CAP. 4

Question 1

Introduction

Answer 1

Starting point of any digital business/e-commerce strategy: analyse the environment in which operates. Two environments:
* Macro-environment.
* Micro-environment.
We concentrate on the role of the macro-environmental forces, using the widely used SLEPT framework; often, these factors are known as the PEST factors, but we use SLEPT to stress the importance of the law in influencing Internet marketing practices. The SLEPT factors:
* Social.
* Legal and ethical.
* Economic.
* Political.
* Technological.
When completing a review, it’s important not to give all influences equal weighting, but focus on the ones that matter most in the current environment.
Managers have to constantly scan the environment and assess which changes are relevant to their sphere of influence. Changes in social culture and the introduction and adoption of new technologies tend to be very rapid. Governmental and legal changes tend to happen over longer timescales, but new laws can be introduced fast. The trick for managers is to identify the critical factors to competitiveness and service delivery and monitor these. The technological and legal factors are most important to managing e-commerce, so we focus on these.
Since the law is one of the most important issues, the seven most important legal issues are:
1. Data protection and privacy law.
2. Disability and discrimination law.
3. Brand and trademark protection.
4. Intellectual property rights.
5. Contract law.
6. Online advertising law.
7. Social media.
There are 4 main acts, directives and laws that e-commerce companies must comply with:
* Electronic Commerce (EC Directive) Regulations 2002
* The General Data Protection Regulations
* The Distance Selling Act 2000
* ICO Cookie Law
Organisations that don’t monitor these factors or don’t respond adequately won’t remain competitive and may fail. The process of monitoring the environment is referred to as environmental scanning, this often occurs as an ad hoc process, but if there’s no reporting mechanism then some major changes may not be apparent to managers. Environmental analysis is required to evaluate info and respond accordingly.
Box 4.1: GDPR

Question 2

The SLEPT factors

Answer 2

• Social.
• Legal and ethical.
• Economic.
• Political.
• Technological.

Question 3

the seven most important legal issues are

Answer 3

1. Data protection and privacy law.
2. Disability and discrimination law.
3. Brand and trademark protection.
4. Intellectual property rights.
5. Contract law.
6. Online advertising law.
7. Social media.

Question 4

4 main acts, directives and laws that e-commerce companies must comply with

Answer 4

• Electronic Commerce (EC Directive) Regulations 2002
• The General Data Protection Regulations
• The Distance Selling Act 2000
• ICO Cookie Law

Question 5

Social factors

Answer 5

Some of key elements include:
* Culture;
* Demographics (es: age, gender);
* Social lifestyles;
* Domestic structures;
* Affluence/wealth;
* Religion.
In relation to e-commerce, consumers are changing the buying process they go through to purchase a product. There has been an increase in showrooming. Research by Columbia Business School and Almia (2013): 21% of all consumers are ‘M-Shoppers’: they use mobile devices while in retail stores to assist in their shopping decision. It’s not just a Millennials’ behaviour: 74% of M-Shoppers are over 29 years.

Question 6

Legal and ethical factors

Answer 6

Legislative changes can affect the business environment. Legal factors to consider:
* Data protection and privacy law, replaced by GDPR (25 May 2018);
* Disability and discrimination law;
* Brand and trademark protection;
* Intellectual property rights;
* Contract law;
* Online adv law.

Question 7

Economic factors

Answer 7

These relate to the elements of an economy and its condition. Examples:
* Market growth and employment;
* Inflation rate;
* Interest rates;
* Monetary/fiscal policies;
* Foreign exchange rates.
A good example from an e-commerce standpoint is the area of dynamic pricing. This is where a transactional e-commerce site uses algorithms to change the price of its products/services, based on different market conditions, such as competitor pricing, supply and demand, spending habits, time of day, location and operating system.

Question 8

Political factors

Answer 8

An organisation needs to consider the political situation of a country and the world in relation to that country. Areas to consider:
* Government/leadership;
* Policies;
* Tax laws;
* Internet governance.

Question 9

Technology factors

Answer 9

New technology is changing the way that people and businesses do things. Improvements in both hardware and software are key factors in this change. This demonstrates why mobile optimisation should be a key element of digital marketing strategy.

Question 10

Cultural factors

Answer 10

The social and cultural impacts of the Internet are important from an e-commerce perspective since they govern demand for digital services and propensity to purchase online and use different types of e-commerce services.
Nowadays, smartphones are changing the way people interact with companies, family and friends

Question 11

Factors affecting e-commerce buying behaviour

Answer 11

It’s useful for digital business managers to understand the fears people have about placing orders online, so that action can be taken to overcome some of these barriers. Common fears:
1. Credit card information being stolen. Use email authenticity to prevent fraud messages and encrypting all parts of a website.
2. ‘Fake’ online stores. Displaying clear contact info, including a company address, and providing links to independent customer reviews. They also add awards, official partner logos.
3. Information will get sold. Clear privacy policy and give customers the option to choose what info they’d like to receive and how often they want to receive it.
4. Unsure what the product is really like. Offer product videos, 3D views and detailed info on elements.
5. Lost orders. Different shipping options and order tracking.
6. Need help from a salesperson. Education videos and comparison tables to help provide additional purchase info. Adoption of live chat for customer service.
Problems encountered most often:
- Slower delivery than indicated (17%);
- Technical website failure while ordering or paying (9%);
- Receiving wrong or damaged goods/services (9%);
- Difficulties in finding info on guarantees and other legal rights (5%);
- Final costs higher than indicated or difficult to make complaints and seek redress after a complaint (4%);
- Foreign retailers not selling in their country and problems with fraud (3%).
These barriers to access and usage of the web still remain, and governments are concerned about social exclusion.

