Chapter 2 - Study Guide

E-Marketplaces: Mechanisms, Tools, and Impacts of E-Commerce

As you read the textbook and go through this lesson, think about the following questions:
What are e-commerce activities and what e-commerce mechanisms support them?

What are the components of the e-marketplace? Who participates? How does participation
take place?
E-MARKETPLACE COMPONENTS AND PARTICIPANTS
A marketspace includes electronic transactions that bring about a new distribution of goods and
services. The major components and players in a marketspace are customers, sellers, goods and
services (physical or digital), infrastructure, a front end, a back end, intermediaries and other
business partners, and support services. A brief description of each follows:
>Customers - The 1.6 billion people worldwide who surf the Web are potential buyers of the
goods and services offered or advertised on the Internet. These consumers are looking for
bargains, customized items, collectors items, entertainment, socialization, and more. They are in
the drivers seat. They can search for detailed information, compare, bid, and sometimes
negotiate. Organizations are the largest consumers, accounting for more than 85 percent of EC
activities.
>Sellers - Millions of storefronts are on the Web, advertising and offering a huge variety of
items. These stores are owned by companies, government agencies, or individuals. Every day it

is possible to find new offerings of products and services. Sellers can sell direct from their Web
sites or from e-marketplaces.
>Products and services - One of the major differences between the marketplace and the
marketspace is the possible digitization of products and services in a marketspace. Although both
types of markets can sell physical products, the marketspace also can sell digital products, which
are goods that can be transformed to digital format and instantly delivered over the Internet. In
addition to digitization of software and music, it is possible to digitize dozens of other products
and services, as shown in Online File W2.1. Digital products have different cost curves than
those of regular products. In digitization, most of the costs are fixed, and variable costs are very
low. Thus, profit will increase very rapidly as volume increases, once the fixed costs are paid for.
>Infrastructure - The marketspace infrastructure includes electronic networks, hardware,
software, and more. (EC infrastructure is presented in Chapter 1; also see Online Chapter 19.)
>Front end - Customers interact with a marketspace via a front end. The components of the front
end can include the sellers portal, electronic catalogs, a shopping cart, a search engine, an
auction engine, and a payment gateway. (For details, see Beynon-Davies 2004.)
>Back end - 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. (For details, see
Beynon-Davies 2004.)
>Intermediaries - In marketing, an intermediary is typically a third party that operates between
sellers and buyers. Intermediaries of all kinds offer their services on the Web. The role of these
electronic intermediaries (as will be seen throughout the text and especially in Chapters 3, 5, and
10) is frequently different from that of regular intermediaries (such as wholesalers). For example,
online intermediaries create and manage the online markets. They help match buyers and sellers,
provide some infrastructure services, and help customers and/or sellers to institute and complete
transactions. They also support the vast number of transactions that exist in providing services,
as demonstrated in the WebMD case (Case 2.1). Most of these online intermediaries operate as
computerized systems.
>Other business partners - In addition to intermediaries, several types of partners, such as
shippers, use the Internet to collaborate, mostly along the supply chain.
>Support services - Many different support services are available, ranging from certification and
escrow services (to ensure security) to content providers.
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What are the different roles of search engines, electronic catalogues, and shopping
carts in the e-marketplace?
What are online auctions?
What is online bartering?
What is online negotiation?
What are some Web 2.0 tools?
What is a virtual world?

Practice Quiz
2.1 True/False

1) EC enablers include electronic markets, e-stores, and e-catalogs.

Answer: TRUE
2) Storefronts, malls, and portals are EC mechanisms that support the entertainment EC
activity.
Answer: FALSE
3) The emergence of electronic marketplaces has resulted in lower information search costs
for buyers and lower transaction and distribution costs for sellers.
Answer: TRUE
4) Although both marketplaces and marketspaces can sell physical products, the
marketspace can also sell digital products.
Answer: TRUE
5) An intermediary is a third party that operates between sellers and buyers.
Answer: TRUE
6) 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
7) Electronic storefronts, Internet malls, and exchanges are major B2B e-marketplaces.
Answer: FALSE
8) Brokers and infomediaries are two types of online intermediaries.
Answer: TRUE
9) Search engines not only "search and match," but also have capabilities that can be used
to perform routine tasks that require intelligence.
Answer: FALSE
10) 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
11) Shopping carts for B2B are fairly simple, but a shopping cart for B2C may be more
complex.
Answer: FALSE

