E-Commerce Management

E-Business and
This book keeps getting better and better with every version. It is fast
becoming the de facto standard for e-business and e-commerce for
both faculty and students.
Ben Clegg, Aston Business School

This text provides a strong strategic framework to help

students understand this fast-moving subject, as well as
a useful guide to practical analysis.
Mette Prst Knudsen, University of Southern Denmark

What approach to e-business strategy should you follow? How much do you need to
invest in e-business? Which processes should be your priorities?
Written in an engaging and informative style, E-Business and E-Commerce Management explores these
questions, equipping you with the knowledge and skills to navigate todays fast-paced world of continuous
technological development.
In this latest edition of his bestselling text, leading authority Dave Chaffey brings together the latest academic
thinking and professional practice. Covering all aspects of e-business including strategy, digital marketing and
supply chain management, E-Business and E-Commerce Management gives you the benefit of:

A structured approach to planning, implementing, assessing and improving Fourth Edition

e-business strategy for all types of organization.
The latest on managing e-business security and cutting edge e-marketing

E-Business and
techniques such as social media and search engine optimization.
Case studies of technology leaders such as Dell, Facebook and Google,
as well as start-ups and small businesses.
Real-life interviews with professionals who describe their e-business strategies. Fourth

E-Commerce
Whether youre an undergraduate or postgraduate student studying e-business and e-commerce, or
Edition
a business manager, E-Business and E-Commerce Management is the essential text to help you keep
pace with technology, strategy and implementation.

Dave Chaffey (www.davechaffey.com) is an e-business consultant and visiting lecturer on e-business

courses at Warwick University and Cranfield School of Management.
Chaffey Management
Additional learning resources are online at
www.pearsoned.co.uk/chaffey
Strategy, Implementation and Practice

An imprint of www.pearson-books.com
Dave Chaffey

CVR_CHAFF9601_04_SE_CVR.indd 1 8/4/09 09:31:49

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E-Business and
E-Commerce
Management
Strategy, Implementation and Practice

Visit the E-Business and E-Commerce Management, fourth edition Companion Website at
www.pearsoned.co.uk/chaffey to find valuable student learning material including:

A study guide to reinforce key ideas and topics

Multiple choice questions to test your learning

Links to relevant sites on the web

An online glossary to explain key terms

Flashcards to test your understanding of key terms

A smarter online searching guide

Link to Dave Chaffeys blog with a collection of articles and links

Link to Dave Chaffeys Twitter feed

A01_CHAF9601_04_SE_FM.QXD:D01_CHAF7409_04_SE_C01.QXD 16/4/09 10:59 Page ii

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A01_CHAF9601_04_SE_FM.QXD:D01_CHAF7409_04_SE_C01.QXD 16/4/09 10:59 Page iii

Fourth Edition

E-BUSINESS AND
E-COMMERCE
MANAGEMENT
STRATEGY, IMPLEMENTATION AND PRACTICE

Dave Chaffey
A01_CHAF9601_04_SE_FM.QXD:D01_CHAF7409_04_SE_C01.QXD 16/4/09 10:59 Page iv

Pearson Education Limited

Edinburgh Gate
Harlow
Essex CM20 2JE
England

and Associated Companies throughout the world

Visit us on the World Wide Web at:

www.pearsoned.co.uk

First published 2002

Second edition published 2004
Third edition published 2007
Fourth edition published 2009

Dave Chaffey 2002

Marketing Insights Limited 2002, 2009

The right of Dave Chaffey to be identified as author of this work has

been asserted by him in accordance with the Copyright, Designs and Patents Act 1988.

All rights reserved. No part of this publication may be reproduced, stored in a retrieval
system, or transmitted in any form or by any means, electronic, mechanical,
photocopying, recording or otherwise, without either the prior written permission of the
publisher or a licence permitting restricted copying in the United Kingdom issued by the
Copyright Licensing Agency Ltd, Saffron House, 610 Kirby Street, London EC1N 8TS.