Question 12

Understanding users’ access requirements

Answer 12

To fully understand online customer propensity to use an online service we need to consider the user’s access location, access device and webographics, which is a term coined by Grossnickle and Raskin (2001) which includes:
* Usage location;
* Access device;
* Connection speed – broadband vs dial-up;
* ISP;
* Experience level;
* Usage type;
* Usage level.

Question 13

Consumers influenced by using the online channel

Answer 13

To help develop effective online service, we need to understand customers’ online buyer behaviour and motivation. Finding info about goods and services is a common online activity, but each organisation needs to capture data about online influence in the buying process for their own market. Managers also need to understand how different types of media, intermediary and influencer sites influence consumers.
Edelman (communications marketing firm) produces an annual Trust Barometer; 2017 report: search engines were the most trusted source for general news and info; huge increase in online influencers. Influence has shifted from traditional media sources to individuals who have built an online following among their peer group for niche topics.
There’s also a wide variation in influence and type of info sought according to type of product, so it’s important to assess the role of the Internet in supporting buying decisions for a particular market. Understanding the potential reach of a website and its role in influencing purchase is important in setting digital marketing budgets.
Most purchases of EU online shoppers: clothes and sports goods, travel and holiday accommodation, household goods, tickets for events, ….

Question 14

Motivation for use of online services

Answer 14

Psychographics segmentations that divide users/potential users into groups based on knowledge, attitudes, uses and responses to the brand, product or service. Demographics explains who your buyer is and psychographics helps understand why you customer buys.
Elements of psychographic segmentation:
* Occasion
* Benefits sought
* Usage rate
* User status
* Loyalty status
Ways to gather data:
1. Interviews.
2. Surveys.
3. Customer data.
The revised Web Motivation Inventory (WMI) identified by Rodgers et al. (2007): useful framework for understanding different motivations for using the web. 4 motives that cut across cultures: research (info acquisition); communication (socialisation); surfing (entertainment); shopping. These can be broken down further:
1. Community
* Get to know other people
* Participate in online chat
* Join a group
2. Entertainment
* Amuse myself
* Entertain myself
* Find info to entertain myself
3. Product trial
* Try on the latest fashions
* Experience a product
* Try out a product
4. Information
* Do research
* Get info I need
* Search for info I need
5. Transaction
* Make a purchase
* Buy things
* Purchase a product I’ve heard about
6. Game
* Play online games
* Entertain myself with Internet games
* Play online games with individual from other countries
7. Survey
* Take a survey on a topic I care about
* Fill out an online survey
* Give my opinion on a survey
8. Downloads
* Download music
* Listen to music
* Watch online videos
9. Interaction
* Connect with my friends
* Communicate with others
* Instant message others I know
10. Search
* Get answers to specific questions
* Find info I can trust
11. Exploration
* Find interesting web pages
* Explore new sites
* Surf for fun
12. News
* Read about current events and news
* Read entertainment news
Digital advertisers and site owners can use this framework to review the suitability of facilities to meet these needs.
Internet users take longer to become confident to purchase more expensive and complex products.
This links to the FCB Involvement Grid, a matrix developed by Foot, Belding & Cone (FBC), which plots varies consumer purchases against ‘think vs feel’. There are a number of variables that drive the level of involvement up or down, such as price and frequency of purchase, social visibility, risk involved, commitment of time and complexity of purchase.
As products go through different stages in product lifecycles and innovation, they can undergo a change in involvement.
The 4 quadrants have been segmented into 4 buying types – Informative, Affective, Habitual and Satisfaction; each one requires a particular communication style, type of media and level of repetition.

Question 15

Elements of psychographic segmentation

Answer 15

• Occasion
• Benefits sought
• Usage rate
• User status
• Loyalty status

Question 16

The revised Web Motivation Inventory (WMI) identified by Rodgers et al. (2007):

Answer 16

useful framework for understanding different motivations for using the web. 4 motives that cut across cultures: research (info acquisition); communication (socialisation); surfing (entertainment); shopping. These can be broken down further:
1. Community
* Get to know other people
* Participate in online chat
* Join a group
2. Entertainment
* Amuse myself
* Entertain myself
* Find info to entertain myself
3. Product trial
* Try on the latest fashions
* Experience a product
* Try out a product
4. Information
* Do research
* Get info I need
* Search for info I need
5. Transaction
* Make a purchase
* Buy things
* Purchase a product I’ve heard about
6. Game
* Play online games
* Entertain myself with Internet games
* Play online games with individual from other countries
7. Survey
* Take a survey on a topic I care about
* Fill out an online survey
* Give my opinion on a survey
8. Downloads
* Download music
* Listen to music
* Watch online videos
9. Interaction
* Connect with my friends
* Communicate with others
* Instant message others I know
10. Search
* Get answers to specific questions
* Find info I can trust
11. Exploration
* Find interesting web pages
* Explore new sites
* Surf for fun
12. News
* Read about current events and news
* Read entertainment news

Question 17

FCB Involvement Grid

Answer 17

a matrix developed by Foot, Belding & Cone (FBC), which plots varies consumer purchases against ‘think vs feel’. There are a number of variables that drive the level of involvement up or down, such as price and frequency of purchase, social visibility, risk involved, commitment of time and complexity of purchase.
As products go through different stages in product lifecycles and innovation, they can undergo a change in involvement.
The 4 quadrants have been segmented into 4 buying types – Informative, Affective, Habitual and Satisfaction; each one requires a particular communication style, type of media and level of repetition.

