TIF_9780273761389_13

Exam Name___________________________________ 1. From 1995 through 2000, many EC projects and start-up companies were funded with little analysis of their business viability or finances. Answer:

True False

Diff: 1

Type: TF Page Ref: 664 AACSB: Objective:

2. The result of the rush to invest in EC projects and start-up companies was the 2001 to 2003 "dot-com bust," when hundreds of EC startups went out of business and the stock market crashed. Answer:

True False

Diff: 1


3. After the dot-com bust, most IT executives acquired the knowledge and tools to do ROI calculations on proposed EC investments. Answer: True

False

Diff: 2


4. One reason why EC justification is needed is that companies now realize that EC is not necessarily the solution to all problems. Answer:

True False

Diff: 2


5. According to a CIO Insight report, EC justification decreases the credibility of EC projects. Answer: True

False

Diff: 1


6. One basic way to categorize different EC investments is to distinguish between investment in infrastructure and investment in specific EC applications. Answer:

True False

Diff: 1


7. Infrastructure investments are made for the short-term because of frequent technological changes. Answer: True

False

Diff: 1


8. Cost-benefit analysis is frequently assessed by return on investment (ROI), which is also the name of a specific method for evaluating investments. Answer:

True False

Diff: 2 Type: TF Page Ref: 665 AACSB: Objective:

9. All EC investments need to be formally justified to insure that they align with the company's competitive strategy. Answer: True

False

Diff: 2


10. Metrics are used to describe costs, benefits, or the ratio between them and need to be defined properly with a clear way to measure them. Answer:

True False

Diff: 3


11.

Key performance indicators (KPI) are used to qualitatively track critical metrics or success factors. Answer: True

False

Diff: 2


12. Cannibalization occurs when a new EC initiative produces substantial online sales, but traditional sales fall such that no increase in total revenue occurs. Answer:

True False

Diff: 2


13. A major difficulty in justifying EC projects is that many costs and benefits are intangible and therefore very difficult to measure. Answer:

True False Type: TF

Diff: 2

Page Ref: 671 AACSB: Objective:

14. Creating a competitive advantage, providing a benefit to society, and improving the company's image are examples of tangible benefits that might be realized from an EC project. Answer: True

False

Diff: 2


15. In preparing the business case for EC investment, managers should examine the potential additional revenues, such as increased revenues via products or services from a larger global market because of more effective product marketing on the Web. Answer:

True False

Diff: 2


16.

The ROI method uses a formula that divides the total net benefit by the initial cost. The result is a ratio that measures the ROI for each year or for an entire period. Answer:

True False

Diff: 2


17. In an NPV analysis, analysts convert future values of benefits to their present-value equivalents by discounting future cash flows at the risk-free rate set by the Federal Reserve Bank. Answer: True

False

Diff: 2


18. Given the diversity of activities involved in e-procurement, the metrics used to measure the value of e-procurement must reflect how well each process is accomplished and take into consideration whether the company is a buyer or seller. Answer:

True False

Diff: 2


19. The average cost curve of regular products is U-shaped and has an optimal lowest point, but with digital products the average cost per unit declines as quantity increases. Answer:

True False

Diff: 2


20. Usability testing refers to testing application software modules one at a time. Answer: True

False

Diff: 2


21. Unit testing refers to testing the combination of application modules acting in concert. Answer:

True

False

Diff: 2


22. Interoperability refers to connecting people, data, and diverse systems. Answer:

True False

Diff: 1


23. Performance value is the likelihood a segment of source code can be used again to add new functionalities with slight or no modification. Answer: True

False

Diff: 2


24. The higher purchase price is a disadvantage of purchasing an EC system. Answer: True

False

Diff: 1


25. Vendors dropping a product or going out of business is a disadvantage to purchasing an EC system. Answer:

True False

Diff: 1


26. Turnkey computing is the provision of computational resources on demand via a computer network. Answer: True

False

Diff: 1 Type: TF Page Ref: 695 AACSB: Objective:

