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FIFTH EDITION

E-BUSINESS &
E-COMMERCE
MANAGEMENT
STRATEGY, IMPLEMENTATION
Financial Times
AND PRACTICE Prentice Hall
is an imprint of

■AVE CHAFFEY PEARSON

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First published 2002


Second edition published 2004
Third edition published 2007
Fourth edition published 2009
Fifth edition published 2011

© Dave Chaffey 2002


© Marketing insights Limited 2002, 2009, 2011

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, 6-10 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
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Pearson Education is not responsible for the content of third party internet sites.

ISBN: 978-0-273-75201-1

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. — 5th ed.
p. cm.
ISBN 978-0-273-75201-1 (pbk.)
1 . Electronic commerce. 2. Business enterprises—Computer networks. I. Title.
HF5548.32.C472 2011
658.8’72—dc22
2011007808

109876543
14 13

Typeset in 10/12pt Minion by 30


Printed and bound by Rotolito Lombarda, Italy
Brief contents

Preface xiii
Guided tour xxiv
About the author xxvi
Author’s acknowledgements xxvii
Publisher’s acknowledgements xxvii

Introduction

1 Introduction to e-business and e-commerce 3


2 Marketplace analysis for e-commerce 48
3 E-business infrastructure 92
4 E-environment 179

5 E-business strategy 237


6 Supply chain management 307
7 E-procurement 354
8 E-marketing 382
9 Customer relationship management 450

10 Change management 530


11 Analysis and design 577
12 E-business service implementation and optimization 649

Glossary 705
Index 722
Contents

Preface XIII The e-commerce environment 54


Guided tour XXIV Strategic agility 55
About the author xxvi Online marketplace analysis 56
Author’s acknowledgements xxvii Location of trading in the marketplace 61
Publisher’s acknowledgements xxvii Review of marketplace channel structures 61
Location of trading in the marketplace 64
The importance of multi-channel marketplace
models 65
Commercial arrangement for transactions 65
Introduction 1 Different types of online intermediary 66
Summary of the types of intermediary 68
The importance of search engines 68
Introduction to e-business and e-commerce 3
Business models for e-commerce 71
Learning outcomes / Management issues 3
Revenue models 73
Links to other chapters 3
Online publisher and intermediary revenue models 74
Introduction 4
Focus on Auction business models 78
The impact of electronic communications on
Focus on Internet start-up companies 78
traditional businesses 6 From 'bricks and mortar’ to 'clicks and mortar' 79
Managing social media 7 Assessing e-businesses 79
Real- world e-business: HP. com 7 Valuing Internet start-ups 79
What is the difference between e-commerce and Case Study 2.1 i-to-i - a global marketplace for a
e-business? 10 start-up company 81
E-commerce defined 10 Why dot-coms failed 83
E-business defined 12 Case Study 2.2 Zopa launches a new lending
Case Study 1.1 A short history of Facebook 19 model 85
Business or consumer models of e-commerce Summary 87
transactions 27 Exercises 88
E-business opportunities 30 References 89
Business adoption of digital technologies for Further reading 90
e-commerce and e-business 31 Web links 91
Drivers of business Internet adoption 31
Case Study 1.2 North West Supplies extends its E-business infrastructure 92
reach online 34 Learning outcomes / Management issues 92
E-business risks and barriers to business adoption 35 Links to other chapters 92
Evaluating an organization's e-business capabilities 37 Introduction 93
Drivers of consumer Internet adoption 37 E-business infrastructure components 94
Barriers to consumer Internet adoption 39 Real-world e-business: lastminute.com 96
Case Study 1.3 eBay - the world’s largest Internet technology 98
e-business 40 Hosting of websites and e-business services 99
Summary 43 The Internet timeline 99
Exercises 44 Just how big is the Internet? 1 02
References 45 Case study 3.1 Innovation at Google 103
Further reading 46 Intranets and extranets 105
Web links 46 Web technology 112
Internet-access software applications 116
Marketplace analysis for e-commerce 48 Augmented reality 118
Learning outcomes / Management issues 48 Blogs and blogging 118
Links to other chapters 48 Electronic mail or e-mail 1 20
Introduction 49 Feeds 1 20
Real-world e-business: More Th>n 50 How does it work? Internet standards 124
viii Contents

