Economics and Justification of Electronic Commerce
Multiple Choice Questions (Circle the correct answer)
1) Metrics are used to describe all of the following except:
a. standards.
b. costs.
c. benefits.
d. the ratio of costs to benefits.
2) In B2C, an example of a tangible EC metric from the buyer's perspective is ____________.
a. ease of use of EC
b. convenience in purchasing
c. profit per customer
d. cost/price of the product
3) Productivity benefits from using EC are difficult to measure because ____________.
a. the payoffs are too short
b. there is no time lag in EC gains
c. EC gains in certain areas of the company may be offset by losses in other areas
d. qualitative benefits do not count
4) The major steps in the process of justifying large-scale EC and IT projects include all of the following except:
a. lay an appropriate foundation for analysis with your vendor and then conduct your ROI.
b. document and verify all figures used in the calculation. Clarify all assumptions.
c. do not leave out strategic benefits, including long-term ones.
d. be careful not to overestimate cost and underestimate benefits (a tendency of many managers).
5) Pouilly's Poodle Shop wants to produce monthly cash flows from its Internet Doggie-Cam investment. The most appropriate method for assessing this investment is ____________.
a.break-even analysis
b.total cost of ownership
c.payoff
d.internal rate of return (IRR)
6) All of the following direct metrics indicate progress in e-procurement except:
a. increased order fulfillment rate.
b. decreased number of rejects received from suppliers.
c. reduced inventory costs.
d. increased on-time deliveries.
7) Justifying information security projects _____________.
a. is not needed because it is well-known that preventing network security problems is less labor intensive than cleaning up virus infections
b. is not done because ROI calculators are not available
c. should focus on defending against external threats such as hackers and malware
d. should be done because employee security training is usually poorly done
8) EC can increase revenues by all of the following except:
a. increasing both reach and richness.
b. allowing customers to order anytime from any place via the use of m-commerce and l-commerce.
c. becoming an online portal.
d. creating value-added content from selling searches, access to data, and electronic documents.
9) A Web-based seller of CDs carefully monitors the prices charged by its competitors for identical products. This company has the ability to change a given price within three minutes in response to changes by competitors. This is an example of EC _____________.
a. competitive advantage
b. core competency
c. product or service differentiation
d. agility
10) As a company moves to incorporate an online presence with its traditional brick-and-mortar operation, it adds the costs related to training for all personnel, in the capabilities of the EC system, and a new advertising campaign to announce its new site to the costs directly associated with building the new Web presence. In this case, training and advertising are examples of ____________.
a. transaction costs
b. complementary investments
c. direct costs
d. indirect costs
Critical Analysis / Case Study Problems
The Critical Analysis questions are designed to help you gain a deeper understanding of the subject matter, develop an increased ability to apply what you have learned and integrate this knowledge into a greater understanding and appreciation for your field of study. Completion of the following questions will help you outline your answers and organize your thoughts within an appropriate framework. These practice questions will not be graded, but you should apply the same analytical skills and writing proficiencies that you will need for the unit essays. We suggest writing your answers on another piece of paper and comparing your results to the suggested answers at the end of this chapter to help you identify any areas you need to review.
1. Distinguish intangible costs and benefits and explain why they must be considered when justifying an IT investment.
2. Relate EC to cultural differences