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Chapter 2 E-Marketplaces: Structure, Mechanisms, Economics, and Impacts 1

Chapter 2
E-Marketplaces: Structure, Mechanisms, Economics, and Impacts


True-False Questions

1. The functions and efficiency of an e-market are the same as that of a physical marketplace.

Answer: False Difficulty: East Page Reference: 44


AACSB: Reflective thinking skills

2. The emergence of electronic marketplaces has resulted in lower information search costs for
buyers and lower transaction and distribution costs for sellers.

Answer: True Difficulty: Medium Page Reference: 44, 45


AACSB: Reflective thinking skills

3. Although both marketplaces and marketspaces can sell physical products, the marketspace
also can sell digital products, which are goods that can be transformed to digital format and
delivered instantly over the Internet.

Answer: True Difficulty: Medium Page Reference: 45


AACSB: Use of information technology

4. Front end refers to the activities that support online order fulfillment, inventory management,
purchasing from suppliers, payment processing, packaging, and delivery.

Answer: False Difficulty: Medium Page Reference: 45


AACSB: Use of information technology

5. In marketing, an intermediary is a third party that operates between sellers and buyers.
Intermediaries of all kinds offer their services on the Web.

Answer: True Difficulty: Medium Page Reference: 45


AACSB: Use of information technology

2 E-Marketplaces: Structure, Mechanisms, Economics, and Impacts

6. WebMD, which is the largest U.S. medical services company, is known mainly for its
webmd.com consumer portal, but its core business is being an e-intermediary.

Answer: True Difficulty: Easy Page Reference: 46


AACSB: Use of information technology

7. The major B2B e-marketplaces are electronic storefronts, Internet malls, and exchanges.

Answer: False Difficulty: Easy Page Reference: 47


AACSB: Use of information technology

8. A portal is an information gateway that attempts to address information overload by enabling
people to search and access relevant information from disparate IT systems and the Internet,
using advanced search and indexing techniques, such as Googles desktop.

Answer: True Difficulty: Medium Page Reference: 49


AACSB: Use of information technology

9. Intermediaries are human or electronic agents that play an important role in EC by providing
value-added services such as making payment arrangements to buyers and sellers.

Answer: True Difficulty: Medium Page Reference: 51


AACSB: Use of information technology

10. Travelers using airline Web sites to book their flights directly without the use of travel agents
is resulting in the reintermediation of travel agents.

Answer: False Difficulty: Hard Page Reference: 53


AACSB: Reflective thinking skills

11. Search engines not only search and match, but also have capabilities that can be used to
perform routine tasks that require intelligence.

Answer: False Difficulty: Easy Page Reference: 57


AACSB: Use of information technology

Chapter 2 E-Marketplaces: Structure, Mechanisms, Economics, and Impacts 3

12. An electronic shopping cart is an order-processing technology that allows customers to
accumulate items they wish to buy while they continue to shop.

Answer: True Difficulty: Easy Page Reference: 58


AACSB: Use of information technology

13. Shopping carts for B2B are fairly simple, but a shopping cart for B2C may be more complex.

Answer: False Difficulty: Medium Page Reference: 59


AACSB: Use of information technology

14. An auction is a competitive process and market mechanism that uses a competitive process
by which a seller solicits consecutive bids from buyers or a buyer solicits bids from sellers.

Answer: True Difficulty: Easy Page Reference: 59


AACSB: Use of information technology

15. Negotiation and bargaining are two types of auctions where prices are not fixed, but rather
are allowed to fluctuate as market supply and demand change.

Answer: False Difficulty: Medium Page Reference: 60


AACSB: Use of information technology

16. Reverse auctions are bidding or tendering systems in which the buyer places an item for bid
on a request for quote (RFQ) system; then potential suppliers bid on the job, with the price
reducing sequentially, and the lowest bid wins.

Answer: True Difficulty: Medium Page Reference: 61


AACSB: Use of information technology

17. E-auctions are becoming less important selling and buying channels for companies and
individuals.

Answer: False Difficulty: Easy Page Reference: 62


AACSB: Reflective thinking skills

4 E-Marketplaces: Structure, Mechanisms, Economics, and Impacts

18. The major limitations of e-auctions are insufficient security, risk of fraud, and a limited pool
of participants.

Answer: True Difficulty: Medium Page Reference: 62


AACSB: Reflective thinking skills

19. A limitation of e-bartering for businesses is that excess capacity items such as office space,
storage, factory space; idle facilities; and labor cannot be bartered.

