Creating a Winning E-Business

Second Edition

Operating Your E-Business

Chapter 5
 Learning Objectives

 Describe operational challenges for a startup

e-business
 Define legal, office space, and human resources
issues
 Discuss electronic payment methods
 Explain front-end and back-end e-business
systems

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Second Edition, Chapter 5
 Learning Objectives
(continued)
 Identify e-business technologies and technology
providers
 Discuss the benefits of outsourcing e-business
operations

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Second Edition, Chapter 5
 Startup and Operational
Challenges
 Identifying and solving legal issues
 Planning for and acquiring commercial office
space
 Hiring employees
 Selecting and managing electronic payment
methods
 Selecting e-business technologies and
technology providers

Creating a Winning E-Business 4

Second Edition, Chapter 5
 Legal Issues
 Establish a relationship with an attorney
experienced in startups
– Helps to develop business plan
– Establishes company valuation for investors
– Provides leads to investors
– Participates in negotiations
– Reviews all legal documents
– Advises on copyright, trademark, employee
benefits, personnel policies

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Second Edition, Chapter 5
 Legal Issues (continued)
 Copyright
– Form of legal protection for original work
– Takes effect the moment the work is created
– Need copyright notice on Web site as a best
practice
– U.S. Copyright Office good source of information
on copyright law

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Second Edition, Chapter 5
 Legal Issues (continued)

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Second Edition, Chapter 5
 Legal Issues (continued)
 Trademark and service mark
– Distinctive symbol, word, or phrase used to
identify a business
– Make it easy for consumers to identify source of
products and services
– U.S. Patent and Trademark Office good source of
information on trademarks and service marks

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Second Edition, Chapter 5
 Legal Issues (continued)

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Second Edition, Chapter 5
 Legal Issues (continued)
 Content liability
– Exposure to potential liabilities based on Web
content
– Need appropriately worded disclaimer of liability
at Web site

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Second Edition, Chapter 5
 Legal Issues (continued)
 Customer information privacy
– Customers may hesitate to provide information
– Must have clear policy on how customer
information is handled, secured, and used
– Consider voluntary programs such as TRUSTe
• Non-profit organization
• Advocates disclosure of information privacy
programs
• Members post TRUSTe seal at Web site

Creating a Winning E-Business 11

Second Edition, Chapter 5
 Legal Issues (continued)

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Second Edition, Chapter 5
 Legal Issues (continued)
 An e-business is subject to same property and
income taxes as any brick-and-mortar business
 Collection of sales taxes remains problematic
– Collection of sales taxes from online customers
not required unless e-business has presence in
state
– Rules are changing
 Need tax advice from professional (attorney or
accountant)

Creating a Winning E-Business 13

Second Edition, Chapter 5
 Commercial Office Space
 Startup e-business often begins in converted
space in entrepreneur’s home
 Factors requiring a move to commercial office
space
– Cramped quarters
– Hiring new employees
– Need for professional meeting areas

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Second Edition, Chapter 5
 Commercial Office Space
(continued)
 Create a facilities plan before looking for space
– How much space is required?
– How will the space be divided?
– What are electrical and telecommunication
needs?
– Is there access to parking, major roads, public
transportation, qualified job applications?
– What are the security requirements?
– What is the budget?

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Second Edition, Chapter 5
 Hiring Employees
 Knowing whom to hire first can be confusing
 First hires should be key management and
operations staff
 Startup often must offer key employees
– Pleasant working environment
– Competitive salaries and benefits
– Ownership equity

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Second Edition, Chapter 5
 Hiring Employees (continued)
 Leads on finding qualified and talented
employees
– Investors and advisors
– Family and friends
– Professional recruiters

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Second Edition, Chapter 5
 Hiring Employees (continued)

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Second Edition, Chapter 5
 Hiring Employees (continued)

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Second Edition, Chapter 5
 Hiring Employees (continued)
 U.S. Department of Labor and Salary.com
– Good sources of area information
• Salaries
• Benefits
• Employment statistics

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Second Edition, Chapter 5
 Hiring Employees (continued)

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Second Edition, Chapter 5
 Hiring Employees (continued)

Creating a Winning E-Business 22

Second Edition, Chapter 5
 Electronic Payment Methods
 Make selection based on type of products and
services offered and type of customer
 Payment cards
– Credit, debit, and charge cards
• Require a merchant account to accept payment
card receipts
• Require access to a payment gateway to process
payments

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Second Edition, Chapter 5
 Electronic Payment Methods
(continued)

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Second Edition, Chapter 5
 Electronic Payment Methods
(continued)
 Cost of accepting payment cards
– Merchant account fees
• Setup
• Per transaction
• Statement
• Discount rate (percentage of each transaction)