12) An auction is a 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
13) Auctions are based on dynamic pricing.
Answer: TRUE
14) Reverse auctions are bidding or tendering systems in which the buyer places an item
for bid on a request for quote system; then potential suppliers bid on the job, with the price
reducing sequentially, and the lowest bid wins.
Answer: TRUE
15) In the one buyer, many potential sellers dynamic pricing configuration, the sellers use a
forward auction.
Answer: FALSE
2.2 Multiple Choice
1) Electronic markets are the EC mechanism supporting the
A) communicate, collaborate and learn EC activities.
B) presence and delivery, find information, compare, and analyze EC activities.
C) improve performance EC activities.
D) entertainment EC activities.
Answer: B
2) Each of the following is a main function of traditional and electronic markets except
A) matching buyers and sellers.
B) facilitating the exchange of information, goods, services, and payments associated with
market transactions.
C) financing the transformation of raw materials into finished products.
D) providing an institutional infrastructure, such as a legal and regulatory framework that
enables the efficient functioning of the market.
Answer: C
3) Digital products have different cost curves than those of regular products because in
digitization

A) most costs are variable, and fixed costs are low.

B) most costs are fixed, and variable costs are very low.
C) most costs are fixed, but variable costs are high.
D) all costs are variable.
Answer: B
4) The portion of an e-seller's business through which customers interact, including the
seller's portal, electronic catalogs, shopping cart, and payment gateway is the
A) front end of the business.
B) back end of the business.
C) infrastructure for the business.
D) intermediary in the business.
Answer: A
5) The elimination of various types of agents that mediate between buyers and sellers, such
as travel and insurance agents, is referred to as
A) automation.
B) disintermediation.
C) remediation.
D) e-distribution.
Answer: B
6) Online markets that are owned and operated by a single company and that are either
sell-side or buy-side are known as
A) private e-marketplaces.
B) commercial portals.
C) e-malls.
D) B2B marketplaces.
Answer: A
7) Public e-marketspaces are

A) usually B2B markets.

B) often owned by a third party or consortium.
C) usually regulated by the government.
D) all of the above.
Answer: D
8) Functionalities provided by EC merchant server software include
A) electronic catalogs.
B) search engines.
C) shopping carts.
D) all of the above.
Answer: D
9) The presentation of product information in an electronic form and also serving as the
backbone of most e-selling sites describes
A) e-distributor.
B) Kindle.
C) e-magazine.
D) electronic catalog.
Answer: D
10) Search tools that search the contents of a user's or organization's computer files, rather
than searching the Internet are
A) desktop search tools.
B) enterprise search tools.
C) search engine tools.
D) host search tools.
Answer: A
11) A market mechanism that uses a competitive process in which a seller solicits
consecutive bids from buyers or a buyer solicits bids from sellers best defines

A) electronic shopping.
B) request for proposal.
C) auction.
D) request for quotation.
Answer: C
12) The most common and traditional form of auctions in which one seller entertains bids
from many buyers best describes
A) forward auctions.
B) reverse auctions.
C) bidding auction systems.
D) tendering systems.
Answer: A
13) The dynamic pricing configuration where the resulting price is determined by each
party's bargaining power, supply and demand in the item's market, and possibly business
environment factors best describes
A) one buyer, one seller.
B) one seller, many potential buyers.
C) one buyer, many potential sellers.
D) many sellers, many buyers.
Answer: A
14) All of the following are benefits of e-auctions to buyers except:
A) can liquidate large quantities quickly.
B) convenience of bidding anywhere and any time.
C) opportunity to bargain.
D) opportunities to find unique items.
Answer: A
15) Which of the following statements about bartering is false?

A) It is the oldest method of trade.

B) It is primarily done between individuals and private parties.
C) The problem with bartering is that it is difficult to find trading partners.
D) Intermediaries can be helpful, but they are expensive and very slow.
Answer: B
2.3 Fill in the Blank
1) ________ refers to an online market, usually B2B, in which buyers and sellers exchange
goods or services.
Answer: E-marketplace
2) A marketplace in which sellers and buyers exchange goods and services for money (or
other goods and services), but do so electronically defines ________.
Answer: marketspace
3) ________ refers to the portion of an e-seller's business processes through which
customers interact, including the seller's portal, electronic catalogs, a shopping cart, a
search engine, and a payment gateway.
Answer: Front end
4) A private e-marketplace in which one company sells either standard and/or customized
products to qualified companies defines ________.
Answer: buy-side e-marketplace
5) An ________ is an online shopping center where many online stores are located.
Answer: e-mall
6) ________ are electronic intermediaries that provide and/or control information flow in
cyberspace, often aggregating information and selling it to others.
Answer: Infomediaries
7) A ________ is an auction in which a seller entertains bids from buyers, and bidders
increase the price sequentially.
Answer: forward auction
8) The ________ is an auction in which the buyer places an item for bid on a request for
quote system, potential suppliers bid on the job, with the price reducing sequentially, and
the lowest bid wins.