Question 18

Business demand for digital business services

Answer 18

The B2B market is more complex than B2C in that variation in demand will occur according to different types of organisation and people within the buying unit in the organisation. This analysis is also important as part of the segmentation of different groups within a B2B target market. We need to profile business demand according to:
1. Variation in organisation characteristics:
* Size of company (employees or turnover)
* Industry sector and products
* Organisation type (private, public, government, not-for-profit)
* Division
* Country and region
2. Individual role:
* Role and responsibility from job title, function or number of staff managed
* Role in buying decision
* Department
* Product interest
* Demographics
* B2B profiles.
We can profile business users of the Internet in a similar way to consumers by assessing:
1. The percentage of companies with access. In the b2b market, Internet access levels are higher than b2c.
2. Influenced online. In b2b marketing, the high level of access is consistent with a high level of using the Internet to identify suppliers. As for consumer e-commerce, Internet is important in identifying online suppliers rather than completing the transaction online. This is particularly the case in larger companies.
3. Purchase online. This shows the importance of understanding differences in the environment for e-commerce in different countries.
To estimate online revenue contribution to determine the amount of investment in digital business we need to research the number of connected customers, the % whose offline purchase is influenced online and the number who buy online.

Question 19

profile business demand according to

Answer 19

1. Variation in organisation characteristics:
   * Size of company (employees or turnover)
   * Industry sector and products
   * Organisation type (private, public, government, not-for-profit)
   * Division
   * Country and region
2. Individual role:
   * Role and responsibility from job title, function or number of staff managed
   * Role in buying decision
   * Department
   * Product interest
   * Demographics
   * B2B profiles.

Question 20

profile business users of the Internet in a similar way to consumers by assessing:

Answer 20

1. The percentage of companies with access. In the b2b market, Internet access levels are higher than b2c.
2. Influenced online. In b2b marketing, the high level of access is consistent with a high level of using the Internet to identify suppliers. As for consumer e-commerce, Internet is important in identifying online suppliers rather than completing the transaction online. This is particularly the case in larger companies.
3. Purchase online. This shows the importance of understanding differences in the environment for e-commerce in different countries.

Question 21

E-commerce sales across the EU

Answer 21

The European Commission reviewed adoption of the digital business services across Europe. This growth of Internet usage has meant that 77% of enterprises in the EU gave importance to their visibility on Internet and had either a website or home page.
The widespread use of ICT in the workplace has resulted in an increased demand for technology specialists and this has presented recruitment challenges. Recently, this digital skills gap has been reported as a worldwide issue because of the explosive growth of digital devices and communication.

Question 22

Privacy and trust in e-commerce

Answer 22

Ethical standards are personal or business practices or behaviour generally considered acceptable by society.
Ethical issues and the associated laws are an important consideration of Internet business environment for marketer: privacy of consumers is a key ethical issue that affects all types of organisations regardless of whether they have a transactional e-commerce service.
A further ethical issue is providing an accessible level on Internet services for disabled users, and also laws for managing commerce and distance-selling online.

Question 23

Privacy legislation

Answer 23

Privacy: moral right of individuals to avoid intrusion into their personal affairs by third parties. Privacy of personal data such as our identities, likes and dislikes is a major concern to consumers, particularly with the dramatic increase in identity theft. Online fraud and cybercrime are now the UK’s most common offences, becoming almost half of all crime in the country.
Government’s National Cyber Security Strategy (November 2016) defines cybercrime as:
1. Cyber-dependent crimes.
2. Cyber-enabled crimes.
The Computer Misuse Act (CMA, 1990) is part ok UK legislation relating to offences or attacks against computer systems. The most common forms of cybercrime that relate to digital business and e-commerce:
* Phishing;
* Identity theft;
* Hacking.
Box 4.3: Recent cyber-attacks

Question 24

Why personal data is valuable for digital business

Answer 24

rough understanding customers’ needs, characteristics and behaviours it’s possible to create more personalised, targeted communications. Ensure that marketing activities are consistent with the latest data protection and privacy laws. Different interpretations of the law are possible, so companies have to make their own business decision, based on the business benefits of applying particular marketing practices against the financial and reputational risks of compliance.
Main information types used by the Internet marketer governed by ethics and legislation? Info needs are:
1. Contact information.
2. Profile information.
3. Platform usage information.
4. Behavioural information (on a single site).
5. Behavioural information (across multiple sites).
The main issue to be considered by the marketer is disclosure of the types of info collection and tracking data used.
Ethical issues concerned with personal info ownership have been summarised by Mason (1986) into 4 areas:
1. Privacy
2. Accuracy
3. Property
4. Accessibility.
Fletcher (2001) provides an alternative perspective, raising these issues of concern for the individual and the marketer:
* Transparency
* Security
* Liability
Data protection legislation in enacted to protect the individual, to protect their privacy and to prevent misuse of personal data. The first article of the European Union directive 95/46/EC refers to personal data: “Member states shall protect the fundamental rights and freedoms of natural persons [i.e. a named individual at home or at work], and in particular their right to privacy with respect to the processing of personal data”.
GDPR is typical of what has evolved in many countries to help protect personal info. Any company that holds personal data on computers or on file about customers or employees must be registered with the data protection registrar>; this process is known as notification.
The new GDPR includes guidance on:
* Consent;
* Transparency;
* Profiling;
* High-risk processing;
* Certification;
* Administrative fines;
* Breach notification;
* Data transfer.

Question 25

Main information types used by the Internet marketer governed by ethics and legislation? Info needs are

Answer 25

1. Contact information.
2. Profile information.
3. Platform usage information.
4. Behavioural information (on a single site).
5. Behavioural information (across multiple sites).

