2.1: Identify the key components of e-commerce business models.
38) Who are the e-commerce enablers and why are they important?
Answer: E-commerce enablers provide the hardware, operating system software, networks and
communications technology, applications software, web design, consulting services, and other
tools required for e-commerce. While these firms may not be conducting e-commerce per se
(although in many instances, e-commerce in its traditional sense is in fact one of their sales
channels), as a group they have perhaps profited the most from the development of e-commerce.
Difficulty: Moderate
AACSB: Application of knowledge; Written and oral communication
Learning Objective: 2.1: Identify the key components of e-commerce business models.
39) Define elevator pitch and describe its key elements.
Answer: An elevator pitch is a short two-to-three-minute presentation aimed at convincing
investors to invest. The key elements of an elevator pitch are an introduction, in which you state
your name and position, your company's name and a tagline in which you compare what your
company does to a well-known company; background, in which you state the origin of your idea,
and the problem you are trying to solve, the industry size/market opportunity, in which you
provide brief facts about the size of the market; revenue model/numbers/growth metrics, in
which you provide insight into your company's revenue model and results thus far, how fast it is
growing, and early adopters, if there are any; funding, in which you state the amount of funds
you are seeking and what it will help you achieve; and finally exit strategy, in which you explain
how your investors will achieve a return on their investment.
Difficulty: Moderate
AACSB: Application of knowledge; Written and oral communication
Learning Objective: 2.1: Identify the key components of e-commerce business models.
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40) Define organizational development and describe its importance in relation to the
implementation of a business plan and strategy.
Answer: Organizational development is a plan that describes how the company will organize the
work that needs to be accomplished in the business plan or strategy. Typically, work is divided
into functional departments, such as production, shipping, marketing, customer support, and
finance. Jobs within these functional areas are defined, and then recruitment begins for specific
job titles and responsibilities. Typically, in the beginning, generalists who can perform multiple
tasks are hired. As the company grows, recruiting becomes more specialized. For instance, at the
outset, a business may have one marketing manager. But after two or three years of steady
growth, that one marketing position may be broken down into seven separate jobs done by seven
individuals.
All firms – new ones in particular – need an organization to efficiently implement their business
plans and strategies. Many e-commerce firms and many traditional firms that attempt an e-
commerce strategy have failed because they lacked the organizational structures and supportive
cultural values required to support new forms of commerce.
Difficulty: Moderate
AACSB: Analytical thinking; Written and oral communication
Learning Objective: 2.1: Identify the key components of e-commerce business models.
41) All of the following can be considered examples of the market creator business model
except:
A) eBay.
B) Etsy.
C) Uber.
D) Twitter.
Answer: D
Difficulty: Easy
AACSB: Application of knowledge
Learning Objective: 2.1: Identify the key components of e-commerce business models.
42) Which of the following is not a community provider?
A) LinkedIn
B) Facebook
C) Bluefly
D) Pinterest
Answer: C
Difficulty: Easy
AACSB: Application of knowledge
Learning Objective: 2.2: Describe the major B2C business models.
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43) Hình thức nào sau đây KHÔNG PHẢI là một biến thể của mô hình kinh doanh E-tailer
(Nhà bán lẻ trực tuyến – B2C)??
A) Omnichannel merchant (Người bán hàng đa kênh).
B) Virtual merchant (Người bán hàng thuần trực tuyến).
C) Market creator (Người tạo lập thị trường).
D) Manufacturer-direct (Nhà sản xuất bán trực tiếp).
Answer: C
Difficulty: Moderate
AACSB: Application of knowledge
Learning Objective: 2.2: Describe the major B2C business models.
44) Which of the following is an example of a company using the content provider model?
A) Expedia
B) Netflix
C) Dell
D) eBay
Answer: B
Difficulty: Moderate
AACSB: Application of knowledge
Learning Objective: 2.2: Describe the major B2C business models.
45) Which of the following is not an example of the manufacturer-direct business model?
A) Dell
B) Nike
C) Wayfair
D) Everlane
Answer: C
Difficulty: Easy
AACSB: Application of knowledge
Learning Objective: 2.2: Describe the major B2C business models.