Networking standards 124 Further reading 231


The HTTP protocol 126 Web links 232
Uniform resource locators (URLs) 126
Domain names 126
Web presentation and data exchange standards 128
Audio and video standards 138
Focus on Internet governance 138 Strategy and applications 235
Managing e-business infrastructure 143
Managing hardware and systems software 5 E-business strategy 237
infrastructure 145 Learning outcomes / Management issues 237
Managing Internet service and hosting providers 146 Links to other chapters 237
Managing employee access to the Internet and Introduction 238
e-mail 150 Real-world e-business: Standard Life 238
Managing e-business applications infrastructure 150 What is e-business strategy? 241
Focus on Web services, SaaS and service-oriented The imperative for e-business strategy 243
architecture (SOA) 153 E-channel strategies 244
Benefits of web services or SaaS 153
Strategy process models for e-business 246
Challenges of deploying SaaS 154
Strategic analysis 250
Case study 3.2 New architecture or just new hype? 159
Resource and process analysis 250
EDI 161
Competitive environment analysis 257
Focus on Mobile commerce 162
Assessing competitive threats 257
Wireless Internet access standards 162
Co-opetition 261
Wireless access devices 163
Competitor analysis 261
Popularity of applications of mobile
Strategic objectives 262
communications 164
Defining vision and mission 262
Mobile apps 164
How can e-business create business value? 265
Summary 173
Case study 5.1 Capital One creates value through
Exercises 174
e-business 266
References 175
Further reading 177 Objective setting 267
Web links 177 Case study 5.2 Setting the Internet revenue
contribution at Sandvik Steel 271
Strategy definition 275
4 E-environment 179
Decision 1: E-business channel priorities 276
Learning outcomes / Management issues 179
Links to other chapters 179 Decision 2: Market and product development
Introduction 180 strategies 278
Real-world e-business: Lingo24 183 Decision 3: Positioning and differentiation
Social and legal factors 185 strategies 282
Factors governing e-commerce service adoption 185 Decision 4: Business, service and revenue models 283
Privacy and trust in e-commerce 194 Decision 5: Marketplace restructuring 286
Other e-commerce legislation 207 Decision 6: Supply-chain management capabilities 288
Environmental and green issues related to Decision 7: Internal knowledge management
Internet usage 212 capabilities 288
Taxation 213 Decision 8 : Organizational resourcing and
Freedom-restrictive legislation 215 capabilities 288
Economic and competitive factors 216 Strategy implementation 291
Focus on E-commerce and globalization 217 Failed e-business strategies 291
Case study 4.1 The implications of globalization E-business strategy implementation success
for consumer attitudes 218 factors for SMEs 292
The implications of e-commerce for international Case study 5.3 Boo hoo - learning from the largest
B2B trading 219 European dot-com failure 293
Political factors 221 Focus on Aligning and impacting e-business strategies 296
Internet governance 222 Elements of IS strategy 297
E-government 222 Investment appraisal 297
Technological innovation and technology assessment 223 Summary 301
Approaches to identifying emerging technology 226 Exercises 301
Summary 228 References 302
Exercises 228 Further reading 305
References 229 Web links 306
Contents ix