27. Reduced time-to-market is a cloud computing advantage. Answer:

True False

Diff: 2


28. New technologies require new organizational structures and procedures. Answer:

True False

Diff: 1


29. Reengineering eliminates the intermediaries between sellers and buyers.

Answer: True

False

Diff: 1


30. Business process reengineering is the analysis and design of workflows and processes within an organization. Answer:

True False

Diff: 2


31. Structured management is a holistic management approach focused on aligning all aspects of an organization with the wants and needs of clients. Answer: True

False

Diff: 2

Type: TF Page Ref: 701

AACSB: Objective:

32. Mass customization enables manufacturers to create specific products for each customer based on the customer's exact needs. Answer:

True False

Diff: 2


33. Leveraging intangible assets, capabilities, relationships, and unleashing dormant assets is a critical success factor for EC. Answer:

True False

Diff: 2


34. Critical elements that can affect the value of EC across cultures are perceived trust, consumer loyalty, regulation, political influences, and even the content of online ads. Answer:

True False

Diff: 2


35. Developing economies often face power blackouts, unreliable telecommunications infrastructure, undependable delivery mechanisms, and a relatively few customers who own computers and credit cards. These limitations can be overcome when predicting EC investment payoffs by using a combination of break-even analysis and NPV. Answer: True

False

Diff: 2


36. CIOs need to effectively communicate the value of proposed EC projects in order to gain approval for each of the following reasons except A)

the success of EC projects may be assessed in order to pay bonuses to those involved with the project. B) some large companies, and many public organizations, mandate a formal evaluation of requests for funding. C)

companies now realize that EC is not necessarily the solution to all problems. D)

demand for expanding or initiating e-business projects is no longer strong so there are fewer requests for funding. Answer: D

Diff: 2

Type: MC Page Ref: 664-665 AACSB: Objective:

37. One basic way to categorize different EC investments is to distinguish between investments in infrastructure and investments in specific EC applications because benefits from infrastructure investments A)

are very complex. B) have a low return. C)

depend on the EC applications. D)

are made for the long-term. Answer: D

Diff: 1

Type: MC Page Ref: 665 AACSB: Objective:

38. Basic reasons companies invest in IT and EC include each of the following except A)

justify new marketing campaigns.

B) reduce time-to-market. C)

improve business processes. D)

increase customer satisfaction and retention. Answer: A

Diff: 2


39. Not all EC investments need to be formally justified. Each of the following is a case where formal evaluation may not be needed except A)

when the relevant data are not available, are inaccurate, or are too volatile. B) when the value of the investment is relatively small for the organization. C)

when the EC project is mandated and must be done regardless of the costs and benefits. D)

when competitors have made that type of investment. Answer: D

Diff: 2


40. A comparison of the costs of a project against the benefits best defines A)

benefits metric. B) IRR.

C)

cost-benefit analysis. D)

feasibility justification. Answer: C

Diff: 1


41. Metrics can

A)

define the value proposition of business models. B) be the basis for specific goals and plans. C)

assess the health of companies by using tools such as balanced scorecards and performance dashboards. D)

do all of the above.

Answer: D

Diff: 2


42. Metrics are used to describe each of the following except A)

the ratio of costs to benefits. B) costs.

C)

benefits.

standards.

D

D)

Answer:

Diff: 2


43. In B2C, an example of a tangible EC metric from the buyer's perspective is A)

ease of use of EC. B)

cost/price of the product. C)

profit per customer. D)

convenience in purchasing. Answer: B

Diff: 3


44. Tangible metrics include A)

reelection of candidates. B) lower tax rates. C)

flexibility in changing a purchase. D)

ease of use of EC. Answer: B

Diff: 3


45. For governments, an example of an intangible EC metric is A)

risk reduction. B) reelection of candidates. C)

increase in participation in government programs. D)

lower tax rates. Answer: B

Diff: 2


46. Productivity benefits from using EC are difficult to measure because A)

EC gains in certain areas of the company may be offset by losses in other areas. B) the payoffs are too short. C)

qualitative benefits do not count. D)

there is no time lag in EC gains. Answer: A

Diff: 3 Type: MC Page Ref: 669 AACSB: Objective:

47. The relationship between EC investment and organizational performance is A)

shared with other investments. B) not measurable. C)

indirect.

direct.

