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  1. 1. E-Strategy, Internet Communities, and Global EC
  2. 2. IBM’s E-Business Strategy <ul><li>The Problem </li></ul><ul><ul><li>Need to capture new business opportunities and technologies (like EC) </li></ul></ul><ul><ul><li>Develop a business strategy for that purpose </li></ul></ul><ul><ul><li>IBM’s current strategy is to transform itself into an e-business in order to provide business value to the corporation and its shareholders </li></ul></ul><ul><ul><li>IBM views e-business as being much broader than EC because it: </li></ul></ul><ul><ul><ul><li>Serves a broader constituency </li></ul></ul></ul><ul><ul><ul><li>Offers a variety of Web-based processes and transactions </li></ul></ul></ul>
  3. 3. IBM’s E-Business Strategy (cont.) <ul><li>The Solution is based on four goals: </li></ul><ul><ul><li>Lead IBM’s strategy to transform itself into e-business </li></ul></ul><ul><ul><li>Act as a catalyst to help facilitate that transformation </li></ul></ul><ul><ul><li>Help business units become more effective in their use of the Internet/intranet </li></ul></ul><ul><ul><ul><li>Internally </li></ul></ul></ul><ul><ul><ul><li>With their customers </li></ul></ul></ul>
  4. 4. IBM’s E-Business’s Strategy (cont.) <ul><ul><li>Establish a strategy for the corporate Internet site </li></ul></ul><ul><ul><ul><li>Including definition of how it should look, “feel” and be navigated </li></ul></ul></ul><ul><ul><ul><li>Create an online environment most conducive to customers doing business with IBM </li></ul></ul></ul><ul><ul><li>Leverage the wealth of e-business transformational case studies within IBM to highlight the potential of e-business to IBM’s customers </li></ul></ul>
  5. 5. IBM’s E-Business Strategy (cont.) <ul><li>E-commerce </li></ul><ul><li>E-care for customers </li></ul><ul><li>E-care for business partners </li></ul><ul><li>E-care for influencers </li></ul><ul><li>E-care for employees </li></ul><ul><li>E-procurement </li></ul><ul><li>E-marketing communications </li></ul><ul><li>IBM focused on seven key initiatives: </li></ul>
  6. 6. IBM’s E-Business Strategy (cont.) <ul><li>The Results </li></ul><ul><ul><li>Implementation of an e-procurement system that spans IBM globally </li></ul></ul><ul><ul><li>Saved IBM almost $5 billion over a 3-year period </li></ul></ul><ul><ul><li>Electronic invoicing: </li></ul></ul><ul><ul><ul><li>Reduces the number of paper invoices </li></ul></ul></ul><ul><ul><ul><li>Enables fast, competitive tendering from its suppliers </li></ul></ul></ul>
  7. 7. IBM’s E-Business Strategy (cont.) <ul><ul><li>IBM’s evaluation of the procurement process determined where the use of the Web adds value </li></ul></ul><ul><ul><li>Identification of more than 20 initiatives to reduce costs and improve purchasing including: </li></ul></ul><ul><ul><ul><li>Collaboration with suppliers </li></ul></ul></ul><ul><ul><ul><li>Online purchasing </li></ul></ul></ul><ul><ul><ul><li>Knowledge-management-based applications </li></ul></ul></ul>
  8. 8. E-Strategy: Concepts & Overview <ul><li>Strategy—search for revolutionary actions that will significantly change the current position of a company, shaping its future </li></ul><ul><ul><li>Finding the position in a marketplace that best fits the firm’s skills </li></ul></ul><ul><ul><li>Company’s choice of new position that must be driven by its ability to find new trade-offs and leverage a new system of complementary activities into sustainable advantage </li></ul></ul>
  9. 9. Elements of Strategy <ul><li>Elements of a strategy </li></ul><ul><ul><li>Forecasting </li></ul></ul><ul><ul><li>Resource allocation </li></ul></ul><ul><ul><li>Core competency </li></ul></ul><ul><ul><li>Environmental analysis </li></ul></ul><ul><ul><li>Company analysis </li></ul></ul><ul><ul><li>Business planning </li></ul></ul>
  10. 10. Types of E-Strategies <ul><li>EC strategy (e-strategy)—an organization’s strategy for use of e-commerce or e-business </li></ul><ul><ul><li>Click-and-mortar companies that use many EC applications </li></ul></ul><ul><ul><li>Click-and-mortar companies that use only one or two EC applications </li></ul></ul><ul><ul><li>Click-and-mortar companies that use one EC application that fundamentally changes all their business </li></ul></ul><ul><ul><li>Pure-play EC companies </li></ul></ul>