6 Supply chain management 307 Barriers and risks of e-procurement adoption 366
Learning outcomes / Management issues 307 Implementing e-procurement 367
Links to other chapters 307 Integrating company systems with supplier
Introduction 308 systems 368
Problems of supply chain management 311 Focus on B2B marketplaces 371
What is supply chain management? 312 Case study 7.2 Covisint - a typical history of a
Using technology to support supply chain B2B marketplace? 373
management - an example 314 Types of marketplace 376
A simple model of a supply chain 317 The future of e-procurement 377
Case study 6.1 Shell Chemicals redefines its Summary 378
customers' supply chains 318 Exercises 378
What is logistics? 322 References 379
Push and pull supply chain models 324 Further reading 381
Focus on The value chain 325 Web links 381
Restructuring the internal value chain 327
The value stream 327 8 E-marketing 382
Value chain analysis 328 Learning outcomes / Management issues 382
Value networks 329 Links to other chapters 382
Towards the virtual organization 331 Introduction 383
Options for restructuring the supply chain 332 Chapter structure 384
Using e-business to restructure the supply chain 334.
Real-world e-business: Guess 385
Technology options and standards for supply What is e-marketing? 386
chain management 335 Marketing defined 386
Adoption rates of e-business applications 335
E-marketing defined 388
Case study 6.2 Argos uses e-supply chain
E-marketing planning 388
management to improve customer convenience 339
Is a separate e-marketing plan required? 389
IS-supported downstream supply chain
Situation analysis 391
management 340
Demand analysis 392
Outbound logistics management 341
Competitor analysis 396
IS infrastructure for supply chain management 341
Intermediary analysis 398
Supply chain management implementation 342
Internal marketing audit 398
Data standardization and exchange 342
Objective setting 399
The supply chain management strategy process 343
Case study 8.1 The e-volution of easyJet’s
Goal-setting and performance management for
online revenue contribution 402
e-SCM 345
Managing partnerships 346 Strategy 404
Managing global distribution 347 Market and product positioning 407
Case study 6.3 RFID: keeping track starts its Target market strategies 407
move to a faster track 348 Focus on Characteristics of digital media
Summary 349 communications 415
Exercises 350 Tactics 420
References 351 Product 422
Further reading 353 Case study 8.2 Dell gets closer to its customers
Web links 353 online 425
Price 427
7 E-procurement 354 Place 431
Learning outcomes / Management issues 354 Promotion 432
Links to other chapters 354 People, process and physical evidence 434
Introduction 355 Focus on Online branding 434
What is e-procurement? 355 The importance of brand online 437
Understanding the procurement process 357 Actions 439
Types of procurement 359 Control 440
Participants in different types of e-procurement 359 Case study 8.3 The new Napster changes
Drivers of e-procurement 360 the music marketing mix ~ 441
Examples of the benefits of e-procurement 361 Summary 445
Case study 7.1 Cambridge Consultants reduce Exercises 445
costs through e-procurement 362 References 446
Focus on Estimating e-procurement costs 364 Further reading 449
The impact of cost savings on profitability 364 Web links 449
x Contents

