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1. Preview Questions of Ecommerce-Semester II
5) Describe the visions and forces during the early days of e-commerce in terms of what the
various interest groups hoped for: computer science and information technology
professionals; economists; and entrepreneurs, venture capitalists and marketers. Did each
group's vision come to fruition? Explain why or why not.
Answer: Computer scientists and information technologists' vision was of a universal
communications and computing environment that everyone could access with inexpensive
computers. Their interest was in creating a vast worldwide information collection from libraries,
universities, governments, and scientific institutions that was ungoverned by any nation and free
to all. They believed that the Internet, and by extension, the e-commerce that operated within the
infrastructure, should be self-governed and self-regulated.
Economists envisioned a near-perfect competitive market where price, cost, and quality
information are equally distributed. The marketspace would include a nearly infinite number of
suppliers with equal access to hundreds of millions of customers, but where those consumers, in
turn, would have access to all relevant market information—a hypercompetitive market. Market
middlemen would disappear, resulting in lowered costs to consumers. This intensely competitive,
disintermediated environment with lowered transaction costs would eliminate product brands as
well as the possibility of monopoly profits based on brands, geography, or special access factors.
Unfair competitive advantages and the ability to reap returns on capital that far extended a fair
market rate of return would be eliminated. Their vision was called friction-free commerce.
Entrepreneurs, venture capitalists, and marketers, in turn, saw e-commerce as an opportunity to
earn great returns on invested capital. They saw the e-commerce marketspace and technologies
as a powerful method of increasing their ability to even more precisely segment the market into
groups with different price sensitivities. They believed that huge profits could be garnered by
firms that quickly achieved high market visibility and that these successful first movers would
become the new intermediaries of e-commerce, displacing the traditional retail merchants and
content suppliers.
Computer scientists' vision of an ungoverned Internet has not come to fruition as governments
have increasingly sought to regulate and control the technology to ensure that positive social
benefits result. The economists' vision has also, for the most part, not materialized for a variety
of reasons. Consumers have proven to be less price sensitive than expected and the importance of
brand names to consumers' perceptions of quality and service has been extended rather than
decreased or eliminated. Entrepreneurs have discovered new methods for differentiating products
and services. New information asymmetries are continually being introduced by marketers.
Disintermediation has also not occurred as new middlemen emerged. The visions of the
entrepreneurs, venture capitalists, and marketers have also largely not come to fruition as the first
movers from the early years of e-commerce only rarely succeeded. The fast follower large
traditional firms with the resources needed to develop mature markets are displacing most of the
venture capitalist backed entrepreneurs.
6) 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.
7) Define organizational development and describe its importance in relation to the
implementation of a business plan and strategy.

2. 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.
8) Define and describe the transaction broker business model and discuss the eight
components of the business model for this type of B2C firm.
Answer: The transaction broker business model is most commonly found in the financial
services, travel services, and job placement services industries. The eight elements of a business
model are value proposition, revenue model, market opportunity, competitive environment,
competitive advantage, market strategy, organizational development, and management team.
The primary value proposition for a transaction broker is the saving of time and money. These
sites also often provide timely information and opinion. They offer the consumer the opportunity
to increase their individual productivity by helping them to get things done faster and with less
expense.
The revenue model for these firms is based upon receiving commissions or transaction fees when
a successful business deal is completed. 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. Job
sites charge the employers a listing fee up front, rather than when the position is filled as
traditional "head hunter" firms have done.
The market opportunity for transaction brokers in financial services appears to be largely due to
the rising interest in receiving financial planning advice and conducting stock transactions
online. Demand is also increasing for job placement help that is national and even global in
nature and for purchasing travel services quickly and easily online. However, there is some
market resistance due to consumers' fear of loss of privacy and loss of control over their personal
financial information.
The competitive environment for financial services has become fierce as new entrants, including
the traditional brokerage firms that have now entered the online marketspace, have flooded the
market. To compete effectively, online traders must convince consumers that they have superior
security and privacy procedures. The number of job placement sites has also multiplied, and the
largest sites such as Monster, which have the greatest number of job listings, are the most likely
to survive. Consolidation in all of the transaction broker markets is presently occurring, making
the market opportunity and competitive environment for new firms looking to enter the
marketspace bleak.
The market strategies for such firms typically include expensive marketing campaigns to
convince consumers to switch from their current provider or to choose their company over other
more well-established competitors, also a daunting task in the present economic environment.

3. Achieving a competitive advantage is crucial to firms trying to enter these industries. Possible
strategies are to lure well-known names in the industry away from their present positions to head
a new endeavor, giving the firm instant credibility in the market. Experienced, knowledgeable,
and well-known employees may be able to give a new firm a competitive edge.
New companies may have to start out recruiting a specialized highly skilled staff, with an
organizational development plan that is far more advanced than the typical startup. A strong
management team will attract investors and convince investors and consumers alike that a new
firm has plenty of market-specific knowledge and the experience necessary to implement the
business plan.