Answer: False Difficulty: Medium Page Reference: 64


AACSB: Reflective thinking skills

20. Online negotiation can be facilitated by computer technology for the negotiation process and
software agents for searches and comparisons.

Answer: True Difficulty: Easy Page Reference: 64


AACSB: Use of information technology

21. Due to the lack of hurdles, the adoption and growth of m-commerce has been widespread.

Answer: False Difficulty: Medium Page Reference: 66


AACSB: Use of information technology

22. The Internet economys low barriers to entry are both an opportunity and a threat to
businesses.

Answer: True Difficulty: Easy Page Reference: 68


AACSB: Reflective thinking skills

23. Strong competition for commodity-type products, such as toys and CDs, was a major
contributor to the collapse of many dot-com companies, which suggests that a company
needs to use innovative strategies to survive and prosper in the Internet economy.

Answer: True Difficulty: Medium Page Reference: 68


AACSB: Analytic skills

Chapter 2 E-Marketplaces: Structure, Mechanisms, Economics, and Impacts 5

24. Because the strength of each of Porters five forces varies considerably from industry to
industry, it would be a mistake to draw general conclusions about the impact of the Internet
on long-term industry profitability.

Answer: True Difficulty: Medium Page Reference: 70


AACSB: Reflective thinking skills

25. Because of intense competition on the Web, new companies cannot establish good corporate
images quickly as Amazon.com had done when it had few online competitors.

Answer: False Difficulty: Medium Page Reference: 73


AACSB: Reflective thinking skills


Multiple Choice Questions

26. Fundamentally, the success of the pure-play jewelry e-tailer Blue Nile was due to the
companys use of Internet technologies to:

a. go public
b. provide quality ratings
c. eliminate intermediaries
d. offer lower prices than competitors

Answer: D Difficulty: Medium Page Reference: 43

AACSB:

27. Traditional and electronic markets have three main functions, which include each of the
following EXCEPT:

a. transforming raw materials into finished products.
b. matching buyeis anu selleis.
c. facilitating the exchange of information, goods, services, and payments associated with
market transactions.
d. pioviuing an institutional infiastiuctuie, such as a legal anu iegulatoiy fiamewoik that
enables the efficient functioning of the maiket.

Answer: A Difficulty: Easy Page Reference: 44

AACSB: Reflective thinking skills

6 E-Marketplaces: Structure, Mechanisms, Economics, and Impacts

28. Bigital piouucts have uiffeient cost cuives than those of iegulai piouucts because:

a. in digitization, most of the costs are variable and fixed costs are low.
b. in digitization, most of the costs are fixed, and variable costs are very low.
c. in digitization, most of the costs are fixed, but variable costs are high.
d. in digitization, all of the costs are variable.

Answer: B Difficulty: Hard Page Reference: 45

AACSB: Analytic skills

29. The portion of an e-sellers business processes through which customers interact, including
the sellers portal, electronic catalogs, a shopping cart, a search engine, and a payment
gateway is referred to as the _____________ of the business.

a. front end
b. back end
c. infrastructure
d. intermediary

Answer: A Difficulty: Medium Page Reference: 45

AACSB:

30. All the activities that are related to order aggregation and fulfillment, inventory management,
purchasing from suppliers, accounting and finance, insurance, payment processing,
packaging, and delivery are done in what is termed the_______ of the business.

a. front end
b. back end
c. infrastructure
d. intermediary

Answer: B Difficulty: Medium Page Reference: 45

AACSB:

31. The major __________ e-marketplaces are storefronts and Internet malls.

a. B2B
b. C2B
c. B2B2C
d. B2C

Answer: D Difficulty: Medium Page Reference: 47

AACSB:

Chapter 2 E-Marketplaces: Structure, Mechanisms, Economics, and Impacts 7

32. An electronic storefront includes several mechanisms that are necessary for conducting the
sale. The most common mechanisms include each of the following EXCEPT:

a. an electronic catalog;
b. a search engine
c. a supply chain
d. a payment gateway

Answer: C Difficulty: Easy Page Reference: 47

AACSB:

33. _______________ are online markets owned and operated by a single company and may be
either sell-side or buy-side.