  11. 11. Need for a Strategy <ul><li>Why does a company need an e-strategy? </li></ul><ul><ul><li>Fast changes in business and technology means that opportunities and threats can change in a minute </li></ul></ul><ul><ul><li>Company must consider EC strategy that includes contingency plans to deal with changes </li></ul></ul><ul><ul><li>May be too costly not to have one </li></ul></ul>
  12. 12. Charles Schwab’s EC Strategy <ul><li>In 1998 Schwab launched schwab.com —one of the first click-and-mortar stockbrokers </li></ul><ul><ul><li>Changed the company pricing structure radically </li></ul></ul><ul><ul><ul><li>Took a short-term revenue loss </li></ul></ul></ul><ul><ul><ul><li>Looking toward a long-term strategic gain </li></ul></ul></ul><ul><ul><li>EC strategy fit well with company’s overall strategy emphasizing a one-to-one relationship with its customers </li></ul></ul>
  13. 13. Charles Schwab (cont.) <ul><li>Schwab had first-mover advantage in securing key partnerships </li></ul><ul><ul><li>Schwab and Nextel agreed to build an infrastructure allowing investment opportunities over mobile phones or wireless handheld devices </li></ul></ul><ul><ul><li>Initial target was existing off-line customers with incomes over $150,000 a year and who buy and hold </li></ul></ul><ul><ul><li>Key benefits: </li></ul></ul><ul><ul><ul><li>Innovative products Superior service </li></ul></ul></ul><ul><ul><ul><li>Low fees Cutting-edge technology </li></ul></ul></ul>
  14. 14. Charles Schwab (cont.) <ul><li>Partnered with content providers and technology companies to offer: </li></ul><ul><ul><li>Large number of financial services online </li></ul></ul><ul><ul><li>Community and personalized services </li></ul></ul><ul><li>Financial model composed of three parts: </li></ul><ul><ul><li>The revenue model </li></ul></ul><ul><ul><li>The value model </li></ul></ul><ul><ul><li>The growth model </li></ul></ul>
  15. 15. Charles Schwab (cont.) <ul><li>CyberTrader's services are designed for online, self-directed active traders who use short-term trading strategies to generate current income </li></ul><ul><li>Cybertrader features include: </li></ul><ul><ul><li>Nasdaq Level II quotes </li></ul></ul><ul><ul><li>Direct Access trading capabilities </li></ul></ul><ul><ul><li>Risk management tools </li></ul></ul><ul><ul><li>Graphical decision support modules </li></ul></ul><ul><ul><li>Streaming News </li></ul></ul><ul><ul><li>Intelligent order routing </li></ul></ul><ul><ul><li>Direct options routing </li></ul></ul>
  16. 16. E-Strategy Landscape <ul><li>Strategy initiation: organization prepares information about its vision,mission,purpose,and the contribution that EC could make to the business </li></ul><ul><li>Strategy formulation: </li></ul><ul><ul><li>Identification of EC applications </li></ul></ul><ul><ul><li>Cost-benefit analysis </li></ul></ul><ul><ul><li>Risk analysis </li></ul></ul>
  17. 17. E-Strategy Landscape (cont.) <ul><li>Strategy implementation: </li></ul><ul><ul><li>Organization’s resources are analyzed </li></ul></ul><ul><ul><li>A plan is developed for attaining the goals </li></ul></ul><ul><li>Strategy assessment: </li></ul><ul><ul><li>Organization periodically assesses progress toward the strategic goals </li></ul></ul><ul><ul><li>Involves the development of EC metrics </li></ul></ul>
  18. 18. Exhibit 11.1 The Landscape of EC Strategy
  19. 19. Strategy Initiation <ul><li>Strategy initiation—the initial phase of e-strategy in which an organization prepares information about its vision, mission, purpose, and the contribution that EC could make </li></ul><ul><ul><li>Review the organization’s business and IT vision and mission </li></ul></ul><ul><ul><li>Generate vision and mission for EC </li></ul></ul><ul><ul><li>Begin with industry and competitive analysis </li></ul></ul>