All trademarks used herein are the property of their respective owners. The use of any
trademark in this text does not vest in the author or publisher any trademark ownership rights
in such trademarks, nor does the use of such trademarks imply any affiliation with or
endorsement of this book by such owners.

ISBN: 978-0-273-71960-1

British Library Cataloguing-in-Publication Data

A catalogue record for this book is available from the British Library

Library of Congress Cataloging-in-Publication Data

Chaffey, Dave, 1963
E-business and e-commerce management : strategy, implementation, and
practice / Dave Chaffey. -- 4th ed.
p. cm.
Includes bibliographical references and index.
ISBN 978-0-273-71960-1 (pbk. : alk. paper) 1. Electronic commerce.
2. Business enterprises--Computer networks. I. Title. II. Title:
Ebusiness and ecommerce management.
HF5548.32.C472 2009
658.8'72--dc22
2009009561

10 9 8 7 6 5 4 3 2 1
13 12 11 10 09

Typeset in 10/12pt Minion by 30

Printed and bound by Rotolito Lombarda, Italy

The publishers policy is to use paper manufactured from sustainable forests.

A01_CHAF9601_04_SE_FM.QXD:D01_CHAF7409_04_SE_C01.QXD 16/4/09 10:59 Page v

Brief contents

Preface xiii
Guided tour xxiv
Authors acknowledgements xxvi
Publishers acknowledgements xxvii

Part 1 Introduction 1

1 Introduction to e-business and e-commerce 3

2 E-commerce fundamentals 51
3 E-business infrastructure 103
4 E-environment 192

Part 2 Strategy and applications 253

5 E-business strategy 255

6 Supply chain management 330
7 E-procurement 380
8 E-marketing 412
9 Customer relationship management 481

Part 3 Implementation 559

10 Change management 560

11 Analysis and design 604
12 Implementation and maintenance 680

Glossary 736
Index 754
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Contents

Preface xiii Introduction 52

Guided tour xxiv Real-world E-Business: More Th>n 53
About the author xxvi The e-commerce environment 57
Authors acknowledgements xxvii Strategic agility 57
Publishers acknowledgements xxvii Online marketplace analysis 59
Location of trading in the marketplace 67
The importance of multi-channel marketplace
Part 1 models 70
Different types of online intermediary 71
Introduction 1 Types of intermediaries 74
The importance of search engines 76
1 Introduction to e-business and e-commerce 3 Business models for e-commerce 77
Revenue models 79
Learning outcomes / Management issues 3
Online publisher and intermediary revenue models 80
Links to other chapters 3
Focus on auction business models 86
Introduction 4
Case Study 2.1 The impact of B2B reverse
The impact of the electronic communications on
auctions 87
traditional businesses 6
Focus on Internet start-up companies 88
Real-world E-Business: HP.com 7
From bricks and mortar to clicks and mortar 88
What is the difference between e-commerce and
Assessing e-businesses 89
e-business? 9
Valuing Internet start-ups 89
E-commerce defined 10 Case Study 2.2 lastminute.com an international
E-business defined 13 dot-com survivor 91
Case Study 1.1 A short history of Facebook 17 The dot-com bubble bursts 93
Business or consumer models of e-commerce Why dot-coms failed 93
transactions 26 The impact of the dot-com phenomenon on
E-business opportunities 29 traditional organizations 95
Business adoption of digital technologies for Case Study 2.3 Zopa launches a new lending
e-commerce and e-business 30 model 95
Drivers of business Internet adoption 30 Summary 98
Case Study 1.2 North West Supplies extends its Exercises 99
reach online 33 References 100
E-business risks and barriers to business adoption 35 Further reading 101
Evaluating an organizations e-business capabilities 36 Web links 101
Drivers of consumer Internet adoption 37
Barriers to consumer Internet adoption 39 3 E-business infrastructure 103
Management responses to e-commerce and Learning outcomes / Management issues 103
e-business 39 Links to other chapters 103
Part 1: Introduction 39 Introduction 104
Part 2: Strategy and applications 40 E-business infrastructure components 105
Part 3: Implementation 42 Real-world E-Business: Random House 107
Case Study 1.3 eBay the worlds largest Internet technology 109
e-business 42 Hosting of web sites and e-business services 110
Summary 46 The Internet timeline 111
Exercises 46 Just how big is the Internet? 114
References 48 Case Study 3.1 Innovation at Google 115
Further reading 49 Intranets and extranets 116
Web technology 124
Web links 49
Internet-access software applications 128
Blogs and blogging 129
2 E-commerce fundamentals 51
Electronic mail or e-mail 131
Learning outcomes / Management issues 51
Feeds 132
Links to other chapters 51
Voice over IP (VoIP) 134
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viii Contents