46) In general, the key to becoming a successful content provider is to:
A) own the content being provided.
B) own the technology by which content is created, presented, and distributed.
C) provide online content for free.
D) provide other services as well as online content.
Answer: A
Difficulty: Moderate
AACSB: Application of knowledge
Learning Objective: 2.2: Describe the major B2C business models.
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47) The term "creators" was a label originated by which of the following?
A) Facebook
B) Yahoo
C) Google
D) YouTube
Answer: D
Difficulty: Easy
AACSB: Application of knowledge
Learning Objective: 2.2: Describe the major B2C business models.
48) Which of the following is not considered a portal?
A) Yahoo
B) MSN
C) Amazon
D) AOL
Answer: C
Difficulty: Easy
AACSB: Application of knowledge
Learning Objective: 2.2: Describe the major B2C business models.
49) Portals primarily generate revenue in all of the following ways except:
A) charging advertisers for ad placement.
B) collecting transaction fees.
C) sales of goods.
D) charging subscription fees.
Answer: C
Difficulty: Moderate
AACSB: Application of knowledge
Learning Objective: 2.2: Describe the major B2C business models.
50) The basic value proposition of community providers is:
A) they offer a fast, convenient one-stop platform where users can focus on their most important
concerns and interests.
B) they offer consumers valuable, convenient, time-saving, and low-cost alternatives to
traditional service providers.
C) they create a digital environment for buyers and sellers to meet, agree on a price, and transact.
D) they increase customers' productivity by helping them get things done faster and less
expensively.
Answer: A
Difficulty: Moderate
AACSB: Application of knowledge
Learning Objective: 2.2: Describe the major B2C business models.
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51) Which of the following statements about user generated content and creators is not
true?
A) Creators can be considered a subset of influencers.
B) Creators have come to occupy an ever-increasing role in the online content landscape.
C) More than 200 million people characterize themselves as creators.
D) The "creator economy" is rapidly growing.
Answer: A
Difficulty: Moderate
AACSB: Application of knowledge
Learning Objective: 2.2: Describe the major B2C business models.
52) All of the following are horizontal portals except:
A) MSN
B) Sailnet
C) Yahoo
D) AOL
Answer: B
Difficulty: Easy
AACSB: Application of knowledge
Learning Objective: 2.2: Describe the major B2C business models.
53) The financial services and travel services industries typically use the ________ business
model.
A) community provider
B) môi giới giao dịch
C) market creator
D) e-tailer
Answer: B
Difficulty: Easy
AACSB: Application of knowledge
Learning Objective: 2.2: Describe the major B2C business models.
54) In the ________ business model, a business builds a digital environment in which
buyers and sellers can meet, display products, search for products, and establish prices.
A) market creator
B) community provider
C) e-tailer
D) portal
Answer: A
Difficulty: Moderate
AACSB: Application of knowledge
Learning Objective: 2.2: Describe the major B2C business models.
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55) On-demand service companies are characterized by the free sharing of resources
between the company and consumers.
Answer: FALSE
Difficulty: Moderate
AACSB: Application of knowledge
Learning Objective: 2.2: Describe the major B2C business models.
56) Define and describe the transaction broker business model and discuss value
proposition, revenue model, market opportunities, and competitive environment for this
type of B2C firm.
Answer: The transaction broker business model provides online order processing for
transactions that were previously normally handled in person, by phone, or by mail. It is most
commonly found in the financial services and travel services industries.
The primary value proposition for a transaction broker is the saving of time and money. These
companies also often provide relevant content.
The revenue model for these firms is based upon receiving commissions or transaction fees each
time a transaction occurs. Online stock trading firms receive either a flat fee for each transaction
or a fee based on a sliding scale according to the size of the transaction. Attracting new
customers and encouraging them to trade are the keys to generating more revenue for these
companies. Online travel companies generate commissions from travel bookings.
Market opportunities for transaction brokers in financial services are increasing due to the rising
interest in online financial services. However, there is some market resistance due to consumers'
fear of loss of privacy and loss of control over their personal financial information.