  20. 20. Industry Assessment <ul><li>What industry is the EC initiative related to? </li></ul><ul><li>Who are the customers? </li></ul><ul><li>What are the current practices of selling and buying? </li></ul><ul><li>Who are the major competitors? (How intense is the competition?) </li></ul><ul><li>What e-strategies are used, by whom? </li></ul><ul><li>How is value added throughout the value chain? </li></ul><ul><li>What are the major opportunities and threats? </li></ul><ul><li>Are there any metrics or best practices in place? </li></ul><ul><li>What are the existing and potential partnerships for EC? </li></ul>
  21. 21. Company Assessment <ul><li>The organization investigates its own: </li></ul><ul><ul><li>Business strategy </li></ul></ul><ul><ul><li>Performance </li></ul></ul><ul><ul><li>Customers </li></ul></ul><ul><ul><li>Partners </li></ul></ul><ul><li>It looks at everything that has an impact on its operations </li></ul><ul><ul><li>Processes </li></ul></ul><ul><ul><li>People </li></ul></ul><ul><ul><li>Information flows </li></ul></ul><ul><ul><li>Technology support </li></ul></ul>
  22. 22. Industry, Company, and Competitive Analysis <ul><li>SWOT analysis—a methodology that surveys the opportunities and threats in the external environment and relates them to the organization’s particular strengths and weaknesses </li></ul><ul><li>SWOT Analysis </li></ul><ul><ul><li>Strengths </li></ul></ul><ul><ul><li>Opportunities </li></ul></ul><ul><ul><li>Weaknesses </li></ul></ul><ul><ul><li>Threats </li></ul></ul>SWOT
  23. 23. Exhibit 11.2 SWOT Matrix
  24. 24. Competitive Intelligence on the Internet <ul><li>Internet can play a major role as a source of competitive information (competitive intelligence) </li></ul><ul><ul><li>Review competitors’ Web sites </li></ul></ul><ul><ul><li>Examine publicly available financial documents </li></ul></ul><ul><ul><li>Ask the customers—award prizes to those who best describe your competitors’ strengths and weaknesses </li></ul></ul>
  25. 25. Competitive Intelligence on the Internet (cont.) <ul><ul><li>Analyze related discussion groups </li></ul></ul><ul><ul><ul><li>Find out what people think about a company and its products and competitor's products </li></ul></ul></ul><ul><ul><ul><li>Reaction to new ideas and products </li></ul></ul></ul><ul><ul><li>Use information delivery services </li></ul></ul><ul><ul><ul><li>Find out what it published on the Internet </li></ul></ul></ul><ul><ul><ul><li>Known as push technologies </li></ul></ul></ul><ul><ul><li>Corporate research companies provide information about your competitors: </li></ul></ul><ul><ul><li>Examine chat rooms </li></ul></ul>
  26. 26. Issues in Strategy Initiation <ul><li>Advantages </li></ul><ul><ul><li>Chance to capture large markets </li></ul></ul><ul><ul><li>Establishing a brand name </li></ul></ul><ul><ul><li>Exclusive strategic alliances </li></ul></ul><ul><li>Disadvantages </li></ul><ul><ul><li>Cost of developing EC initiative is usually very high </li></ul></ul><ul><ul><li>Chance of failure is high </li></ul></ul><ul><ul><li>System may be obsolete as compared to second wave arrivals </li></ul></ul><ul><ul><li>No support services are available at the beginning </li></ul></ul><ul><li>To be a first mover or a follower? </li></ul>
  27. 27. Should You Have a Separate Online Company? <ul><li>Advantages </li></ul><ul><ul><li>Reducing or eliminating internal conflicts </li></ul></ul><ul><ul><li>Providing more freedom to management in pricing, advertising, etc. </li></ul></ul><ul><ul><li>Can create new brands quickly </li></ul></ul><ul><ul><li>Take the e-business to an IPO and make a fortune </li></ul></ul><ul><li>Disadvantages </li></ul><ul><ul><li>May be very costly and risky </li></ul></ul><ul><ul><li>Collaboration with off-line business may be difficult </li></ul></ul><ul><ul><li>Lose expertise of business functions unless you use close collaboration </li></ul></ul>