How does it work? Internet standards 136 Further reading 249

Networking standards 136 Web links 249
The HTTP protocol 138
Uniform resource locators (URLs) 139
Domain names 139 Part 2
Web presentation and data exchange standards 141
Audio and video standards 152 Strategy and applications 253
Focus on Internet governance 152
Managing e-business infrastructure 158 5 E-business strategy 255
Managing hardware and systems software Learning outcomes / Management issues 255
infrastructure 159 Links to other chapters 255
Managing Internet service and hosting providers 160 Introduction 256
Managing employee access to the Internet and Real-world E-Business: Standard Life 256
e-mail 165 What is e-business strategy? 259
Managing e-business applications infrastructure 165 The imperative for e-business strategy 261
Focus on web services, SaaS and service-oriented E-channel strategies 262
architecture (SOA) 168 Strategy process models for e-business 264
Benefits of web services or SaaS 168 Strategic analysis 269
Challenges of deploying SaaS 169 Resource and process analysis 269
Case Study 3.2 New architecture or just new Competitive environment analysis 276
hype? 174 Assessing competitive threats 276
EDI 176 Co-opetion 281
Focus on mobile commerce 177 Competitor analysis 281
Wireless Internet access standards 178 Strategic objectives 281
Wireless access devices 179 Defining vision and mission 282
Popularity of mobile applications 179 How can e-business create business value? 285
Summary 186 Case Study 5.1 Capital One creates value
Exercises 187 through e-business 286
References 188
Objective setting 287
Further reading 190
Case Study 5.2 Setting the Internet revenue
Web links 190
contribution at Sandvik Steel 292
Strategy definition 295
4 E-environment 192 Decision 1: E-business channel priorities 298
Learning outcomes / Management issues 192 Decision 2: Market and product development
Links to other chapters 192 strategies 300
Introduction 193 Decision 3: Positioning and differentiation
Real-world E-Business: GD Worldwide 196 strategies 303
Social and legal factors 198 Decision 4: Business, service and revenue models 306
Factors governing e-commerce service adoption 198 Decision 5: Marketplace restructuring 308
Privacy and trust in e-commerce 209 Decision 6: Supply-chain management capabilities 309
Other e-commerce legislation 222 Decision 7: Internal knowledge management
Environmental and green issues related to Internet capabilities 310
usage 227 Decision 8: Organizational resourcing and
Taxation 229 capabilities 310
Freedom-restrictive legislation 231 Strategy implementation 313
Economic and competitive factors 232 Failed e-business strategies 314
Focus on e-commerce and globalization 233 E-business strategy implementation success
Case Study 4.1 The implications of globalization factors for SMEs 315
for consumer attitudes 235 Case Study 5.3 Boo hoo learning from the
The implications of e-commerce for international largest European dot-com failure 316
B2B trading 236 Focus on information systems strategy and
Political factors 238 e-business strategy 319
Internet governance 239 Elements of IS strategy 320
E-government 240 Investment appraisal 320
Technological innovation and technology assessment 241 Summary 324
Approaches to identifying emerging technology 244 Exercises 325
Summary 246 References 326
Exercises 246 Further reading 328
References 247 Web links 329
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Contents ix