C

D)

Answer:

Diff: 3


48. EC costs and benefits can be classified into two broad categories A)

short-term and capital. B) direct and routine. C)

operational and strategic. D)

tangible and intangible. Answer: D

Diff: 1


49. The major steps in the process of justifying large-scale EC and IT projects include each of the following except A)

do not leave out strategic benefits, including long-term ones. B) document and verify all figures used in the calculation. Clarify all assumptions. C)

be careful not to overestimate cost and underestimate benefits (a tendency of many managers). D)

lay an appropriate foundation for analysis with your vendor, and then conduct your ROI. Answer: C

Diff: 3


50. A graphic representation of the maturity, adoption, and social application of specific IT tools best defines A)

hype cycle.

logic model.

Gantt chart.

B)

C)

D)

network diagram. Answer: A

Diff: 2


51. Gartner's hype cycle includes each of the following stages except A)

simplicity of method. B) trough of disillusionment. C)

plateau of productivity. D)

technology trigger. Answer: A

Diff: 3

Type: MC Page Ref: 672

AACSB: Objective:

52. According to Gartner's hype cycle, which of the following is the stage of overenthusiasm and unrealistic projections during which a flurry of publicized activity by technology leaders may result in some successes but more failures as the technology is pushed to its limits? A)

trough of disillusionment B) slope of enlightenment C)

peak of inflated expectations D)

plateau of productivity Answer: C

Diff: 3


53. According to Gartner's hype cycle, which of the following stages is the point at which the technology becomes unfashionable and the media abandons the topic, because the topic did not live up to its inflated expectations? A)

peak of inflated expectations B) plateau of productivity C)

trough of disillusionment D)

slope of enlightenment Answer: C

Diff: 3


54. Traditional methods for evaluating EC investments include each of the following except A)

discount rate. B) ROI.

C)

NPV.

D)

payback period. Answer: A

Diff: 1


55. Which of the following is the discount rate that makes the NPV of cash flows produced over time equal to zero? A)

IRR

B)

ROI

C)

TCO

D)

CPR

Answer:

A

Diff: 2


56. A formula for calculating the cost of owning, operating, and controlling an IT system best defines A)

total cost of ownership. B) total benefits of ownership. C)

return on investment. D)

payback period. Answer: A

Diff: 2

Type: MC Page Ref: 675

AACSB: Objective:

57. Benefits of ownership that include both tangible and intangible costs best defines A)

NPV analysis. B) total benefits of ownership. C)

benefit-to-cost analysis. D)

economic value of ownership. Answer: B

Diff: 2


58. The return on invested capital generated by a company minus the cost of the capital used in recreating the cash flow best describes A)

return on investment. B) break-even analysis. C)

economic value added. D)

NPV analysis. Answer: C

Diff: 3


59. Maximizing the value for unconstrained project selection is an advantage of A)

payback period. B) net present value. C)

total cost of ownership. D)

economic value added. Answer: B

Diff: 2


60. The disadvantage of the NPV method for evaluating EC and IT is A)

it is difficult to compare projects of unequal lives or sizes.

