An imprint of www.pearson-books.com

E-BusinEss and E-CommErCE managEmEnt

davE ChaffEy

Strategy, ImplementatIon and practIce

Fourth edition

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Fourth edition

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 today’s 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 e-business strategy for all types of organization.

• The latest on managing e-business security and cutting edge e-marketing 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.

Whether you’re an undergraduate or postgraduate student studying e-business and e-commerce, or 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.

‘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 Præst Knudsen, university of southern denmark

Additional learning resources are online at www.pearsoned.co.uk/chaffey

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E-Business andE-CommerceManagementStrategy, Implementation and Practice

Visit the E-Business and E-Commerce Management, fourth edition Companion Website atwww.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 Chaffey’s blog with a collection of articles and links� Link to Dave Chaffey’s Twitter feed

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We work with leading authors to develop thestrongest educational materials in business andmanagement, bringing cutting-edge thinking andbest learning practice to a global market.

Under a range of well-known imprints, includingFinancial Times Prentice Hall we craft high qualityprint and electronic publications which help readersto understand and apply their content, whetherstudying or at work.

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STRATEGY, IMPLEMENTATION AND PRACTICE

Dave Chaffey

Fourth Edition

E-BUSINESS ANDE-COMMERCEMANAGEMENT

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Pearson Education LimitedEdinburgh GateHarlowEssex CM20 2JEEngland

and Associated Companies throughout the world

Visit us on the World Wide Web at:www.pearsoned.co.uk

First published 2002Second edition published 2004Third edition published 2007Fourth edition published 2009

© Dave Chaffey 2002© Marketing Insights Limited 2002, 2009

The right of Dave Chaffey to be identified as author of this work hasbeen 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 retrievalsystem, or transmitted in any form or by any means, electronic, mechanical,photocopying, recording or otherwise, without either the prior written permission of thepublisher or a licence permitting restricted copying in the United Kingdom issued by theCopyright 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 anytrademark in this text does not vest in the author or publisher any trademark ownership rightsin such trademarks, nor does the use of such trademarks imply any affiliation with orendorsement of this book by such owners.

ISBN: 978-0-273-71960-1

British Library Cataloguing-in-Publication DataA catalogue record for this book is available from the British Library

Library of Congress Cataloging-in-Publication DataChaffey, 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 2009658.8'72--dc22

2009009561

10 9 8 7 6 5 4 3 2 113 12 11 10 09

Typeset in 10/12pt Minion by 30Printed and bound by Rotolito Lombarda, Italy

The publisher’s policy is to use paper manufactured from sustainable forests.

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Preface xiii

Guided tour xxiv

Author’s acknowledgements xxvi

Publishers acknowledgements xxvii

1 Introduction to e-business and e-commerce 3

2 E-commerce fundamentals 51

3 E-business infrastructure 103

4 E-environment 192

5 E-business strategy 255

6 Supply chain management 330

7 E-procurement 380

8 E-marketing 412

9 Customer relationship management 481

10 Change management 560

11 Analysis and design 604

12 Implementation and maintenance 680

Glossary 736

Index 754

Implementation 559Part 3

Strategy and applications 253Part 2

Introduction 1

Brief contents

Part 1

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Preface xiiiGuided tour xxivAbout the author xxviAuthor’s acknowledgements xxviiPublisher’s acknowledgements xxvii

1 Introduction to e-business and e-commerce 3Learning outcomes / Management issues 3Links to other chapters 3Introduction 4The impact of the electronic communications ontraditional businesses 6Real-world E-Business: HP.com 7What is the difference between e-commerce ande-business? 9

E-commerce defined 10E-business defined 13Case Study 1.1 A short history of Facebook 17Business or consumer models of e-commercetransactions 26

E-business opportunities 29Business adoption of digital technologies fore-commerce and e-business 30

Drivers of business Internet adoption 30Case Study 1.2 North West Supplies extends itsreach online 33

E-business risks and barriers to business adoption 35Evaluating an organization’s e-business capabilities 36Drivers of consumer Internet adoption 37Barriers to consumer Internet adoption 39