Answer: reverse auction

9) The ________ is an auction model in which a would-be buyer specifies the price he or she
is willing to pay to any willing and able seller.
Answer: name-your-own-price model
10) ________ is a marketplace in which an intermediary arranges barter transactions.
Answer: Bartering exchange
2.4 Essay
1) List the six major EC trading activity categories.
Answer: The six major EC trading activity categories are:
(1) presence and discovery, find information, compare, analyze;
(2) trading buy, sell, exchange;
(3) communicate, collaborate, learn;
(4) entertainment;
(5) improve performance;
(6) other activities, recruit, customer service.
2) Discuss intermediation, disintermediation, and reintermediation.
Answer: Intermediation occurs when a third party operates between buyers and sellers.
Intermediaries provide information about demand, supply, prices, and requirements or they offer
value-added services. E-marketplaces, infomediaries and portals provide information for free or
low cost, resulting in the disintermediation or elimination of the intermediary. Reintermediation
occurs when the disintermediated entity takes on new intermediary roles.

Chapter Quiz
1. An intermediary is a third party that operates between sellers and buyers.
A. True
B. False
2. Travelers using airline Web sites to book their flights directly without the use of
travel agents is resulting in the reintermediation of travel agents.
A. True
B. False
3. Reverse auctions are bidding or tendering systems in which the buyer places an item
for bid on a request for quote system; then potential suppliers bid on the job, with the
price reducing sequentially, and the lowest bid wins.
A. True
B. False
4. An order-processing technology that allows customers to accumulate items they wish
to buy while they continue to shop best defines.

A.
B.
C.
D.

mobile portal.
e-fulfillment agent.
electronic shopping cart.
intelligent agent.

5. A market mechanism that uses a competitive process in which a seller solicits

consecutive bids from buyers or a buyer solicits bids from sellers best defines:
A. electronic shopping.
B. request for proposal.
C. request for quotation.
D. auction.
6. Impacts of auctions include:
A. highly visible distribution mechanism.
B. EC component in a business model.
C. profit for individuals.
D. all of the above.
7. 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. automation.
D. e-distribution.
8. Popular search engines include each of the following except:
A. Lycos.
B. Google.
C. Linux.
D. AltaVista.
9. Each of the following is a type of EC search except:
A. Internet/Web search.
B. enterprise search.
C. host search.
D. desktop search.
10. Major department and discount stores are classified as:
A. regional stores.
B. general malls.
C. specialized malls.
D. pure-play stores.
11. Digital products have different cost curves than those of regular products because in
digitization:
A. most costs are fixed, but variable costs are high.
B. most costs are fixed, and variable costs are very low.
C. most costs are variable, and fixed costs are low.
D. all costs are variable.
12. Types of business activities in virtual worlds include each of the following except:

A.
B.
C.
D.

assembling physical products.

conducting regular business activities, such as advertising.
creating and managing a virtual business.
providing services for those who build, manage, or make money with virtual
properties.

13. Web sites with audio interfaces that can be accessed by a cell phone best describes:
A. knowledge portals.
B. intelligent engines.
C. voice portals.
D. mobile portals.
14. Benefits of e-auctions to sellers include:
A. convenience of bidding anywhere and anytime.
B. anonymity.
C. lack of differentiation.
D. optimal price is determined by the market.
15. Which of the following are EC activities supported by Web 2.0 tools and social
network services?
A. presence and discovery
B. compare and analyze
C. trading, buy, sell, exchange
D. entertainment
16. All of the following are benefits of e-auctions to buyers except:
A. can liquidate large quantities quickly.
B. opportunity to bargain.
C. opportunities to find unique items.
D. convenience of bidding anywhere and anytime.
17. Although both marketplaces and marketspaces can sell physical products, the
marketspace can also sell digital products.
A. True
B. False
18. An auction is a market mechanism that uses a competitive process by which a seller
solicits consecutive bids from buyers or a buyer solicits bids from sellers.
A. True
B. False
19. EC enablers include electronic markets, e-stores, and e-catalogs.
A. True
B. False