Question 26

Ethical issues concerned with personal info ownership have been summarised by Mason (1986) into 4 areas

Answer 26

1. Privacy
2. Accuracy
3. Property
4. Accessibility.

Question 27

Fletcher (2001) provides an alternative perspective, raising these issues of concern for the individual and the marketer

Answer 27

• Transparency
• Security
• Liability

Question 28

The new GDPR includes guidance on:

Answer 28

• Consent;
• Transparency;
• Profiling;
• High-risk processing;
• Certification;
• Administrative fines;
• Breach notification;
• Data transfer.

Question 29

Worldwide regulations on privacy and electronic communication

Answer 29

In the USA there’s a privacy initiative aimed at education of consumers and businesses and in January 2004 was introduced the CAN-SPAM Act to assist in the control of unsolicited email. Anti-spam legislation in other countries:
* Australia is implementing a new @notificable Data Breaches’ scheme
* Canada has a privacy Act
* New Zealand Privacy Commissioner
* Summary of all countries
Box 4.4: UK and European email marketing law
Box 4.5: Understanding cookies

Question 30

Viral email marketing

Answer 30

Viral marketing isn’t covered explicitly in the PECR, because organisations can’t be sure that friends actually agreed to give them their details.
There are several initiatives by industry groups to reassure web users about threats to their personal info (es: TrustAct). For example, a privacy statement will describe:
* How a site collects info;
* How the info is used;
* Who the info is shared with;
* How users can access and correct info;
* How users can decide to deactivate from the site or withhold info from third parties.
GetSafeOnline: to educate consumers to help them understand and manager online privacy and security.
Companies should:
1. Follow privacy and consumer protection guidelines and laws in all local markets; use local privacy and security certification where available.
2. Inform the user, before asking for info:
* Who the company is;
* What personal data are collected, processed and stored;
* What’s the purpose of collection.
3. Ask for consent for collecting sensitive personal data (ask before collecting).
4. Reassure customers by providing clear and effective privacy statements and explaining the purpose of data collection.
5. Let individuals know when cookies or other covert software is used to collect info.
6. Never collect or retain personal data unless strictly necessary.
7. Amend incorrect data when informed and tell others; enable correction on-site.
8. Only use data for marketing when a user has been informed and agreed (opt-in).
9. Provide the option to stop receiving info (opt-out).
10. Use appropriate security technology to protect customer info on the site.

Question 31

Companies should:

Answer 31

1. Follow privacy and consumer protection guidelines and laws in all local markets; use local privacy and security certification where available.
2. Inform the user, before asking for info:
   * Who the company is;
   * What personal data are collected, processed and stored;
   * What’s the purpose of collection.
3. Ask for consent for collecting sensitive personal data (ask before collecting).
4. Reassure customers by providing clear and effective privacy statements and explaining the purpose of data collection.
5. Let individuals know when cookies or other covert software is used to collect info.
6. Never collect or retain personal data unless strictly necessary.
7. Amend incorrect data when informed and tell others; enable correction on-site.
8. Only use data for marketing when a user has been informed and agreed (opt-in).
9. Provide the option to stop receiving info (opt-out).
10. Use appropriate security technology to protect customer info on the site.

Question 32

Other e-commerce legislation

Answer 32

Sparrow (2000) identified 8 areas of law that need to concern online marketers.
1. Marketing your e-commerce business
- Domain name registration. Most companies own several domains; domain name disputes can arise when an individual or company has registered a domain name that another company claims they have the right to.
A related issue is brand and trademark protection. There are some basic tools:
* Google Alerts and Giga Alert
* Copyscape
- Accessibility law. Law relating to discriminating against disabled users; this is often contained within disability and discrimination Acts.
In 2000, Bruce Maguire brought a case against the Sydney Organising Committee for the Olympic Games; he demonstrated deficiencies in the site that prevented him using it adequately. This was the first case brought in the world.
2. Forming an electronic contract (contract law and distance-selling law)
Two aspects of forming an electronic contract:
- Country of origin principle. The contract formed between a buyer and a seller on a website will be subject to the laws of a particular country. In 2002, attempts by the EU to adopt the ‘country of origin principle’, where the law for the contract will be that where the merchant is located.
- Distance-selling law. Sparrow (2000) advises different forms of disclaimers to protect the retailer.
Disclaimers can also be used to limit liability if the website service causes a problem for the user. Sparrow suggests that terms and conditions should be developed to refer to issues such as timing of delivery and damage or loss of goods.
The Consumer Protection Regulations 2000 also have a bearing on e-commerce contracts in the EU. It was originally developed to protect people using mail-order. The main requirements are that e-commerce sites must contain easily accessible content that clearly states that before an order is placed a company must provide:
* Business name, contact details and address;
* Description of goods or services;
* Price, including taxes;
* How a customer can pay;
* Delivery arrangements, costs and how long goods will take to arrive;
* The minimum length of contract and billing period;
* Conditions for ending contracts;
* How customers can cancel and when they lose the right to cancel;
* A standard cancellation form, if they can cancel;
* Conditions for money given as a deposit or financial guarantees;
* What digital content does;
* Cost of using phone line or other communication to complete the contract where it will cost more than the basic rate.
Also additional regulations for selling online:
* Making clear customers have to pay when place an order;
* Displaying clearly how they can pay and including delivery options and costs;
* Listing steps involved in a customer placing an order;
* Reasonable steps to let customers correct errors in their order;
* Letting customers know languages available;
* Making sure they can store and reproduce terms and conditions;
* Giving a contact email address;
* Giving a VAT number;
* Explaining the cost of using phone lines or other communication to complete the contract if cost more than basic rate;
* Giving a description of your goods, services or digital content;
* Giving total price;
* Detailing total delivery cost;
* Telling minimum length of contract;
* Giving any conditions for ending rolling contracts or contracts with no clear end date.
Once an order has been placed, the consumer has a right to cancel, and companies must let them know that they can cancel order up to 14 days after it has been delivered. This rule is different for selling digital services that can be downloaded or streamed. In this case, digital businesses must:
* Get the customer to confirm before they download or stream content that they’re aware they’ll lose 14-day right to cancel;
* Get the customer to agree to an instant download before they start the download;
* Include this info in a confirmation of the contract, with other pre-contract info.
If a company doesn’t follow these rules, the customer will keep their 14-day right to cancel without paying.
3. Making and accepting payment
The relevant laws are those referring to liability between a credit card issuer, the merchant and the buyer. Merchants need to be aware of their liability for different situations.
4. Authenticating contracts concluded over the Internet
Authentication refers to establishing the identity of the purchaser. Using digital signatures is another method of helping to prove the identity of purchasers and merchants.
5. Email risks
One of the risks with email is infringing an individual’s privacy. Specific laws have been developed in many countries to reduce the volume of spam.
A further issue is defamation.
6. Protecting intellectual property (IP)
Intellectual property rights (IPR) protect designs, ideas and inventions and include content and services developed for e-commerce sites. Copyright law is designed to protect authors, producers, broadcasters and performers through ensuring that they see some returns from their works every time they are experienced. European Directive of Copyright (2001/29/EC) in 2003: covers new technologies and approaches.
IP can be misappropriated in two senses online:
1. An organisation’s IP may be misappropriated: it’s easy to copy web content and republish it to another site. Reputation management services can be used to assess how an organisation’s content, logos, and trademarks are being used on other websites.
2. An organisation may misappropriate content inadvertently.
7. Advertising on the Internet
Adv standards enforced by independent agencies also apply in the Internet environment. They’re less strongly policed, leading to more edgy creative executions online intended to have a viral effect.
8. Data protection
It has been referred to in depth in the previous section.