a. Private e-marketplaces
b. Commercial portals
c. E-malls
d. B2B marketplaces

Answer: A Difficulty: Easy Page Reference: 48

AACSB:

34. A(n) _____________ is a single point of access thiough a Web biowsei to help useis finu
ielevant anu accuiate business infoimation anu ieuuce infoimation oveiloau.

a. intermediary
b. search engine
c. information portal
d. browser

Answer: C Difficulty: Easy Page Reference: 49

AACSB:

35. Finding relevant and accurate information is often time-consuming and requires access to
multiple systems causing organizations to lose a lot of productive employee time. One
solution to this problem is the use of:

a. portals.
b. intermediaries.
c. browsers.
d. intranets.

Answer: A Difficulty: Medium Page Reference: 49

AACSB:

8 E-Marketplaces: Structure, Mechanisms, Economics, and Impacts

36. A type of broker that helps consumers compare different stores is a:

a. virtual mall.
b. search agent.
c. shopping facilitator.
d. metamediary.

Answer: C Difficulty: Medium Page Reference: 52

AACSB:

37. Human or electronic intermediaries attempt to address each of the following limitations of
direct interaction EXCEPT:

a. search costs.
b. lack of privacy for those wanting to remain anonymous.
c. contract risk.
d. product distribution.

Answer: D Difficulty: Medium Page Reference: 52

AACSB:

38. The elimination of various types of agents that mediate between buyers and sellers, such as
travel and insurance agents, is referred to as:

a. remediation
b. disintermediation
c. e-distribution
d. automation

Answer: B Difficulty: Medium Page Reference: 53

AACSB:

39. A moue is puichasing wheie piices aie negotiateu oi uiscounteu is ________________! which
iefeis to nonfixeu piices, such as those in #$%&'()* oi stock maikets.

a. dynamic pricing
b. commodity pricing
c. pre-shopping
d. negotiation

Answer: A Difficulty: Medium Page Reference: 54

AACSB:

Chapter 2 E-Marketplaces: Structure, Mechanisms, Economics, and Impacts 9

40. Although used occasionally in B2C commerce, customized catalogs are especially useful in
B2B e-commerce for each of the following reasons EXCEPT:

a. e-catalogs can show only the items that the employees in a specific organization are
allowed to purchase.
b. Intranets, in particular, can deliver customized catalogs to different business customers.
c. e-catalogs can show the buyei's IB numbei foi the item, mouel, oi SK0 numbei iathei
than the sellei's IB numbeis.
d. E-catalogs can be customizeu to show the same item to uiffeient customeis at uiffeient
piices, ieflecting uiscounts oi puichase-contiact agieements.

Answer: B Difficulty: Medium Page Reference: 56

AACSB:

41. To be successful and useful, large e-catalogs need a(n) __________________.

a. search engine
b. directory
c. data mining technology
d. enhanced viewing capability

Answer: A Difficulty: Medium Page Reference: 57

AACSB:

42. A ____________ has capabilities that can be used to perform routine tasks that require
intelligence such as providing customers with assistance based on their movements on a Web
site.

a. search engine
b. intelligent engine
c. software agent
d. software engine

Answer: C Difficulty: Medium Page Reference: 58

AACSB:

43. Popular search engines include all of the following EXCEPT:

a. Google
b. MSN
c. AltaVista
d. Lycos

Answer: B Difficulty: Easy Page Reference: 58

AACSB:

10 E-Marketplaces: Structure, Mechanisms, Economics, and Impacts

44. A(n) ____________ is an order-processing technology that allows customers to accumulate
items they wish to buy while they continue to shop.

a. intelligent agent
b. e-fulfillment agent
c. electronic shopping cart
d. merchant server

Answer: C Difficulty: Medium Page Reference: 58

AACSB:

45. The most common and traditional form of auctions in which one seller entertains bids from
many buyers is referred to as:

a. forward auctions
b. reverse auctions.
c. double auction.
d. e-auctions.

Answer: A Difficulty: Medium Page Reference: 61

AACSB:

46. An auction in which there is one buyer and many potential sellers; or in which a buyer places
an item for bid on an RFQ system and the lowest bid wins is referred to as all of the
following EXCEPT:

a. reverse auctions.
b. forward auctions.
c. bidding system.
d. tendering system.