6 Supply chain management 330 Organizational risks 393

Learning outcomes / Management issues 330 Failure to achieve real cost reductions 393
Links to other chapters 330 Technology risks 394
Introduction 331 Implementing e-procurement 394
Problems of supply chain management 334 The growth in adoption of web-enabled
What is supply chain management? 335 e-procurement 396
Using technology to support supply chain Integrating company systems with supplier
management an example 337 systems 397
A simple model of a supply chain 340 Focus on electronic B2B marketplaces 400
Case Study 6.1 Shell chemicals redefines its Case Study 7.2 Covisint a typical history of a
customers supply chains 341 B2B marketplace? 403
What is logistics? 345 Types of marketplace 405
Push and pull supply chain models 347 The future of e-procurement? 407
Focus on the value chain 348 Summary 407
Restructuring the internal value chain 350 Exercises 408
The value stream 351 References 409
Value chain analysis 351 Further reading 410
Value networks 352 Web links 410
Towards the virtual organization 354
Options for restructuring the supply chain 356 8 E-marketing 412
Using e-business to restructure the supply chain 358 Learning outcomes / Management issues 412
Technology options and standards for supply Links to other chapters 412
chain management 359 Introduction 413
Adoption rates of e-business applications 360 Chapter structure 414
Case Study 6.2 Tesco develops a buy-side Real-world E-Business: Guess 415
e-commerce system for supply chain management 363 What is e-marketing? 416
IS-supported downstream supply chain Marketing defined 416
management 365 E-marketing defined 417
Outbound logistics management 365 Distinguishing between e-marketing, e-business
IS infrastructure for supply chain management 366 and e-commerce 417
Supply chain management implementation 368 E-marketing planning 418
Data standardization and exchange 368 Is a separate e-marketing plan required? 418
Human resources requirements of SCM 369 Situation analysis 420
The supply chain management strategy process 371 Demand analysis 421
Managing partnerships 372 Competitor analysis 425
Managing global distribution 374 Intermediary analysis 427
Case Study 6.3 RFID: keeping track starts its Internal marketing audit 428
Objective setting 428
move to a faster track 374
Case Study 8.1 The e-volution of easyJets online
Summary 375
revenue contribution 431
Exercises 376
Strategy 433
References 377
Market and product positioning 436
Further reading 379
Target market strategies 437
Web links 379
Focus on characteristics of new-media marketing
communications 443
7 E-procurement 380
Tactics 448
Learning outcomes / Management issues 380
Product 451
Links to other chapters 380
Case Study 8.2 Dell gets closer to its customers
Introduction 381 online 453
What is e-procurement? 381 Price 456
Understanding the procurement process 384 Place 460
Types of procurement 385 Promotion 462
Participants in online procurement 386 People, Process and Physical evidence 464
Drivers of e-procurement 387 Focus on online branding 464
Case Study 7.1 Cambridge Consultants reduce The importance of brand online 467
costs through e-procurement 388 Actions 469
Focus on estimating e-procurement cost 390 Control 470
The impact of cost savings on profitability 391 Case Study 8.3 The new Napster changes the
Risks and impacts of e-procurement 392 music marketing mix 471
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x Contents