Question 33

Sparrow: 8 areas of law that need to concern online marketers

Answer 33

1. Marketing your e-commerce business (domain name registration, accessibility law)
2. Forming an electronic contract (contract law, distance-selling law)
3. Making and accepting payments
4. Authenticating contracts concluded over the Internet
5. Email risks
6. Protecting intellectual property
7. Advertising on the Internet
8. Data protection

Question 34

Environmental and green issues related to Internet usage

Answer 34

E-commerce and digital communications may have environmental benefits; companies can also make cost savings while positioning as environmentally concerned.
Online shopping can also have environmental benefits. In 2007: IMRG launched a Go Green, Go Online campaign where identified 6 reasons why e-commerce is green:
1. Fewer vehicle-miles.
2. Lower inventory requirements.
3. Fewer printed materials.
4. Less packaging.
5. Less waste.
6. Dematerialisation.
Study by Siikavirta et al. (2003): theoretically possible to reduce the greenhouse gas emissions generated by grocery shopping by 18% to 87% compared with the situation in which household members go to store; this would lead to a reduction of all Finland’s greenhouse gas emissions by as much as 1%, but in reality the figure is much lower, since only 10% of grocery shopping trips are online.
Cairns (2005): study on the importance of grocery shopping; a direct substitution of car trips by van trips could reduce vehicle-km by 70% or more. Ahmed and Sharma (2006): used value chain analysis to assess the role of Internet in changing the amount of energy and materials consumed by businesses for each part of the supply chain.

Question 35

Taxation

Answer 35

How to change tax laws to reflect globalisation through the Internet? The fear is that Internet may cause significant reductions in tax revenues to national or local governments if existing laws don’t cover changes in purchasing patterns.
Government revenue is normally protected. While this can be levied for physical goods imported by air and sea, it’s less easy to administer for services: agreements must be reached with individual suppliers.
In Eu, the use of online betting in lower-tax areas has resulted in lower revenues to governments in the countries where consumers would have formerly paid gaming tax to the government via a betting ship.
This trend has been dubbed LOCI, ‘location-optimised commerce on the Internet’ by Mougayer (1998).

Question 36

Tax jurisdiction

Answer 36

It determines which country gets tax income from a transaction. Under the pre-eletronic commerce system of international tax treaties, the right to tax was divided between the residence country and the source country. In 2002: EU enacted 2 laws on how VAT was to be charged and collected for electronic services. These were in accordance with the principles agreed within the framework of the OECD at a 1998 conference. These principles establish that the rules for consumption taxes should result in taxation in the jurisdiction where consumption takes place.
EU VAT rules changed from 1 January 2015. If the supplier (residence) and the customer (source) are both in UK, VAT will be chargeable:
* Exports to private customers in EU will attract UK VAT or local VAT;
* Exports outside EU will be zero-rated (but tax may be levied on imports);
* Imports into UK from EU or beyond will attract local VAT, or UK import tax when received through customs;
* Services attract VAT according to where the supplier is located.

Question 37

Freedom-restrictive legislation

Answer 37

Some individuals and organisations believe that legislation may be too restrictive. UK: new Telecommunications Act and Regulation of Investigatory Powers Act (RIP) took several years to enact since it involved giving security forces the ability to monitor all communications passing through ISPs. This was contested due to cost burdens placed on infrastructure providers and ISPs, and many citizens and employees weren’t happy about being monitored.
Freedom House: human rights organisation to reduce censorship; governments in many countries are increasingly censoring online content. Censorship methods: implementing licensing and regulation laws, applying existing print and broadcast restrictions to the Internet, filtering content and direct censoring after dissemination.