  28. 28. Strategy Formulation <ul><li>Strategy formulation </li></ul><ul><ul><li>Development of long-range and strategic plans to exploit opportunities and manage threats in the business environment in light of corporate strengths and weaknesses </li></ul></ul><ul><li>Includes examining or redefining EC mission </li></ul><ul><ul><li>Specifying achievable objectives </li></ul></ul><ul><ul><li>Developing strategies </li></ul></ul><ul><ul><li>Setting implementation guidelines </li></ul></ul>
  29. 29. Discovering EC Opportunities <ul><li>3 common mistakes in allocating EC investment </li></ul><ul><ul><li>Let a thousand flowers bloom—fund many projects indiscriminately </li></ul></ul><ul><ul><li>Bet it all—put everything on a single high-stake initiative </li></ul></ul><ul><ul><li>Trend-surf—follow the crowd toward the next “big thing” </li></ul></ul><ul><li>Any of the above can be risky and costly </li></ul>
  30. 30. Discovering EC Opportunities (cont.) <ul><li>Approaches to identifying EC opportunities </li></ul><ul><ul><li>Problem-driven </li></ul></ul><ul><ul><li>Technology-driven </li></ul></ul><ul><ul><li>Market-driven—waiting to see what the competitors will do </li></ul></ul><ul><ul><li>Fear or greed-driven </li></ul></ul><ul><ul><ul><li>Afraid if they do not practice EC they will be big losers </li></ul></ul></ul><ul><ul><ul><li>Think they can make lots of money going into EC </li></ul></ul></ul>
  31. 31. Determining an Appropriate EC Application Portfolio <ul><li>Find the most appropriate portfolio in order to share limited resources </li></ul><ul><ul><li>Combine long-term speculative investments in new potentially high-growth business </li></ul></ul><ul><ul><li>With short-term investments in existing, profit-making businesses </li></ul></ul><ul><li>Boston Consulting Group’s matrix </li></ul><ul><ul><li>Cash cows Questionable projects </li></ul></ul><ul><ul><li>Starts Dogs </li></ul></ul>
  32. 32. EC Application Portfolio <ul><li>Strategy based on company fit (assessed by five levels from high to low) </li></ul><ul><ul><li>Alignment with core capabilities </li></ul></ul><ul><ul><li>Alignment with other company initiatives </li></ul></ul><ul><ul><li>Fit with organizational structure </li></ul></ul><ul><ul><li>Fit with company’s culture and values </li></ul></ul><ul><ul><li>Ease of technical implementation </li></ul></ul><ul><li>Project’s viability—assessed by 4 criteria </li></ul><ul><ul><li>Market value potential </li></ul></ul><ul><ul><li>Time to positive cash flow </li></ul></ul><ul><ul><li>Personal requirements </li></ul></ul><ul><ul><li>Funding requirements </li></ul></ul><ul><li>Tjan’s portfolio strategy—Internet portfolio map </li></ul>
  33. 33. Exhibit 11.4 Tjan Application Portfolio Map
  34. 34. Strategic Directions at Chubb <ul><li>Typical choice of EC model at Chubb Corp. </li></ul><ul><ul><li>Create a new business model with EC as a major driver—discarded because they had a successful business model with products matching distribution systems </li></ul></ul><ul><ul><li>Spawn a secondary business model around EC; go directly to consumers—did not want to interrupt their relationships with agents and brokers </li></ul></ul>
  35. 35. Chubb Corp. (cont.) <ul><ul><li>Use EC as a tool within the existing business model (the selected model) </li></ul></ul><ul><ul><ul><li>Helped Chubb further differentiate products and services by providing superb customer service over the Internet </li></ul></ul></ul><ul><ul><ul><li>Opened several Web sites—one for each specialty group (e.g., for wine collectors) </li></ul></ul></ul><ul><ul><ul><li>Enables superb communication with agents and business partners </li></ul></ul></ul><ul><ul><ul><li>Allows business expansion into 20 countries </li></ul></ul></ul>
  36. 36. Making the Business Case for EC <ul><li>Business case—written document that is used by managers to garner funding for specific applications or projects by providing justification for investments </li></ul><ul><ul><li>Provides foundation for tactical decision making and technology by management </li></ul></ul><ul><ul><li>Helps clarify the company’s use of its resources to accomplish the e-strategy </li></ul></ul>