To compete effectively, online brokers must convince consumers that they have effective
security and privacy procedures in place, and like physical banks and brokerage firms, provide a
broad range of financial services, not just stock trading.
Difficulty: Difficult
AACSB: Analytical thinking; Written and oral communication
Learning Objective: 2.2: Describe the major B2C business models.
57) All of the following are examples of business-to-business (B2B) business models except:
A) e-distributors. (nhà phân phối – kho hàng cho DN khác)
B) e-procurement. (nhà thu mua)
C) exchanges. (sàn giao dịch)
D) portals. (cổng vào cho B2C)
Answer: D
Difficulty: Easy
AACSB: Application of knowledge
Learning Objective: 2.3: Describe the major B2B business models.
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58) What is the primary revenue model for an e-distributor?
A) sales (họ sở hữu hàng hóa)
B) transaction fee
C) advertising
D) subscription
Answer: A
Difficulty: Moderate
AACSB: Application of knowledge
Learning Objective: 2.3: Describe the major B2B business models.64) A ________ marketplace
supplies products and services of interest to a particular industry.
A) perfect
B) differentiated
C) horizontal
D) vertical
Answer: D
Difficulty: Moderate
AACSB: Application of knowledge
Learning Objective: 2.3: Describe the major B2B business models.
65) SaaS and PaaS providers can typically provide services at lower costs through scale
economies.
Answer: TRUE
Difficulty: Moderate
AACSB: Application of knowledge
Learning Objective: 2.3: Describe the major B2B business models.
66) What is a B2B exchange, and what benefits do they offer?
Answer: An exchange is an independent digital marketplace that connects hundreds to
potentially thousands of suppliers and buyers in a dynamic, real-time environment. Exchanges
are typically owned by independent firms whose business is making a market, and they generate
revenue by charging a commission or fee based on the size of the transactions conducted among
trading parties. They usually serve a single vertical industry and focus on the exchange of direct
inputs to production and short-term contracts or spot purchasing.
For buyers, B2B exchanges make it possible to gather information, check out suppliers, collect
prices, and keep up to date on the latest happenings all in one place. Sellers, on the other hand,
benefit from expanded access to buyers. The greater the number of sellers and buyers, the higher
the chances of making a sale. Exchanges make it significantly less expensive and time-
consuming to identify potential suppliers and customers and for them to do business with one
another. As a result, they can lower transaction costs–the cost of making a sale or purchase.
Exchanges can also lower product costs and inventory-carrying costs–the cost of keeping a
product on hand in a warehouse.
Difficulty: Moderate
AACSB: Application of knowledge; Written and oral communication
Learning Objective: 2.3: Describe the major B2B business models.
67) A ________ refers to a competitive strategy in which firms attempt to achieve lower
business process costs.
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A) strategy of cost competition
B) scope strategy
C) customer intimacy strategy
D) focus/market niche strategy
Answer: A
Difficulty: Moderate
AACSB: Analytical thinking
Learning Objective: 2.4: Understand the key business concepts and strategies applicable to e-
commerce.
68) Which of the following features of e-commerce technology changes industry structure by
lowering barriers to entry but greatly expands the market at the same time?
A) global reach
B) richness
C) interactivity
D) personalization
Answer: A
Difficulty: Moderate
AACSB: Information technology
Learning Objective: 2.4: Understand the key business concepts and strategies applicable to e-
commerce.
69) Which of the following is not a primary activity in a firm value chain?
A) outbound logistics
B) finance/accounting
C) operations
D) after-sales service
Answer: B
Difficulty: Moderate
AACSB: Application of knowledge
Learning Objective: 2.4: Understand the key business concepts and strategies applicable to e-
commerce.
70) Which of the following is a networked business ecosystem that coordinates a firm's
suppliers, distributors, and delivery firms with its own production needs using Internet
technology.
A) value chain
B) value system
C) value web
D) business strategy
Answer: C
Difficulty: Moderate
AACSB: Application of knowledge
Learning Objective: 2.4: Understand the key business concepts and strategies applicable to e-
commerce.