B) it assumes reinvestment at the same rate. C)

it may be difficult to classify outlays as expenses or investments. D)

the true benefits are difficult to measure. Answer: A

Diff: 3


61. Types of appraisal and justification methods for IT investments include each of the following except A)

portfolio approaches. B) ratio approaches. C)

real-time investment approaches. D)

financial approaches. Answer: C

Diff: 3


62. Which of the following advanced methods for EC justification and evaluation uses the idea of critical success factors and focuses on key organizational objectives and the potential impacts of the proposed EC project on each of them? A)

performance dashboard B) management by maxim C)

benchmarks

D)

information economics Answer: D

Diff: 3


63. Which of the following advanced methods for EC justification and evaluation uses a combination of brainstorming and consensus-reaching methodologies to determine how much a company should invest in large EC infrastructures? A)

balanced scorecard B) management by maxim C)

benchmarks

D)

scoring methodologies Answer: B

Diff: 3


64. Each of the following metrics indicates excellence in e-procurement except A)

increased on-time deliveries. B) increased order fulfillment rate. C)

increased production costs. D)

decreased number of rejects received from suppliers. Answer: C

Diff: 3


65. Justifying information security projects A)

is not done because ROI calculators are not available. B)

is not needed because it is well-known that preventing network security problems is less labor intensive than cleaning up virus infections. C)

should be done because employee security training is usually poorly done. D)

should focus on defending against external threats such as hackers and malware. Answer: C

Diff: 3


66. Antivirus investments are easily justified because more than ________ percent of viruses enter business networks via email. A)

85

33

50

25

A

B)

C)

D)

Answer:

Diff: 2


67. The average-cost curves (AVC) of physical products and digital products A)

are both L-shaped. B) are different because the AVC of physical products declines as quantity increases forming an L-shape, while the AVC of digital products is U-shaped. C)

are different because the AVC of digital products declines as quantity increases forming an L-shape, while the AVC of physical products is U-shaped. D)

are both U-shaped. Answer: C

Diff: 3


68. An equation indicating that for the same quantity of production, Q, companies either can use a certain amount of labor or invest in more automation best describes A)

unit testing.

B)

production function. C)

product valuation. D)

Q-model.

B

Answer:

Diff: 2


69. Transaction costs include each of the following except A)

negotiation costs. B) production costs. C)

search costs.

D)

monitoring costs. Answer: B

Diff: 2


70. Costs incurred in ensuring that the agent performs tasks as expected best defines A)

production costs. B)

agency costs. C)

time-on-task costs. D)

opportunity costs. Answer: B

Diff: 2


71. McAfee allows users of its VirusScan virus-detection software to automatically update the latest security patches online. This is an example of ________ to attract customers who value this automatic update. A)

agility

B)

product or service differentiation C)

core competency D)

competitive advantage Answer: B

Diff: 2


72. The fair market value of a business or the price at which a property would change hands between a willing buyer and a willing seller who are both informed and under no compulsion to act best describes A)

feasibility.

agility.

valuation.

B)

C)

D)

reusability. Answer: C

Diff: 2


73. A Web-based seller of CDs carefully monitors the prices charged by its competitors for identical products. This company has the ability to change a given price within three minutes in response to changes by competitors. This is an example of EC A)

core competency. B) product or service differentiation. C)

competitive advantage. D)

agility.

D

Answer:

Diff: 2


74. Referencing the capabilities needed by Webstore users, buyers need the ability to A)

create the capability for cross-selling and up-selling. B) analyze purchases in order to customize buyers' experiences. C)

provide Web-based postsale support. D)

track orders once they are shipped. Answer: D

Diff: 2


75. Referencing capabilities needed by Webstore users, sellers need the ability to do each of the following except A)

select products to purchase and negotiate or determine their total price. B)

provide an electronic shopping cart in which buyers can assemble their purchases. C)

track shipments to ensure that they are delivered. D)

arrange product delivery. Answer: A

Diff: 3


76. Determining whether a website meets the original business objectives and vision best defines A)

feasibility testing. B) usability testing. C)

acceptance testing. D)

unit testing. Answer: C

Diff: 2


77. A structured approach to shifting/transitioning individuals, teams, and organizations from a current state to a desired future state. It is an organizational process aimed at empowering employees to accept and embrace changes in their current business environment. This best describes A)

usability testing. B) change management. C)

employee empowerment. D)

acceptance testing. Answer: B

Diff: 2


78. Each of the following is a critical success factor (CSF) of the Old Economy except A)

compete to sell product. B) build market share to get economies of scale. C)

deliver high-value products. D)

create new partnerships, stay with core competency. Answer:

D

Diff: 2


79. One of the strengths of EC is the ease with which its adopters can reach a global population of consumers. However, ECdriven businesses must consider the critical elements affecting the value of EC across cultures. These elements include each of the following except A)

perceived trust. B) political influences. C)

consumer loyalty. D)

delivery delays. Answer: D

Diff: 2


80. Each of the following apply to EC in developing economies except A)

developing economies struggle with various issues that create too many business and technology risks to justify investment in those economies at this time. B)

developing economies, such as China and India, represent a significant opportunity for EC to connect businesses to customers, as well as other businesses. C)

developing economies often face power blackouts and unreliable infrastructure and delivery mechanisms creating limitations that make it difficult for firms to predict whether EC investments will pay off, and when. D)

the potential volume of transactions in developed countries can make EC investments more attractive for established firms than new firms because established firms have already recovered the costs of their IT infrastructures. Answer: A

Diff: 3


81. List and briefly describe three reasons why EC justification is needed. Answer: Companies realize that EC is not necessarily the solution to all problems. Therefore, EC projects must compete for funding and resources with other internal and external projects. Analysis is needed to determine when funding of an EC project is appropriate. Some large companies, and many public organizations, mandate a formal evaluation of requests for funding. Companies need to assess the success of EC projects after completion, and later on a periodic basis. The success of EC projects may be assessed in order to pay bonuses to those involved with the project. Diff: 2

Type: ES Page Ref: 664-665 AACSB: Objective:

82. List and briefly discuss the difficulties in measuring productivity and performance gains from EC investments. Answer: Data, or the analysis of the data, may hide productivity gains. In service industries, such as finance or health-care delivery, it is more difficult to define what the products are, how they change in quality, and how they may be related to corresponding benefits and costs. EC productivity gains in certain areas of the company may be offset by losses in other

areas. For example, increased online sales may decrease offline sales, a situation known as cannibalism. The results of any investment justification depend on what is actually measured. To assess the benefits of EC investment, one should look at productivity improvement in the area where the EC project was installed. However, productivity increase may not necessarily be a profitable improvement if there are losses in other areas. Many EC investments take five to six years to show significant positive results, but many studies do not wait that long to measure productivity changes. Diff: 3

Type: ES Page Ref: 669 AACSB: Objective:

83. Explain tangible costs and benefits. Explain intangible costs and benefits. Answer: Tangible costs are those that are easy to measure and quantify and that relate directly to a specific investment. The costs involved in purchasing hardware, software, consulting, and support services usually are tangible, as are labor costs. These costs can be measured through accounting information. Tangible benefits are direct benefits such as increased profitability, improved productivity, and greater market share, and can be measured with relative ease. Intangible costs are indirect costs that may include the learning curve of the firm's customer service employees to incorporate an EC system to respond to customer inquiries. Another intangible cost may involve having to adapt other business processes or information systems, such as processing items returned by customers or building and operating an inventory tracking system. In many cases, EC projects generate intangible benefits, such as faster time-to-market, increased employee and customer satisfaction, easier distribution, greater organizational agility, and improved control. These are very desirable benefits, but it is difficult to place an accurate monetary value on them. Diff: 2


84. List and explain five methods for evaluating IT investments. Answer: ROI, payback period, net present value, value analysis, and information economics are five methods. ROI uses a formula to determine the value of a product by dividing net benefits by the initial cost of the project. The payback period calculates how long it will take to recover the cost of a new project. The net present value discounts the net benefits for each year back to their present value, and then compares them with the cost of doing the project. Value analysis evaluates the performance of a low-cost, small-scale version of the project before committing major investment dollars to the full project. Information economics looks at how a project will impact key organizational objectives. Exhibit 13.7 identifies additional methods. Diff: 3