Question 38

Economic and competitive factors

Answer 38

The economic health and competitive environment will determine the e-commerce potential. Managers developing e-commerce strategies in multinational companies will initially target countries most developed in the use of technology. E-economy (by Booz Allen Hamilton, 2002): “is the dynamic system of interactions between a nation’s citizens, the businesses and government that capitalise upon online technology to achieve a social or economic good”.
Knowledge of different economic conditions is also part of budgeting for revenue from different countries.
The trend towards globalisation can insulate a company to some extent from fluctuations in regional markets, but is no protection from a global recession. Managers can also study e-commerce in leading countries to help predict future e-commerce trends in their own country.
Globalisation: move towards international trading in a single global marketplace and to blurring of social and cultural differences between countries.
Quelch and Klein (1996): a company must have:
* A 24-hour order-taking and customer service response capability;
* Regulatory and customs-handling experience to ship internationally;
* In-depth understanding of foreign marketing environments to assess the advantages of its own products and services.
Language and cultural understanding may also be a problem, and SME is unlikely to possess the resources to develop a multi-language version of its site or employ staff with sufficient language skill. Quelch and Klein (1996): the growth of the use of Internet for business will accelerate the trend of English becoming the lingua franca of commerce. Tailoring e-commerce services for individual countries or regions is referred to as localisation. A website may need to support customers from a range of countries with:
* Different product needs;
* Language differences;
* Cultural differences.
The importance of localisation is highlighted by a report by the Common Sense Advisory (2002). It may be necessary to vary:
* The language that content is provided in;
* Tone and style of copy;
* Site design;
* Range of product offerings;
* Product pricing;
* Currency and payment options;
* Local customer service/contact points;
* Dates and times presented in local formats.
Promotional offers used to encourage acquisition of customer email addresses, but this may be affected by local data protection, taxation and trading lows.
Localisation will address all these issues: a website often needs more than translation. For large multinational companies, localisation is a significant strategic issue for e-commerce. The decision on the level of localisation will need to be taken on a regional or country basis to prioritise different countries according to the size of the market and the importance of having localisation.
Singh and Pereira (2005): evaluation framework for the level of localisation:
1. Standardised websites (not localised).
2. Semi-localised websites.
3. Localised websites.
4. Highly localised websites.
5. Culturally customised websites.
While local preferences are significant, it’s difficult to balance costs against the likely increase or conversion rate.
Nitish et al. (2006): indication of the importance of localisation, assessing localised websites in terms not only of content, but of cultural values; without cultural adaptation, confidence or flow falls, resulting in lower purchase intent.
Translate Media (2013): an average 20% increase in conversion when landing pages and ads were translated into local language, and a 70% increase when websites fully localised.
A further aspect of localisation is SEO, since sites with local-language versions will be listed more prominently by local versions of the search engines.
Case Study 4.1: The implication of micro-localisation vs globalisation based on consumer attitudes

Question 39

Quelch and Klein (1996): a company must have:

Answer 39

• A 24-hour order-taking and customer service response capability;
• Regulatory and customs-handling experience to ship internationally;
• In-depth understanding of foreign marketing environments to assess the advantages of its own products and services.

Question 40

A website may need to support customers from a range of countries with:

Answer 40

• Different product needs;
• Language differences;
• Cultural differences.

Question 41

The importance of localisation is highlighted by a report by the Common Sense Advisory (2002). It may be necessary to vary:

Answer 41

• The language that content is provided in;
• Tone and style of copy;
• Site design;
• Range of product offerings;
• Product pricing;
• Currency and payment options;
• Local customer service/contact points;
• Dates and times presented in local formats.

Question 42

Singh and Pereira (2005): evaluation framework for the level of localisation:

Answer 42

1. Standardised websites (not localised).
2. Semi-localised websites.
3. Localised websites.
4. Highly localised websites.
5. Culturally customised websites.

Question 43

The implications of e-commerce for international B2B trading

Answer 43

Hamill and Gregory (1997): highlight the strategic implications of e-commerce for international b2b trading: there will be increasing standardisation of prices across borders as businesses become more aware of price differentials; they predict that the importance of traditional intermediaries will be reduced by Internet-enabled direct marketing and sales.
Most governments are encouraging SMEs to use e-commerce to tap into the international market. Hamill and Gregory (1997): identify the barriers to SME internationalisation: psychological, operational, organisational, product/market.
SMEs have been slow to adopt the Internet. Arnott and Bridgewater (2002): tested the level of sophistication by which SMEs are using the Internet: the majority of firms are using the Internet for info provision rather than interactive, relationship-building or transactional facilities. Pavic et al. (2007): the owner-managers of SMEs would like to take a step at a time and incorporate e-business into their existing strategies gradually and when they feel they’re ready. They didn’t find any measurable evidence that e-business can create a competitive advantage for SMEs; however, there may be a possibility that when companies integrate the Internet into strategy, the new technology will lead to a competitive advantage.
Karjaluoto and Huhtamaki (2010): model which demonstrates how SMEs can develop an e-commerce strategy; it shows that the business develops through 4 stages:
1. The use of the Internet for information.
2. Communication.
3. Transactions.
4. Integrated and strategic part of the business.
Driving this development cycle are 3 main factors:
1. Environmental factors (including SLEPT);
2. Firm’s resources;
3. Characteristics of the owner-manager and their business.
The starting point for many businesses is the active use of email to assist with efficient communications; then build and publish a website, and once the business is engaged in selling or buying online it implements a rudimentary e-commerce strategy. This volves into an e-business model when the SME has further integrated its online strategy with its offline operations. The active participation in supply chain management activities using online systems is a good example. The final stage is for the business to develop a business model that transforms it into an increasingly virtual and networked organisation.
This model is useful in providing a simple evolutionary perspective on how SMEs might develop digital strategies, but it assumes a linear process and implies that all firms must follow the same path.
Karagozoglu and Lindell (2004): e-commerce strategies by SMEs largely built on their existing bricks and mortar business models. While small firms that engaged in e-commerce experienced enhanced sales growth and profitability, procurement via online systems was less successful, because of the high cost of e-commerce platforms and the related technologies required.
Tan et al. (2009): studied 55 small online retailers in the US, actively engaged in e-commerce and had developed a model of digital business management. This highlights the importance of the owner-manager making a commitment to growth via a digital strategy. An important focus for those seeking such growth was the need to differentiate product offerings and build a vibrant online community to increase sales and profitability. This contrasted with those firms that were seeking to compete primarily on price.

Question 44

Karjaluoto and Huhtamaki (2010): model which demonstrates how SMEs can develop an e-commerce strategy:

Answer 44

it shows that the business develops through 4 stages:
1. The use of the Internet for information.
2. Communication.
3. Transactions.
4. Integrated and strategic part of the business.
Driving this development cycle are 3 main factors:
1. Environmental factors (including SLEPT);
2. Firm’s resources;
3. Characteristics of the owner-manager and their business.

Question 45

Government and digital transformation

Answer 45

The political environment is shaped by the interplay of government agencies, public opinion, consumer pressure groups and industry-backed organisations.
Political action enacted through government agencies to control the adoption of the Internet can include:
* Promoting the benefits of adopting the Internet for consumers and business to improve a country’s economic prosperity;
* Enacting legislation to protect privacy or control taxation;
* Providing organisations with guidelines and assistance for compliance with legislation;
* Setting up international bodies to coordinate the Internet.
Political involvement is intended to improve the economic competitiveness of countries or groups of countries.
The UK government is one of the most digitally advanced, and the next stage of its ‘digitally enabled transformation’ has 3 main components:
* Transforming while citizen-facing services;
* Full department transformation;
* Internal government transformation.
Objectives not only cover the continued development of world-class digital services, but also:
* Growing the right people, skills and culture;
* Building better workplace tools processes and governance;
* Making better use of data;
* Creating shared platforms to speed up transformation.
Managers aware of this initiative can tap into sources of funding for development or free training to support their online initiatives; alternatively, there may be incentives such as tax breaks.
The European Commission provides some examples of the role of government organisations in promoting and regulating e-commerce. According to the working party, a socially inclusive information society:
* Will have ready, easy-to-use public and individual access to the communication channels without heavy dependence on private or public agencies as intermediaries;
* Will ensure that the kinds of info essential for day-to-day life, for full participation in society, and for support in times of need, are easily available at no cost;
* Will invest heavily in the info handling and communication.
The EC has set up i2010, which has 3 pillars of ICT for growth and employment:
1. Combines all the regulatory instruments at the Commission’s disposal, which will allow to create a modern, market-orientated regulatory framework for the digital economy.
2. Brings the EU’s research and development instruments into the game of digital convergence and sets priorities for our cooperation with the private sector to promote innovation and technological leadership.
3. Seeks to promote, with the tools available to the Commission, an inclusive European Information Society.
Booz Allen Hamilton (2002): review approaches used by governments to encourage use of the Internet. They identify 5 broad themes:
1. Increasing the penetration of access devices.
2. Increasing skills and confidence of target groups.
3. Establishing ‘driving licenses’ or ‘passport’ qualifications.
4. Building trust, or allaying fears.
5. Direct marketing campaign.
The UK government’s ‘Digital Strategy to make Britain the Best Place in the World to Start and Grow a Digital Business’ (2017) outlines the following aims:
* Skills, infrastructure and innovation at the heart of new strategy to support Britain’s world-leading digital economy.
* Includes a new Digital Skills Partnership and bold new pledges for millions of free digital training opportunities.
* Backs the UK digital sectors to invest for the long term and includes measures to help all businesses harness the productivity benefits of digital innovation.
* More than 4 million free digital skills training opportunities will be created as part of a digital strategy to make Britain the best place to start and grow a digital business and ensure our digital economy works for everyone.
The government also recognises that businesses play an important role in developing the strategy; the plan includes:
* Creation of 5 international tech hubs in emerging markets; they will help provide British businesses with a global competitive edge and drive collaboration on skills, innovation, technology and research and development.
* A new competition to spark the development of new FinTech products that can support those who struggle to access financial services and provide consumers with the tools they need to manage their finance well.
* A commitment to create a Secretary-of-State-led forum for government and the tech community to work together to spark growth in the digital economy.
* A Business Connectivity Forum to bring together business organisations, local authorities, and communications providers to help businesses access fast, affordable and reliable broadband.
* Confirmation of £1 billion programme to keep Britain at the forefront of digital connectivity. This funding will accelerate the development and uptake of next-generation digital infrastructure.

Question 46

According to the working party, a socially inclusive information society:

Answer 46

• Will have ready, easy-to-use public and individual access to the communication channels without heavy dependence on private or public agencies as intermediaries;
• Will ensure that the kinds of info essential for day-to-day life, for full participation in society, and for support in times of need, are easily available at no cost;
• Will invest heavily in the info handling and communication.

Question 47

The EC has set up i2010, which has 3 pillars of ICT for growth and employment:

Answer 47

1. Combines all the regulatory instruments at the Commission’s disposal, which will allow to create a modern, market-orientated regulatory framework for the digital economy.
2. Brings the EU’s research and development instruments into the game of digital convergence and sets priorities for our cooperation with the private sector to promote innovation and technological leadership.
3. Seeks to promote, with the tools available to the Commission, an inclusive European Information Society.

Question 48

Booz Allen Hamilton (2002): review approaches used by governments to encourage use of the Internet. They identify 5 broad themes:

Answer 48

1. Increasing penetration of access devices
2. Increasing skills and confidence of target groups
3. Establishing ‘driving licences’ or ‘passport’ qualifications
4. Building trust, or allaying fears
5. Direct marketing campaign

Question 49

Internet governance

Answer 49

Internet governance describes the control to manage the growth of Internet and its usage.
Dyson (1998): different layers of jurisdiction are:
1. Physical space comprising each individual country where its own laws hold.
2. ISPs – the connection between the physical and virtual worlds.
3. Domain name control and communities.
4. Agencies such as TrustAct.

Question 50

E-government

Answer 50

E-government is distinct from Internet governance. The EC has published an eGovernment Action Plan 2016-2020, to facilitate a digital single market. The plan has 3 main aims:
1. To modernise public administration;
2. To achieve the digital internal market;
3. To engage more with citizens and businesses to deliver high-quality services.
The Action Plan aims to support the coordination and collaboration at EU level. To achieve this vision, 3 main policy priorities:
1. Modernising public administrations using key digital enabler;
2. Enabling mobility of citizens and businesses by cross-boarder interoperability;
3. Facilitating digital interaction between administrations and citizens/businesses for high quality public services.
Technological innovation and technology assessment
No one can predict future, and many companies have misunderstood the market for products.
Not all organisations can be technologically innovative. Generally, one of the best things organisations can do is analyse the current situation and respond rapidly where appropriate.
The suitability of new approaches for attracting visitors to the site must be evaluated. When a new technique is introduced. A manager faces a difficult decision as to whether to:
* Ignore the use of the technique – a cautious, wait-and-see approach;
* Enthusiastically adopt the technique without a detailed evaluation – a risk-taking, early adopter approach;
* Evaluate the technique and then take a decision – intermediate approach.
This diffusion-adoption process was identified by Rogers (1983), who classified those trialling new products as innovators, early adopter, early majority, late majority, or laggards.
Gartner (2010): alternative graphic representation of diffusion of innovation for assessing the maturity, adoption and business application of specific technologies; he recognises the following stages within a hype cycle; emerging trends in 2016:
1. Innovation trigger.
2. Peak or inflated expectations.
3. Through of disillusionment.
4. Slope of enlightenment.
5. Plateau of productivity.
Trott (1998): different requirements necessary within an organisation to be able to respond effectively to technological change or innovation:
* Growth orientation.
* Vigilance.
* Commitment to technology.
* Acceptance of risk.
* Cross-functional cooperation.
* Receptivity.
* Slack.
* Adaptability.
* Diverse range of skills.
Problem of early adopter (as organisation): the leading edge is often also referred to as the bleeding edge due to the risk of failure. The reason for risk-taking is that rewards are high.

Question 51

Approaches to identifying emerging technology

Answer 51

PMP (2008): 4 contrasting approaches to identifying new technologies:
1. Technology networking. Individuals monitor trends through personal network and technology scouting and then share them.
2. Crowdsourcing. Crowdsourcing facilitates access to a marketplace of ideas from customer, partners or inventors for organisations looking to solve specific problems.
3. Technology hunting. Structured review of new technology through reviewing the capabilities of start-up companies.
4. Technology mining. A traditional literature review of technologies described in published documents.
5. Technology incubators. Start-up incubators to find innovative solutions.
It may also be useful to identify how rapidly a new concept is being adopted. Rapid diffusion: when product/service adopted quickly.
What action should e-commerce managers take when confronted by new techniques and technologies? Benchmarking of best of breed sites within sectors and in different sectors is essential as part of environmental scanning.
Microsoft Cross Screen Engagement research (2010): two-phase study; they identified 4 kinds of consumer behaviours when engaging with multiple devices:
1. Content grazing: the most common way consumers interact with multiple devices.
2. Investigative spider-webbing: 57% of consumers use one device to find info related to what they’re doing on another one.
3. Quantum journey: 46% of consumers use multiple devices to accomplish a task.
4. Social spider-webbing: 39% of consumers share content about activities they’ve accomplished on other devices.

Question 52

PMP (2008): 4 contrasting approaches to identifying new technologies:

Answer 52

1. Technology networking. Individuals monitor trends through personal network and technology scouting and then share them.
2. Crowdsourcing. Crowdsourcing facilitates access to a marketplace of ideas from customer, partners or inventors for organisations looking to solve specific problems.
3. Technology hunting. Structured review of new technology through reviewing the capabilities of start-up companies.
4. Technology mining. A traditional literature review of technologies described in published documents.
5. Technology incubators. Start-up incubators to find innovative solutions.

Question 53

Microsoft Cross Screen Engagement research (2010): two-phase study; they identified 4 kinds of consumer behaviours when engaging with multiple devices:

Answer 53

1. Content grazing: the most common way consumers interact with multiple devices.
2. Investigative spider-webbing: 57% of consumers use one device to find info related to what they’re doing on another one.
3. Quantum journey: 46% of consumers use multiple devices to accomplish a task.
4. Social spider-webbing: 39% of consumers share content about activities they’ve accomplished on other devices.