E-Commerce 2017:
Business. Technology. Society.
Thirteenth edition
Kenneth C. Laudon & Carol Guercio Traver
Answers to End of Chapter Questions
, Chapter 1: Introduction to E-commerce
1. What does omni-channel mean in terms of e-commerce presence?
Also called omni-channel merchants, bricks-and-clicks companies have a network of physical
stores as their primary retail channel, but also have online offerings.
2. What is information asymmetry?
Information asymmetry refers to any disparity in relevant market information among parties in a
transaction. E-commerce technologies make it possible for merchants to know much more about
consumers and to be able to use this information more effectively than was ever true in the past.
Online merchants can use this information to develop new information asymmetries, enhance
their ability to brand products, charge premium prices for high-quality service, and segment the
market into an endless number of subgroups, each receiving a different price.
3. What are some of the unique features of e-commerce technology?
● Ubiquity: Available just about everywhere, at all times, making it possible to shop from your
desktop, at home, at work, or even from your car.
● Global reach: P
ermits commercial transactions to cross cultural and national boundaries far
more conveniently and cost-effectively than is true in traditional commerce.
● Universal standards: Shared by all nations around the world, in contrast to most traditional
commerce technologies, which differ from one nation to the next.
● Richness: Enables an online merchant to deliver marketing messages in a way not possible
with traditional commerce technologies.
● Interactivity: A
llows for two-way communication between merchant and consumer and
enables the merchant to engage a consumer in ways similar to a face-to-face experience, but
on a much more massive, global scale.
● Information density: Is the total amount and quality of information available to all market
participants. The Internet reduces information collection, storage, processing, and
communication costs while increasing the currency, accuracy, and timeliness of information.
● Personalization and customization: The increase in information density allows merchants to
target their marketing messages to specific individuals and results in a level of
personalization and customization unthinkable with previously existing commerce
technologies.
● Social technology : Provides a many-to-many model of mass communications. Millions of
users are able to generate content consumed by millions of other users. The result is the
formation of social networks on a wide scale and the aggregation of large audiences on
social network platforms.
4. What are some of the factors driving the growth of social e-commerce?
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, ● The increasing popularity of social sign-on (signing onto websites using your Facebook or
other social network ID)
● Network notification (the sharing of approval or disapproval of products, services, and
content)
● Online c ollaborative shopping tools
● Social search (recommendations from online trusted friends)
● The increasing prevalence of integrated social commerce tools such as Buy buttons,
Shopping tabs, and virtual shops on Facebook, Instagram, Pinterest, YouTube, and other
social network sites.
5. What are three benefits of universal standards?
a. Lower m arket entry costs—the cost merchants must pay just to bring their goods to market.
b. Reduce search costs—the effort required to find suitable products.
c. Price discovery becomes simpler, faster, and more accurate
d. Users, both businesses and individuals, also experience n etwork externalities—benefits that
arise because everyone uses the same technology.
6. How does the ubiquity of e-commerce impact consumers?
a. From a consumer point of view, ubiquity reduces transaction costs—the costs of
participating in a market. To transact, it is no longer necessary that you spend time and
money traveling to a market.
b. At a broader level, the ubiquity of e-commerce lowers the cognitive energy required to
transact in a marketspace. Cognitive energy refers to the mental effort required to complete
a task.
7. Name three of the business consequences that can result from growth in information density.
a. Price transparency = the ease with which consumers can find out the variety of prices in a
market.
b. Cost transparency = the ability of consumers to discover the actual costs merchants pay for
products.
c. Price discrimintation = s
elling the same goods, or nearly the same goods, to different
targeted groups at different prices. For instance, an online merchant can discover a
consumer’s avid interest in expensive exotic vacations, and then pitch expensive exotic
vacation plans to that consumer at a premium price.
8. What difficulties are presented in trying to measure the number of web pages in existence?
There is no precise measurement of the number of web pages in existence, in part because
today’s search engines index only a portion of the known universe of web pages. Google has
identified over 30,000 trillion unique uniform resource locators (URLs), commonly known as web
addresses, up from 1 trillion in 2008, although many of these pages do not necessarily contain
unique content (Schwartz, 2015). In addition to this “surface” or “visible” Web, there is also the
so-called deep Web that is reportedly 500 to 1,000 times greater than the surface Web. The deep
Web contains databases and other content that is not routinely indexed by search engines such
as Google
9. Why is the mobile platform not just a hardware phenomenon?
The mobile platform provides the ability to access the Internet from a variety of mobile devices
such as smartphones, tablets, and other ultra-lightweight laptop computers via wireless networks
or cell phone service. The mobile platform is not just a hardware phenomenon. The introduction
of the Apple iPhone in 2007, followed by the Apple iPad in 2010, has also ushered in a
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, sea-change in the way people interact with the Internet from a software perspective. Today,
more Americans access the Internet via a mobile app than by using a desktop computer and web
browser.
10. What is conversational commerce and how does it relate to social e-commerce and
m-commerce?
Mobile e-commerce (m-commerce), refers to the use of mobile devices to enable online
transactions. M-commerce involves the use of cellular and wireless networks to connect
smartphones and tablet computers to the Internet.
Social e-commerce is e-commerce that is enabled by social networks and online social
relationships.
Social e-commerce is often intertwined with m-commerce, particularly as more and more social
network users access those networks via mobile devices. A variation of social e-commerce
known as conversational commerce leverages the mobile connection even further.
Conversational commerce involves the use of mobile messaging apps such as Facebook
Messenger, WhatsApp, Snapchat, Slack, and others as a vehicle for companies to engage with
consumers.
11. Describe the three different stages in the evolution of e-commerce.
E-commerce has gone through three stages: innovation, consolidation, and reinvention.
a. The early years of e-commerce were a technological success, with the digital infrastructure
created during the period solid enough to sustain significant growth in e-commerce during
the next decade, and a mixed business success, with significant revenue growth and
customer usage, but low profit margins. (Innovation)
b. E-commerce entered a period of consolidation beginning in 2001 and extending into 2006.
c. E-commerce entered a period of reinvention in 2007 with the emergence of the mobile
digital platform, social networks, and Web 2.0 applications that attracted huge audiences in
a very short time span.
12. Define disintermediation and explain the benefits to Internet users of such a phenomenon. How
does disintermediation impact friction-free commerce?
Disintermediation is defined as displacement of market middlemen who traditionally are
intermediaries between producers and consumers by a new direct relationship between
producers and consumers. Manufacturers and content originators would develop direct market
relationships with their customers. The resulting intense competition, the decline of
intermediaries, and the lower transaction costs would eliminate product brands, and along with
these, the possibility of monopoly profits based on brands, geography, or special access to
factors of production. Eventually, this led to lower product prices for the internet user.
Again, Prices for products and services would fall to the point where prices covered costs of
production plus a fair, “market rate” of return on capital, plus additional small payments for
entrepreneurial effort (that would not last long). Unfair competitive advantages (which occur
when one competitor has an advantage others cannot purchase) would be reduced, as would
extraordinary returns on invested capital. This vision was called f riction-free commerce.
→ A vision of commerce in which information is equally distributed, transaction costs are low,
prices can be dynamically adjusted to reflect actual demand, intermediaries decline, and unfair
competitive advantages are eliminated.
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