Management responses to e-commerce ande-business 39

Part 1: Introduction 39Part 2: Strategy and applications 40Part 3: Implementation 42Case Study 1.3 eBay – the world’s largeste-business 42

Summary 46Exercises 46References 48Further reading 49Web links 49

2 E-commerce fundamentals 51Learning outcomes / Management issues 51Links to other chapters 51

Introduction 52Real-world E-Business: More Th>n 53The e-commerce environment 57

Strategic agility 57Online marketplace analysis 59

Location of trading in the marketplace 67The importance of multi-channel marketplacemodels 70Different types of online intermediary 71Types of intermediaries 74The importance of search engines 76

Business models for e-commerce 77Revenue models 79Online publisher and intermediary revenue models 80

Focus on auction business models 86Case Study 2.1 The impact of B2B reverseauctions 87

Focus on Internet start-up companies 88From ‘bricks and mortar’ to ‘clicks and mortar’ 88Assessing e-businesses 89Valuing Internet start-ups 89Case Study 2.2 lastminute.com – an internationaldot-com survivor 91The dot-com bubble bursts 93Why dot-coms failed 93The impact of the dot-com phenomenon ontraditional organizations 95Case Study 2.3 Zopa launches a new lendingmodel 95

Summary 98Exercises 99References 100Further reading 101Web links 101

3 E-business infrastructure 103Learning outcomes / Management issues 103Links to other chapters 103Introduction 104

E-business infrastructure components 105Real-world E-Business: Random House 107Internet technology 109

Hosting of web sites and e-business services 110The Internet timeline 111Just how big is the Internet? 114Case Study 3.1 Innovation at Google 115Intranets and extranets 116

Web technology 124Internet-access software applications 128

Blogs and blogging 129Electronic mail or e-mail 131Feeds 132Voice over IP (VoIP) 134

Part 1

Introduction 1

Contents

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How does it work? Internet standards 136Networking standards 136The HTTP protocol 138Uniform resource locators (URLs) 139Domain names 139Web presentation and data exchange standards 141Audio and video standards 152

Focus on Internet governance 152Managing e-business infrastructure 158

Managing hardware and systems softwareinfrastructure 159Managing Internet service and hosting providers 160Managing employee access to the Internet ande-mail 165Managing e-business applications infrastructure 165

Focus on web services, SaaS and service-orientedarchitecture (SOA) 168

Benefits of web services or SaaS 168Challenges of deploying SaaS 169Case Study 3.2 New architecture or just newhype? 174EDI 176

Focus on mobile commerce 177Wireless Internet access standards 178Wireless access devices 179Popularity of mobile applications 179

Summary 186Exercises 187References 188Further reading 190Web links 190

4 E-environment 192Learning outcomes / Management issues 192Links to other chapters 192Introduction 193Real-world E-Business: GD Worldwide 196Social and legal factors 198

Factors governing e-commerce service adoption 198Privacy and trust in e-commerce 209Other e-commerce legislation 222

Environmental and green issues related to Internetusage 227Taxation 229

Freedom-restrictive legislation 231Economic and competitive factors 232Focus on e-commerce and globalization 233

Case Study 4.1 The implications of globalizationfor consumer attitudes 235The implications of e-commerce for internationalB2B trading 236

Political factors 238Internet governance 239

E-government 240Technological innovation and technology assessment 241

Approaches to identifying emerging technology 244Summary 246Exercises 246References 247

Further reading 249Web links 249

5 E-business strategy 255Learning outcomes / Management issues 255Links to other chapters 255Introduction 256Real-world E-Business: Standard Life 256What is e-business strategy? 259

The imperative for e-business strategy 261E-channel strategies 262Strategy process models for e-business 264

Strategic analysis 269Resource and process analysis 269Competitive environment analysis 276Assessing competitive threats 276Co-opetion 281Competitor analysis 281

Strategic objectives 281Defining vision and mission 282How can e-business create business value? 285Case Study 5.1 Capital One creates valuethrough e-business 286Objective setting 287Case Study 5.2 Setting the Internet revenuecontribution at Sandvik Steel 292