71) If you wished to leverage the ubiquitous nature of the Web to differentiate your product, you
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would:
A) enable individual customization of the product by consumers.
B) implement a strategy of commoditization.
C) adopt a strategy of cost competition.
D) develop a scope strategy to compete within a narrower market segment.
Answer: A
Difficulty: Difficult
AACSB: Analytical thinking
Learning Objective: 2.4: Understand the key business concepts and strategies applicable to e-
commerce.
72) A strategy designed to compete within a narrow market or product segment is called a
________ strategy.
A) scope
B) differentiation
C) commoditization
D) focus
Answer: D
Difficulty: Moderate
AACSB: Application of knowledge
Learning Objective: 2.4: Understand the key business concepts and strategies applicable to e-
commerce.
73) ________ technologies are technologies that enable the incremental improvement of
products and services.
A) Sustaining
B) Differentiating
C) Disruptive
D) Commodity
Answer: A
Difficulty: Moderate
AACSB: Application of knowledge
Learning Objective: 2.4: Understand the key business concepts and strategies applicable to e-
commerce.
74) Innovative entrepreneurs and their business firms that destroy existing business models are
referred to as:
A) crowdfunders.
B) venture capitalists.
C) disruptors.
D) angel investors.
Answer: C
Difficulty: Moderate
AACSB: Application of knowledge
Learning Objective: 2.4: Understand the key business concepts and strategies applicable to e-
commerce.
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75) The term unfit fitness refers to a situation in which employees of a firm have the wrong skills
for the current environment.
Answer: TRUE
Difficulty: Moderate
AACSB: Application of knowledge
Learning Objective: 2.4: Understand the key business concepts and strategies applicable to e-
commerce.
76) Scale economies are efficiencies that result from increasing the size of the business.
Answer: TRUE
Difficulty: Moderate
AACSB: Application of knowledge
Learning Objective: 2.4: Understand the key business concepts and strategies applicable to e-
commerce.
77) A company's strong linkages with its customers increase switching costs.
Answer: TRUE
Difficulty: Moderate
AACSB: Application of knowledge
Learning Objective: 2.4: Understand the key business concepts and strategies applicable to e-
commerce.
78) The Internet's universal standards have changed industry structure by increasing barriers to
entry and decreasing competition within an industry.
Answer: FALSE
Difficulty: Difficult
AACSB: Application of knowledge
Learning Objective: 2.4: Understand the key business concepts and strategies applicable to e-
commerce.
79) Interactivity that enables product customization alters industry structure by decreasing the
threat of substitutes.
Answer: TRUE
Difficulty: Difficult
AACSB: Application of knowledge
Learning Objective: 2.4: Understand the key business concepts and strategies applicable to e-
commerce.
80) E-commerce has increased price competition in many markets.
Answer: TRUE
Difficulty: Moderate
AACSB: Application of knowledge
Learning Objective: 2.4: Understand the key business concepts and strategies applicable to e-
commerce.
81) Social technologies change industry structure by weakening powerful sales channels and
shifts bargaining power to consumers.
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Answer: FALSE
Difficulty: Difficult
AACSB: Information technology
Learning Objective: 2.4: Understand the key business concepts and strategies applicable to e-
commerce.
82) Briefly discuss the difference between a scope strategy and a focus/market niche strategy and
provide an example of each.
Answer: A scope strategy is a strategy to compete in all markets around the globe, rather than
merely in local, regional, or national markets. The Internet's global reach, universal standards,
and ubiquity can certainly be leveraged to assist businesses in becoming global competitors.
eBay, for instance, along with many of the other top e-commerce companies, has readily attained
a global presence. Apple is another example. A focus/market niche strategy is a strategy to
compete within a narrow market segment or product segment. This is a specialization strategy
with the goal of becoming the premier provider in a narrow market. For instance, Dick's Sporting
Goods uses e-commerce to continue its historic focus on sports equipment and apparel; and W.