85. Define cloud computing. Identify five advantages of cloud computing. Answer: Cloud computing is the provision of computational resources on demand via a computer network, and the customer pays only for actual usage. Advantages include no local server installation, rapid scalability, reliability of systems incorporating the technology, pay per use, and reduced time-to-market. Diff: 2

Type: ES Page Ref: 695 AACSB: Objective:

1. TRUE

2. TRUE

3. FALSE

4. TRUE

5. FALSE

6. TRUE

7. FALSE

8. TRUE

9. FALSE

10. TRUE

11. FALSE

12. TRUE

13. TRUE

14. FALSE

15. TRUE

16. TRUE

17. FALSE

18. TRUE

19. TRUE

20. FALSE

21.

FALSE

22. TRUE

23. FALSE

24. FALSE

25. TRUE

26. FALSE

27. TRUE

28. TRUE

29. FALSE

30. TRUE

31. FALSE

32. TRUE

33. TRUE

34. TRUE

35. FALSE

36. D

37. D

38. A

39. D

40. C

41. D

42. D

43. B

44. B

45. B

46. A

47. C

48. D

49. C

50. A

51. A

52. C

53. C

54. A

55. A

56. A

57. B

58. C

59. B

60. A

61. C

62.

D

63. B

64. C

65. C

66. A

67. C

68. B

69. B

70. B

71. B

72. C

73. D

74. D

75. A

76. C

77. B

78. D

79. D

80. A

81. Companies realize that EC is not necessarily the solution to all problems. Therefore, EC projects must compete for funding and resources with other internal and external projects. Analysis is needed to determine when funding of an EC project is appropriate. Some large companies, and many public organizations, mandate a formal evaluation of requests for funding. Companies need to assess the success of EC projects after completion, and later on a periodic basis. The success of EC projects may be assessed in order to pay bonuses to those involved with the project.

82. Data, or the analysis of the data, may hide productivity gains. In service industries, such as finance or health-care delivery, it is more difficult to define what the products are, how they change in quality, and how they may be related to corresponding benefits and costs. EC productivity gains in certain areas of the company may be offset by losses in other areas. For example, increased online sales may decrease offline sales, a situation known as cannibalism. The results of any investment justification depend on what is actually measured. To assess the benefits of EC investment, one should look at productivity improvement in the area where the EC project was installed. However, productivity increase may not necessarily be a profitable improvement if there are losses in other areas. Many EC investments take five to six years to show significant positive results, but many studies do not wait that long to measure productivity changes.

83. Tangible costs are those that are easy to measure and quantify and that relate directly to a specific investment. The costs involved in purchasing hardware, software, consulting, and support services usually are tangible, as are labor costs. These costs can be measured through accounting information. Tangible benefits are direct benefits such as increased profitability, improved productivity, and greater market share, and can be measured with relative ease. Intangible costs are indirect costs that may include the learning curve of the firm's customer service employees to incorporate an EC system to respond to customer inquiries. Another intangible cost may involve having to adapt other business processes or information systems, such as processing items returned by customers or building and operating an inventory tracking system. In many cases, EC projects generate intangible benefits, such as faster time-to-market, increased employee and customer satisfaction, easier distribution, greater organizational agility, and improved control. These are very desirable benefits, but it is difficult to place an accurate monetary value on them.

84. ROI, payback period, net present value, value analysis, and information economics are five methods. ROI uses a formula to determine the value of a product by dividing net benefits by the initial cost of the project. The payback period calculates how long it will take to recover the cost of a new project. The net present value discounts the net benefits for each year back to their present value, and then compares them with the cost of doing the project. Value analysis evaluates the performance of a low-cost, small-scale version of the project before committing major investment dollars to the full project. Information economics looks at how a project will impact key organizational objectives. Exhibit 13.7 identifies additional methods.

85. Cloud computing is the provision of computational resources on demand via a computer network, and the customer pays only for actual usage. Advantages include no local server installation, rapid scalability, reliability of systems incorporating the technology, pay per use, and reduced time-to-market.

TIF_9780273761389_13

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