Strategy definition 295Decision 1: E-business channel priorities 298Decision 2: Market and product developmentstrategies 300Decision 3: Positioning and differentiationstrategies 303Decision 4: Business, service and revenue models 306Decision 5: Marketplace restructuring 308Decision 6: Supply-chain management capabilities 309Decision 7: Internal knowledge managementcapabilities 310Decision 8: Organizational resourcing andcapabilities 310

Strategy implementation 313Failed e-business strategies 314E-business strategy implementation successfactors for SMEs 315Case Study 5.3 Boo hoo – learning from thelargest European dot-com failure 316

Focus on information systems strategy ande-business strategy 319

Elements of IS strategy 320Investment appraisal 320

Summary 324Exercises 325References 326Further reading 328Web links 329

Part 2

Strategy and applications 253

viii Contents

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6 Supply chain management 330Learning outcomes / Management issues 330Links to other chapters 330Introduction 331

Problems of supply chain management 334What is supply chain management? 335

Using technology to support supply chainmanagement – an example 337A simple model of a supply chain 340Case Study 6.1 Shell chemicals redefines itscustomers’ supply chains 341What is logistics? 345Push and pull supply chain models 347

Focus on the value chain 348Restructuring the internal value chain 350The value stream 351Value chain analysis 351Value networks 352Towards the virtual organization 354

Options for restructuring the supply chain 356Using e-business to restructure the supply chain 358

Technology options and standards for supplychain management 359Adoption rates of e-business applications 360Case Study 6.2 Tesco develops a buy-sidee-commerce system for supply chain management 363IS-supported downstream supply chainmanagement 365Outbound logistics management 365IS infrastructure for supply chain management 366

Supply chain management implementation 368Data standardization and exchange 368Human resources requirements of SCM 369The supply chain management strategy process 371Managing partnerships 372Managing global distribution 374Case Study 6.3 RFID: keeping track starts itsmove to a faster track 374

Summary 375Exercises 376References 377Further reading 379Web links 379

7 E-procurement 380Learning outcomes / Management issues 380Links to other chapters 380Introduction 381What is e-procurement? 381

Understanding the procurement process 384Types of procurement 385Participants in online procurement 386

Drivers of e-procurement 387Case Study 7.1 Cambridge Consultants reducecosts through e-procurement 388

Focus on estimating e-procurement cost 390The impact of cost savings on profitability 391

Risks and impacts of e-procurement 392

Organizational risks 393Failure to achieve real cost reductions 393Technology risks 394

Implementing e-procurement 394The growth in adoption of web-enablede-procurement 396Integrating company systems with suppliersystems 397

Focus on electronic B2B marketplaces 400Case Study 7.2 Covisint – a typical history of aB2B marketplace? 403Types of marketplace 405

The future of e-procurement? 407Summary 407Exercises 408References 409Further reading 410Web links 410

8 E-marketing 412Learning outcomes / Management issues 412Links to other chapters 412Introduction 413

Chapter structure 414Real-world E-Business: Guess 415What is e-marketing? 416

Marketing defined 416E-marketing defined 417Distinguishing between e-marketing, e-businessand e-commerce 417

E-marketing planning 418Is a separate e-marketing plan required? 418

Situation analysis 420Demand analysis 421Competitor analysis 425Intermediary analysis 427Internal marketing audit 428

Objective setting 428Case Study 8.1 The e-volution of easyJet’s onlinerevenue contribution 431

Strategy 433Market and product positioning 436Target market strategies 437

Focus on characteristics of new-media marketingcommunications 443Tactics 448

Product 451Case Study 8.2 Dell gets closer to its customersonline 453Price 456Place 460Promotion 462People, Process and Physical evidence 464

Focus on online branding 464The importance of brand online 467

Actions 469Control 470

Case Study 8.3 The new Napster changes themusic marketing mix 471

ixContents

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Summary 475Exercises 476References 477Further reading 479Web links 480

9 Customer relationship management 481Learning outcomes / Management issues 481Links to other chapters 481Introduction 482

Marketing applications of CRM 483Real-world E-Business: Warner Breaks 484What is e-CRM? 486