Answer: B Difficulty: Medium Page Reference: 61

AACSB:

47. What is a benefit of e-auctions to sellers?

a. Convenience since the bidding can occur anywhere and any time.
b. High stickiness to the Web site.
c. Anonymity.
d. The optimal price is determined by the market.

Answer: D Difficulty: Hard Page Reference: 62

AACSB: Reflective thinking skills

Chapter 2 E-Marketplaces: Structure, Mechanisms, Economics, and Impacts 11

48. Organizations are embracing mobilized computing technologies for several reasons
EXCEPT:

a. It improves the productivity of workers in the field.
b. Wireless telecom support for mobility is growing quickly.
c. Wireless security problems have been solved with encryption.
d. The prices of notebook computers, wireless handhelds, and smart phones continue to fall
and their capabilities continue to increase.


Answer: C Difficulty: Medium Page Reference: 65

AACSB:

49. EC competition is very intense because online transactions enable each of the following
EXCEPT:

a. For buyer, e-markets reduce the cost of searching for product information; e.g., sellers,
models, prices, frequently to zero.
b. Higher prices because of a greater number of potential buyers.
c. Setting up a Web site is relatively easy and inexpensive, and doing so reduces the need
for a sales force and brick-and-mortar stores.
d. Product or service differentiation and personalization.


Answer: B Difficulty: Medium Page Reference: 68

AACSB: Reflective thinking skills

50. Which of the following statements about differentiation and personalization is not correct?

a. Products must be differentiated for perfect competition.
b. Consumers like differentiation and personalization and are frequently willing to pay more
for them.
c. Differentiation reduces the substitutability between products, benefiting sellers who use
this strategy.
d. Price cutting in differentiated markets does not impact market share very much:


Answer: A Difficulty: Medium Page Reference: 68

AACSB:

12 E-Marketplaces: Structure, Mechanisms, Economics, and Impacts

51. It can be said that competition between companies is being replaced by competition between
___________ .

a. industries
b. digital products and services
c. differentiated products and services
d. networks

Answer: D Difficulty: Medium Page Reference: 69

AACSB:

52. The Internet has influenced industry structures in each of the following ways EXCEPT:

a. A flood of new entrants has come into many industries because of reduced barriers to
entry.
b. Increases differences among competitors whose offerings are kept proprietary.
c. There has been a shift in bargaining and buyer power to end users.
d. Industries are more efficient overall.

Answer: B Difficulty: Medium Page Reference: 70

AACSB: Reflective thinking skills

53. Impacts of e-marketplaces on B2C direct marketing include all of the following EXCEPT:

a. The existence of e-marketplaces has increased the promotion of products and services
through direct marketing.
b. The administrative work related to physical delivery, especially across international
borders, can be reduced significantly, cutting the cycle time by more than 90 percent.
c. Brand images for new companies have become more difficult to establish.
d. EC enables customization of products and services, which is changing marketing and
sales activities both in B2C and in B2B.


Answer: C Difficulty: Medium Page Reference: 73

AACSB: Reflective thinking skills

54. One of the major benefits of e-markets is the improvement in supply chains with the creation
of a(n) _____________________.

a. hub-baseu chain
b. customized chain
c. support chain
d. logistics chain

Answer: A Difficulty: Medium Page Reference: 76

AACSB:

Chapter 2 E-Marketplaces: Structure, Mechanisms, Economics, and Impacts 13

55. ______________ pioviues customeis with exactly what they want, when anu wheie they want it.
Effective communication between the supply chain anu the factoiy flooi is neeueu to make
it happen

a. Virtual manufacturing
b. Demand-driven manufacturing
c. Build-to-order manufacturing
d. Real-time manufacturing

Answer: B Difficulty: Medium Page Reference: 78

AACSB:


Fill In the Blanks

56. An e-marketplace is a virtual marketplace in which sellers and buyers meet and conduct
different types of transactions.

Difficulty: Easy Page Reference: 44

AACSB:

57. A marketspace is a marketplace in which sellers and buyers exchange goods and services for
money or for other goods and services, but do so electronically.

Difficulty: Medium Page Reference: 45

AACSB:

58. All the activities that are related to order aggregation and fulfillment, inventory management,
purchasing from suppliers, accounting and finance, insurance, payment processing,
packaging, and delivery are done in what is termed the back end of the business.