Summary 475
Exercises 476 Part 3
References 477
Further reading 479
Implementation 559
Web links 480
10 Change management 560
9 Customer relationship management 481 Learning outcomes / Management issues 560
Learning outcomes / Management issues 481 Links to other chapters 560
Links to other chapters 481 Introduction 561
Introduction 482 The challenges of e-business transformation 561
Marketing applications of CRM 483 The challenges of sell-side e-commerce
implementation 563
Real-world E-Business: Warner Breaks 484
Different types of change in business 566
What is e-CRM? 486
Case Study 10.1 Process management: making
Benefits of e-CRM 487
complex business simpler 570
Permission marketing 488
Planning change 572
Customer profiling 490
The imperative for project governance? 572
Conversion marketing 491
The project plan and schedule for an e-business
The online buying process 492
system 574
Differences in buyer behaviour in target markets 493
Prototyping 576
Differences between B2C and B2B buyer
Human resource requirements 579
behaviour 493
Staff retention 580
The net promoter score 495
Outsourcing 581
Customer acquisition management 498 Revising organizational structures 583
Focus on marketing communications for customer Approaches to managing change 586
acquisition 498 Senior management involvement 586
The characteristics of interactive marketing Models for achieving change 586
communications 499 Organizational culture 588
Assessing marketing communications effectiveness 502 Focus on knowledge management 590
Online marketing communications 503 What is knowledge? 590
Customer retention management 526 Objectives of knowledge management 592
Personalization and mass customization 528 Implementing knowledge management 593
Online communities 530 Technologies for implementing knowledge
Techniques for managing customer activity and management 594
value 533 Case Study 10.2 Using Web 2.0 tools to support
Lifetime value modelling 534 knowledge management at Janssen-Cillag Australia 596
Focus on excelling in e-commerce service quality 536 Risk management 598
Improving online service quality 536 Summary 600
Customer extension 539 Exercises 600
Advanced online segmentation and targeting References 601
techniques 540 Further reading 603
Technology solutions for CRM 546 Web links 603
Types of CRM applications 547
Integration with back-office systems 547 11 Analysis and design 604
The choice of single-vendor solutions or a more Learning outcomes / Management issues 604
fragmented choice 548 Links to other chapters 604
Data quality 549 Introduction 605
Case Study 9.1 Tesco.com increases product Real-world E-Business: Arena Flowers 606
range and uses triggered communications to Analysis for e-business 608
support CRM 549 Workflow management 609
Summary 552 Process modelling 610
Exercises 552 Process mapping 610
References 553 Task analysis and task decomposition 610
Further reading 556 Process dependencies 612
Web links 557 Validating a new process model 618
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Contents xi

Data modelling 619 Creating static web content 686

Design for e-business 621 Software and services for web-site development
Architectural design of e-business systems 621 and testing 689
Focus on user-centred site design 623 Testing 694
Use-case analysis 627 The testing process 694
Designing the information architecture 634 Testing environments 695
Customer orientation 639 Changeover 695
Elements of site design 641 Database creation and data migration 696
Web accessibility 646 Deployment planning 697
Case Study 11.1 Dabs.com refines its web store 649
Content management and maintenance 697
Focus on security design for e-business 652
Frequency and scope of content updating 697
Managing computer viruses 658
Maintenance process and responsibilities 699
Controlling information service usage 660
Focus on measuring and improving performance of
Monitoring of electronic communications 660
e-business systems 703
E-mail management 665
Hacking 669 Principles of performance management and
Secure e-commerce transactions 671 improvement 704
Approaches to developing secure systems 671 Stage 1: Creating a performance management
Current approaches to e-commerce security 673 system 705
Reassuring the customer 674 Stage 2: Defining the performance metrics
Case Study 11.2 Building an e-business fortress 674 framework 706
Summary 675 Stage 3: Tools and techniques for collecting
Exercises 676 metrics and summarizing results 711
References 677 Budgeting 724
Further reading 679 Case Study 12.1 Learning from Amazons culture
Web links 679 of metrics 726
Summary 732
12 Implementation and maintenance 680 Exercises 732
Learning outcomes / Management issues 680 References 733
Links to other chapters 680 Further reading 734
Introduction 681 Web links 735
Real-world E-Business: Thomas Cook 682
Alternatives for acquiring e-business systems 684 Glossary 736
Development of web-based content and services 686 Index 754
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Supporting resources
Visit www.pearsoned.co.uk/chaffey to find valuable online resources
Companion Website for students

A study guide to reinforce key ideas and topics

Multiple choice questions to test your learning

Links to relevant sites on the web

An online glossary to explain key terms

Flashcards to test your understanding of key terms

A smarter online searching guide

Link to Dave Chaffeys blog with a collection of articles and links

Link to Dave Chaffeys Twitter feed

For instructors

Complete, downloadable Instructors Manual

PowerPoint slides that can be downloaded and used for presentations

Testbank of question material

Also: The Companion Website provides the following features:

Search tool to help locate specific items of content

E-mail results and profile tools to send results of quizzes to instructors

Online help and support to assist with website usage and troubleshooting

For more information please contact your local Pearson Education sales representative or visit
www.pearsoned.co.uk/chaffey