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Second Edition, Chapter 5
 Electronic Payment Methods
(continued)

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Second Edition, Chapter 5
 Electronic Payment Methods
(continued)

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Second Edition, Chapter 5
 Electronic Payment Methods
(continued)
 Must provide secure transmission of data
– Use Secure Sockets Layer (SSL) protocol to
encrypt transaction data
• Relies on digital certificates for authentication
• https://

Creating a Winning E-Business 28

Second Edition, Chapter 5
 Electronic Payment Methods
(continued)

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Second Edition, Chapter 5
 Electronic Payment Methods
(continued)
 Risks of accepting payment cards
– Cardholder not present risk
– Chargeback risk when fraud occurs or when
customer returns products
 E-businesses must also be on the alert for
corporate identity theft
– Theft of business names, logos, addresses, and
Web site information
– Used to defraud customers

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Second Edition, Chapter 5
 Electronic Payment Methods
(continued)
 Other electronic payment methods
– Stored value cards, such as gift cards and smart
cards
– Electronic checks – Electronic equivalent of paper
checks
– Electronic cash (micropayments)
– P2P payment systems

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Second Edition, Chapter 5
 Electronic Payment Methods
(continued)

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Second Edition, Chapter 5
 Electronic Payment Methods
(continued)

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Second Edition, Chapter 5
 Electronic Payment Methods
(continued)

Creating a Winning E-Business 34

Second Edition, Chapter 5
 E-Business Technologies
 Technology decisions
– Processing sales and payment transactions
– Monitoring inventory
– Accounting and internal recordkeeping
– Connecting to the Internet
– Hosting a Web site

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Second Edition, Chapter 5
 E-Business Technologies
(continued)
 Front-end systems
– Customer interaction and control
– Web site and related processes
 Back-end systems
– Not directly accessed by customers
• Accounting and budgeting
• Manufacturing, warehousing, distribution
• Order tracking and customer support
• Marketing

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Second Edition, Chapter 5
 E-Business Technologies
(continued)

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Second Edition, Chapter 5
 E-Business Technologies
(continued)
 Integration of front-end and back-end systems
– Requires technologies to tie disparate systems
together
– Reduces costs by sharing the same transaction
data across systems
– Issues to consider when integrating systems
• Need for real-time or batch processing
• System security
• Compatibility

Creating a Winning E-Business 38

Second Edition, Chapter 5
 E-Business Technologies
(continued)

Creating a Winning E-Business 39

Second Edition, Chapter 5
 E-Business Technologies
(continued)

Creating a Winning E-Business 40

Second Edition, Chapter 5
 E-Business Technologies
(continued)

Creating a Winning E-Business 41

Second Edition, Chapter 5
 E-Business Technologies
(continued)

Creating a Winning E-Business 42

Second Edition, Chapter 5
 E-Business Technologies
(continued)

Creating a Winning E-Business 43

Second Edition, Chapter 5
 E-Business Technologies
(continued)

Creating a Winning E-Business 44

Second Edition, Chapter 5
 Outsourcing Operations
 Wide array of outsourced technology solutions
are available
– Internet service providers
– Web hosting companies
– Application service providers
– Fulfillment houses
 Major advantage is reduced cost
 Major disadvantage is loss of control

Creating a Winning E-Business 45

Second Edition, Chapter 5
 Outsourcing Operations
(continued)

Creating a Winning E-Business 46

Second Edition, Chapter 5
 Chapter Summary
 Establish relationships with an attorney and
accountant or other professionals
 Post appropriately worded liability disclaimer
and privacy policy at Web site
 Create a facilities plan before securing new
office space
 First hires should be key management
personnel

Creating a Winning E-Business 47

Second Edition, Chapter 5
 Chapter Summary
(continued)
 Electronic payment methods
– Payment cards and stored value cards
– Electronic checks and electronic cash
– Micropayments and P2P payment systems
 Merchant account and payment gateway
– Necessary to accept payment cards
– Risks include cardholder not present risk and
chargeback risk

Creating a Winning E-Business 48

Second Edition, Chapter 5
 Chapter Summary
(continued)
 E-businesses technologies
– Integrate front-end and back-end systems
– Storefront software
– Content management systems (CMS)
– Enterprise resource planning (ERP)
– Customer relationship management (CRM)

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Second Edition, Chapter 5
 Chapter Summary
(continued)
 Outsourcing technology requirements
– ISPs and Web hosting companies
– Application service providers (ASPs)
– Order fulfillment houses

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Second Edition, Chapter 5