Difficulty: Medium Page Reference: 45

AACSB:

59. In marketing, an intermediary is typically a third party that operates between sellers and
buyers.

Difficulty: Easy Page Reference: 45

AACSB:

14 E-Marketplaces: Structure, Mechanisms, Economics, and Impacts

60. The front end is the portion of an e-sellers business processes through which customers
interact, including the sellers portal, electronic catalogs, a shopping cart, a search engine,
and a payment gateway.

Difficulty: Medium Page Reference: 45

AACSB:

61. An electronic or Web storefront refers to a single companys Web site where products and
services are sold.

Difficulty: Easy Page Reference: 47

AACSB:

62. To attract users to shopping malls, vendors use rich media called virtual reality to relate the
content via digital representation to potential buyers.

Difficulty: Medium Page Reference: 47

AACSB:

63. Private e-marketplaces are online markets owned and operated by a single company.

Difficulty: Easy Page Reference: 48

AACSB:

64. An information portal is a single point of access through a Web browser to critical business
information located inside and outside of an organization.

Difficulty: Medium Page Reference: 49

AACSB:

65. Commercial (public) portals are portals that offer fairly routine content for broad audiences
and are the most popular portals on the Internet; e.g., yahoo.com, aol.com, and msn.com.

Difficulty: Medium Page Reference: 49

AACSB:

66. E-marketplaces, especially for B2B and mega B2C such as Amazon.com may be plagued by
information overload.

Difficulty: Medium Page Reference:50

AACSB:

Chapter 2 E-Marketplaces: Structure, Mechanisms, Economics, and Impacts 15

67. In cyberspace, there are intermediaries that provide and/or control information flow. These
electronic intermediaries are known as infomediaries.

Difficulty: Medium Page Reference: 51, 52


AACSB:

68. A broker is a company that facilitates transactions between buyers and sellers.

Difficulty: Easy Page Reference: 51

AACSB:

69. A special type of intermediary in e-commerce is the B2B e-distributor which connect
manufacturers with business buyers, such as retailers or resellers in the computer industry.

Difficulty: Medium Page Reference: 53

AACSB:

70. Disintermediation is the elimination of intermediaries between sellers and buyers.

Difficulty: Medium Page Reference: 53

AACSB:

71. A search engine is a computer program that can access databases of Internet resources,
search for specific information or keywords, and report the results.

Difficulty: Easy Page Reference: 57

AACSB:

72. An electronic shopping cart is an order-processing technology that allows customers to
accumulate items they wish to buy while they continue to shop.

Difficulty: Medium Page Reference: 59

AACSB:

73. Dynamic pricing refers to prices that are not fixed, but that are allowed to fluctuate as supply
and demand in a market change.

Difficulty: Easy Page Reference: 60

AACSB:

16 E-Marketplaces: Structure, Mechanisms, Economics, and Impacts

74. Priceline.com pioneered the name-your-own-price model. In this C2B model, a potential
buyer specifies the price or other terms that he or she is willing to pay to any willing and able
seller.

Difficulty: Medium Page Reference: 61

AACSB:

75. Mobile commerce refers to the conduct of e-commerce via wireless devices or from portable
devices.

Difficulty: Easy Page Reference: 64

AACSB:

76. Location-based commerce is an m-commerce application targeted to a customer whose
preferences and needs and location (e.g., using GPS) are known in real time.

Difficulty: Medium Page Reference: 65

AACSB:

77. Because of these interrelationships, the business model of the Internet economy has been
called the Internet ecosystem.

Difficulty: Medium Page Reference: 67

AACSB:

78. Differentiation involves providing a product or service that is unique and not available
elsewhere.

Difficulty: Medium Page Reference: 68

AACSB:

79. The competitive forces model is a model devised by Porter that says that five major forces of
competition determine industry structure and how economic value is divided among the
industry players in an industry; analysis of these forces helps companies develop their
competitive strategy.

Difficulty: Medium Page Reference: 69

AACSB:

Chapter 2 E-Marketplaces: Structure, Mechanisms, Economics, and Impacts 17

80. E-learning systems offer two-way video, on-the-fly interaction, and application sharing.
Such systems provide for interactive remote instruction systems, which link sites over a high-
speed intranet.

Difficulty: Medium Page Reference: 79

AACSB: