Creating a Winning E-Business Second Edition Operating Your E-Business Chapter 5

Creating a Winning E-Business Second Edition, Chapter 5 2 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

Creating a Winning E-Business Second Edition, Chapter 5 3 Learning Objectives (continued)  Identify e-business technologies and technology providers  Discuss the benefits of outsourcing e-business operations

Creating a Winning E-Business Second Edition, Chapter 5 4 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 Second Edition, Chapter 5 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

Creating a Winning E-Business Second Edition, Chapter 5 6 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

Creating a Winning E-Business Second Edition, Chapter 5 7 Legal Issues (continued)

Creating a Winning E-Business Second Edition, Chapter 5 8 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

Creating a Winning E-Business Second Edition, Chapter 5 9 Legal Issues (continued)

Creating a Winning E-Business Second Edition, Chapter 5 10 Legal Issues (continued)  Content liability –Exposure to potential liabilities based on Web content –Need appropriately worded disclaimer of liability at Web site

Creating a Winning E-Business Second Edition, Chapter 5 11 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 Second Edition, Chapter 5 12 Legal Issues (continued)

Creating a Winning E-Business Second Edition, Chapter 5 13 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 Second Edition, Chapter 5 14 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

Creating a Winning E-Business Second Edition, Chapter 5 15 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?

Creating a Winning E-Business Second Edition, Chapter 5 16 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

Creating a Winning E-Business Second Edition, Chapter 5 17 Hiring Employees (continued)  Leads on finding qualified and talented employees –Investors and advisors –Family and friends –Professional recruiters

Creating a Winning E-Business Second Edition, Chapter 5 18 Hiring Employees (continued)

Creating a Winning E-Business Second Edition, Chapter 5 19 Hiring Employees (continued)

Creating a Winning E-Business Second Edition, Chapter 5 20 Hiring Employees (continued)  U.S. Department of Labor and Salary.com –Good sources of area information Salaries Benefits Employment statistics

Creating a Winning E-Business Second Edition, Chapter 5 21 Hiring Employees (continued)

Creating a Winning E-Business Second Edition, Chapter 5 22 Hiring Employees (continued)

Creating a Winning E-Business Second Edition, Chapter 5 23 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

Creating a Winning E-Business Second Edition, Chapter 5 24 Electronic Payment Methods (continued)

Creating a Winning E-Business Second Edition, Chapter 5 25 Electronic Payment Methods (continued)  Cost of accepting payment cards –Merchant account fees Setup Per transaction Statement Discount rate (percentage of each transaction)

Creating a Winning E-Business Second Edition, Chapter 5 26 Electronic Payment Methods (continued)

Creating a Winning E-Business Second Edition, Chapter 5 27 Electronic Payment Methods (continued)

Creating a Winning E-Business Second Edition, Chapter 5 28 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

Creating a Winning E-Business Second Edition, Chapter 5 29 Electronic Payment Methods (continued)

Creating a Winning E-Business Second Edition, Chapter 5 30 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

Creating a Winning E-Business Second Edition, Chapter 5 31 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

Creating a Winning E-Business Second Edition, Chapter 5 32 Electronic Payment Methods (continued)

Creating a Winning E-Business Second Edition, Chapter 5 33 Electronic Payment Methods (continued)

Creating a Winning E-Business Second Edition, Chapter 5 34 Electronic Payment Methods (continued)

Creating a Winning E-Business Second Edition, Chapter 5 35 E-Business Technologies  Technology decisions –Processing sales and payment transactions –Monitoring inventory –Accounting and internal recordkeeping –Connecting to the Internet –Hosting a Web site

Creating a Winning E-Business Second Edition, Chapter 5 36 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

Creating a Winning E-Business Second Edition, Chapter 5 37 E-Business Technologies (continued)

Creating a Winning E-Business Second Edition, Chapter 5 38 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 Second Edition, Chapter 5 39 E-Business Technologies (continued)

Creating a Winning E-Business Second Edition, Chapter 5 40 E-Business Technologies (continued)

Creating a Winning E-Business Second Edition, Chapter 5 41 E-Business Technologies (continued)

Creating a Winning E-Business Second Edition, Chapter 5 42 E-Business Technologies (continued)

Creating a Winning E-Business Second Edition, Chapter 5 43 E-Business Technologies (continued)

Creating a Winning E-Business Second Edition, Chapter 5 44 E-Business Technologies (continued)

Creating a Winning E-Business Second Edition, Chapter 5 45 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 Second Edition, Chapter 5 46 Outsourcing Operations (continued)

Creating a Winning E-Business Second Edition, Chapter 5 47 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 Second Edition, Chapter 5 48 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 Second Edition, Chapter 5 49 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)

Creating a Winning E-Business Second Edition, Chapter 5 50 Chapter Summary (continued)  Outsourcing technology requirements –ISPs and Web hosting companies –Application service providers (ASPs) –Order fulfillment houses