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

Learning Objectives  Describe operational challenges for a startup e-business  Define legal, office space, and human resources issues  Discuss electronic payment methods  Explain front-end and back-end e-business systems  Identify e-business technologies and technology providers  Discuss the benefits of outsourcing e-business operations

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

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

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

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

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)

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?

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

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

Hiring Employees (continued)

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

Electronic Payment Methods (continued)

 Cost of accepting payment cards –Merchant account fees Setup Per transaction Statement Discount rate (percentage of each transaction)

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

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

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

Electronic Payment Methods (continued)

E-Business Technologies (continued)

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

Outsourcing Operations (continued)