Benefits of e-CRM 487Permission marketing 488Customer profiling 490

Conversion marketing 491The online buying process 492

Differences in buyer behaviour in target markets 493Differences between B2C and B2B buyerbehaviour 493The net promoter score 495

Customer acquisition management 498Focus on marketing communications for customeracquisition 498

The characteristics of interactive marketingcommunications 499Assessing marketing communications effectiveness 502Online marketing communications 503

Customer retention management 526Personalization and mass customization 528Online communities 530Techniques for managing customer activity andvalue 533Lifetime value modelling 534

Focus on excelling in e-commerce service quality 536Improving online service quality 536

Customer extension 539Advanced online segmentation and targetingtechniques 540

Technology solutions for CRM 546Types of CRM applications 547Integration with back-office systems 547The choice of single-vendor solutions or a morefragmented choice 548Data quality 549Case Study 9.1 Tesco.com increases productrange and uses triggered communications tosupport CRM 549

Summary 552Exercises 552References 553Further reading 556Web links 557

10 Change management 560Learning outcomes / Management issues 560Links to other chapters 560Introduction 561The challenges of e-business transformation 561

The challenges of sell-side e-commerceimplementation 563

Different types of change in business 566Case Study 10.1 Process management: makingcomplex business simpler 570

Planning change 572The imperative for project governance? 572The project plan and schedule for an e-businesssystem 574Prototyping 576

Human resource requirements 579Staff retention 580Outsourcing 581

Revising organizational structures 583Approaches to managing change 586

Senior management involvement 586Models for achieving change 586Organizational culture 588

Focus on knowledge management 590What is knowledge? 590Objectives of knowledge management 592Implementing knowledge management 593Technologies for implementing knowledgemanagement 594Case Study 10.2 Using Web 2.0 tools to supportknowledge management at Janssen-Cillag Australia 596

Risk management 598Summary 600Exercises 600References 601Further reading 603Web links 603

11 Analysis and design 604Learning outcomes / Management issues 604Links to other chapters 604Introduction 605Real-world E-Business: Arena Flowers 606Analysis for e-business 608

Workflow management 609Process modelling 610

Process mapping 610Task analysis and task decomposition 610Process dependencies 612Validating a new process model 618

Part 3

Implementation 559

x Contents

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Data modelling 619Design for e-business 621

Architectural design of e-business systems 621Focus on user-centred site design 623

Use-case analysis 627Designing the information architecture 634Customer orientation 639Elements of site design 641Web accessibility 646Case Study 11.1 Dabs.com refines its web store 649

Focus on security design for e-business 652Managing computer viruses 658Controlling information service usage 660Monitoring of electronic communications 660E-mail management 665Hacking 669Secure e-commerce transactions 671Approaches to developing secure systems 671Current approaches to e-commerce security 673Reassuring the customer 674Case Study 11.2 Building an e-business fortress 674

Summary 675Exercises 676References 677Further reading 679Web links 679

12 Implementation and maintenance 680Learning outcomes / Management issues 680Links to other chapters 680Introduction 681Real-world E-Business: Thomas Cook 682Alternatives for acquiring e-business systems 684Development of web-based content and services 686

Creating static web content 686Software and services for web-site developmentand testing 689

Testing 694The testing process 694Testing environments 695

Changeover 695Database creation and data migration 696Deployment planning 697

Content management and maintenance 697Frequency and scope of content updating 697Maintenance process and responsibilities 699

Focus on measuring and improving performance ofe-business systems 703

Principles of performance management andimprovement 704Stage 1: Creating a performance managementsystem 705Stage 2: Defining the performance metricsframework 706Stage 3: Tools and techniques for collectingmetrics and summarizing results 711Budgeting 724Case Study 12.1 Learning from Amazon’s cultureof metrics 726

Summary 732Exercises 732References 733Further reading 734Web links 735

Glossary 736Index 754

xiContents

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Supporting resourcesVisit www.pearsoned.co.uk/chaffey to find valuable online resources

CompanionWebsite 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 Chaffey’s blog with a collection of articles and links� Link to Dave Chaffey’s Twitter feed

For instructors

� Complete, downloadable Instructor’s 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 visitwww.pearsoned.co.uk/chaffey

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