9 Customer relationship management 450 Real-world e-business: Confused.com 532


Learning outcomes / Management issues 450 The challenges of e-business transformation 534
Links to other chapters 450 The challenges of sell-side e-commerce
Introduction 451 implementation 535
Marketing applications of CRM 452 Different types of change in business 539
Real-world e-business: eBags 453 Case study 10.1 Process management: making
What is e-CRM? 455 complex business simpler 543
Benefits of e-CRM 456 Planning change 545
Permission marketing 458 The imperative for project governance? 545
Customer profiling 459 The project plan and schedule for an e-business
Conversion marketing 460 system 547
The online buying process 463 Prototyping 551
Differences in buyer behaviour in target markets 464 Human resource requirements 552
Differences between B2C and B2B buyer Staff retention 552
behaviour 464 Outsourcing 554
The net promoter score 465 Revising organizational structures 555
Customer acquisition management 467 Approaches to managing change 558
Focus on Marketing communications for customer Senior management involvement 559
acquisition 467 Models for achieving change 559
The characteristics of interactive marketing Organizational culture 562
communications 468 Focus on Knowledge management 562
Assessing marketing communications What is knowledge? 563
effectiveness 470 Objectives of knowledge management 565
Online marketing communications 471 Implementing knowledge management 565
Focus on Social media and social CRM strategy 481 Technologies for implementing knowledge
Customer retention management 499 management 566
Personalization and mass customization 501 Case study 10.2 Using Enterprise 2.0 tools to
Techniques for managing customer activity support knowledge management at
and value 503 Janssen-Cilag Australia 568
Lifetime value modelling 505 Riskmanagement 571
Focus on Excelling in e-commerce service quality 506 Summary 572
Improving online service quality 506 Exercises 572
Customer extension 510 References 574
Advanced online segmentation and targeting Further reading 575
techniques 510 Web links 575
Technology solutions for CRM 515
Types of CRM applications 517 11 Analysis and design 577
Integration with back-office systems 518 Learning outcomes / Management issues 577
The choice of single-vendor solutions or a Links to other chapters 577
more fragmented choice 518 Introduction 578
Data quality 518 Real-world e-business: Arena Flowers 579
Case study 9.1 Tesco.com increases product Analysis for e-business 582
range and uses triggered communications to Process modelling 582
support CRM 519 Process mapping 582
Summary 521 Task analysis and task decomposition 583
Exercises 522 Process dependencies 584
References 523 Workflow management 585
Further reading 526 Validating a new process model 592
Web links 526 Data modelling 592
Design for e-business 594
Architectural design of e-business systems 594
IB Q Focus on User-centred site design 596
Use-case analysis 601
Implementation 529
Designing the information architecture 608
Customer orientation 612
10 Change management 530
Elements of site design 614
Learning outcomes / Management issues 530
Web accessibility 619
Links to other chapters 530
Case study 11.1 Dabs.com refines its web store 622
Introduction 531
Contents xi

Focus on Security design for e-business 624 Testing environments 663


Managing computer viruses 628 Changeover 663
Controlling information service usage 631 Database creation and data migration 664
Monitoring of electronic communications 631 Deployment planning 665
E-mail management 634 Content management and maintenance 665
Hacking 638 Frequency and scope of content updating 667
Secure e-commerce transactions 639 Maintenance process and responsibilities 668
Approaches to developing secure systems 640 Focus on Web analytics: measuring and improving
Current approaches to e-commerce security 642 performance of e-business services 673
Reassuring the customer 642 Principles of performance management and
Case study 1 1 .2 Building an e-business fortress 643 improvement 674
Summary 644 Stage 1: Creating a performance management
Exercises 644 system 674
References 645 Stage 2: Defining the performance metrics
Further reading 647 framework 676
Web links 647 Stage 3: Tools and techniques for collecting
metrics and summarizing results 679
12 E-business service implementation Budgeting 692
and optimization 649 Case study 12.1 Learning from Amazon's culture
Learning outcomes / Management issues 649 of metrics 695
Links to other chapters 649 Summary 701
Introduction 650 Exercises 701
Optimization of e-business sen/ices 651 References 702
Real-world e-business: Squarespace 651 Further reading 703
Alternatives for acquiring e-business systems 654 Web links 703
Development of web-based content and services 655
Creating static web content 656 Glossary 705
Software and services for developing e-business Index 722
applications 658
Testing 662
The testing process 662
Supporting resources
Visit www.pearsoned.co.uk/chaffcy to find valuable online resources:
Companion Website for students
• Self-assessment questions to check your understanding
• Links to relevant sites on the Web
• Additional case studies
• An online glossary to explain key terms
• Flashcards to test your understanding of key terms
• A sm arter online searching guide
• Link to Dave Chaffey’s blog with a collection of articles and links
• Link to Dave Chaffey’s Twitter feed
• Latest updates from Dave Chaffey

For instructors
• Complete, downloadable Instructor’s Manual
• PowerPoint slides that can be downloaded and used for presentations
• Testbank o f question material
Also: The Com panion Website provides the following features:
• Search tool to help locate specific items o f content
• E-mail results and profile tools to send results o f quizzes to instructors
• Online help and support to assist with website usage and troubleshooting
For more inform ation please contact your local Pearson Education sales representative or visit
www.pearsoned.co.uk/chaffey