W. Grainger focuses on the narrow MRO market segment. Bonobo's, which focused on men's
clothing, is another example. E-commerce offers some obvious capabilities that enable a focus
strategy. Businesses can leverage richness and interactivity to create highly focused messages for
different market segments; information intensity makes it possible to focus e-mail and other
marketing campaigns on small market segments; personalization–and related customization–
means the same product can be personalized and customized to fulfill the very focused needs of
specific market segments and consumers.
Difficulty: Moderate
AACSB: Analytical thinking; Written and oral communication
Learning Objective: 2.4: Understand the key business concepts and strategies applicable to e-
commerce.
83) Briefly discuss the implications of each of the unique features of e-commerce technology for the
overall business environment.
Answer: The ubiquity of e-commerce creates new marketing channels and expands the size of
the overall market. It also creates new efficiencies in industry operations and lowers the costs to
firms of sales operations. The ubiquity of e-commerce also enables differentiation strategies.
The global reach of e-commerce lowers barriers to entry and expands the market at the same
time. This lowers the costs of both industry and firm operations through production and sales
efficiencies. It enables competition on a global scale.
The universal standards of e-commerce lower barriers to entry while at the same time
intensifying competition within an industry. Universal standards also reduce the costs for
communications and computing, enabling firms to engage in broad-scope strategies.
The richness of e-commerce reduces the strength of powerful distribution channels. It also allows
firms to reduce their reliance on traditional sales forces and can enhance post-sales support
services.
The interactivity of e-commerce reduces the threat of substitutes through the enhanced use of
customization. It also reduces industry and firm costs by reducing reliance on sales forces. It also
enables differentiation strategies.
Information density weakens powerful sales channels, thus shifting bargaining power to the
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consumer, while also lowering the costs of obtaining, processing, and distributing information
about suppliers and consumers.
The use of e-commerce technology to personalize and customize a customer's experience or
product reduces threats of substitutes, raises barriers to entry, reduces value chain costs by
lessening reliance on sales forces, and enables personalized marketing strategies.
The use of social technologies shifts programming and editorial decisions to consumers; creates
substitute entertainment products; and energizes a large group of new suppliers.
Difficulty: Difficult
AACSB: Analytical thinking; Written and oral communication
Learning Objective: 2.4: Understand the key business concepts and strategies applicable to e-
commerce.
84) Define value chain and explain the difference between a firm value chain, an industry value
chain, and a value web.
Answer: A value chain is the set of activities performed that transforms raw inputs into final
products and services. Each of these activities adds economic value to the final product. A firm
value chain is the set of activities a firm engages in to create final products from raw inputs. The
key steps and support activities in a firm's value chain are inbound logistics, operations,
outbound logistics, sales and marketing, and after sales service. With an industry value chain, the
chain broadens to include six generic players: suppliers, manufacturers, transporters, distributors,
retailers, and customers. A value web coordinates a firm's suppliers with its own production
needs using an Internet-based supply chain management system. It is a networked trans-business
system that coordinates the value chains of several firms.
Difficulty: Moderate
AACSB: Analytical thinking; Written and oral communication
Learning Objective: 2.4: Understand the key business concepts and strategies applicable to e-
commerce.
85) Describe the four stages involved in business model disruption.
Answer: In the first disruptive stage, disruptors, often funded by new sources of finance,
introduce new products that are less expensive, less capable, and of poorer quality than existing
products. These early products nevertheless find a niche in a market that incumbents do not serve
or are unaware of. In the second stage, disruptors improve their products at a rapid pace, taking
advantage of newer technologies at a faster pace than incumbents, expanding their niche market,
and eventually attracting a larger customer base from the incumbents' market. In the third stage,
the new products and business model become good enough, and even superior to products
offered by incumbents. In the fourth stage, incumbent companies lose market share, and either
go out of business or are consolidated into other more successful firms that serve a much more
limited customer base. Some incumbents survive by finding new customers for their existing
product, adopting some of the newer products and business models in separate divisions of their
firms, or moving into other often nearby markets.
Difficulty: Moderate
AACSB: Analytical thinking; Written and oral communication
Learning Objective: 2.4: Understand the key business concepts and strategies applicable to e-
commerce.
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