  37. 37. Content of an E-Business Case <ul><li>Business case for EC approach for garnering funding for projects used to: </li></ul><ul><ul><li>Provide justification for investments </li></ul></ul><ul><ul><li>Provides bridge between EC plan and the execution </li></ul></ul><ul><ul><li>Provides foundation for tactical decision making and technology risk management </li></ul></ul><ul><ul><li>Clarifies how the organization will use resources to accomplish the e-strategy </li></ul></ul>
  38. 38. Content of an E-Business Case (cont.) <ul><li>Content of an E-business case </li></ul><ul><ul><li>Strategic justification—”where are we going?” </li></ul></ul><ul><ul><li>Generational justification—”how will we get there?” </li></ul></ul><ul><ul><li>Technical justification—”when will we get there?” </li></ul></ul><ul><ul><li>Financial justification—”why will we win?” </li></ul></ul>
  39. 39. Cost-Benefit and Risk Analysis <ul><li>How to conduct an </li></ul><ul><li>e-business case </li></ul><ul><ul><li>Develop goal statement </li></ul></ul><ul><ul><li>Set measurable goals </li></ul></ul><ul><ul><li>Develop short- and long-term action plans </li></ul></ul><ul><ul><li>Gain approval and support </li></ul></ul><ul><li>Revenue model </li></ul><ul><ul><li>Properly planned revenue model is a critical success factor </li></ul></ul><ul><ul><li>Revenues from sales depend on customer acquisition cost and advertisement </li></ul></ul><ul><ul><li>Must be figured into the analysis </li></ul></ul>
  40. 40. Cost-Benefit and Risk Analysis (cont.) <ul><li>It is difficult to justify EC investment due to many intangible variables </li></ul><ul><ul><li>Return on investment (ROI) </li></ul></ul><ul><ul><li>Discounted cash flow </li></ul></ul><ul><li>Two common methods </li></ul><ul><ul><li>Value proposition </li></ul></ul><ul><ul><li>Risk analysis </li></ul></ul>Variables
  41. 41. Value Proposition <ul><li>Value proposition—the benefit a company can derive from implementing a new project, such as EC, usually by increasing its competitiveness and by providing better service to its customers </li></ul>Service
  42. 42. Risk Analysis <ul><li>Risk analysis program should </li></ul><ul><ul><li>Identify all potential risks </li></ul></ul><ul><ul><li>Assess potential damage </li></ul></ul><ul><ul><li>Evaluate possibility of protection (insurance) </li></ul></ul><ul><ul><li>Evaluate cost of protection vs. benefits </li></ul></ul><ul><li>E-business risks </li></ul><ul><ul><li>Strategic risks </li></ul></ul><ul><ul><li>Financial risks </li></ul></ul><ul><ul><li>Operational risks </li></ul></ul>Risk
  43. 43. Issues in Strategy Formulation <ul><li>How to handle channel conflicts </li></ul><ul><ul><li>Let established old-economy-type dealers handle e-business fulfillment </li></ul></ul><ul><ul><li>Sell some products only online </li></ul></ul><ul><ul><li>Help your intermediaries (e.g., build portals) </li></ul></ul><ul><ul><li>Sell online and off-line </li></ul></ul><ul><ul><li>Do not sell online </li></ul></ul>
  44. 44. Issues in Strategy Formulation (cont.) <ul><li>How to handle conflict between off-line and online businesses </li></ul><ul><ul><li>Clear support of top management </li></ul></ul><ul><ul><li>Use of innovative processes that support collaboration </li></ul></ul><ul><ul><li>Clear strategy of “what and how” </li></ul></ul>
  45. 45. Issues in Strategy Formulation (cont.) <ul><li>Pricing strategy </li></ul><ul><ul><li>Setting prices lower than off-line business may lead to internal conflict </li></ul></ul><ul><ul><li>Setting prices at the same level may hurt competitiveness </li></ul></ul><ul><li>Should you get financing from big venture capital firms? </li></ul><ul><ul><li>Venture capital financing causes loss of control over business </li></ul></ul><ul><ul><li>Benefit: access to various VC experts and get the cash you need </li></ul></ul>
  46. 46. Strategy Implementation <ul><li>Strategy implementation--The execution of the e-strategy plan, in which detailed, short-term plans are developed for attaining strategic goals </li></ul><ul><ul><li>Establish a Web team that continues the execution of the plan </li></ul></ul><ul><ul><li>Start with a pilot project </li></ul></ul><ul><ul><li>Planning for resources </li></ul></ul>
  47. 47. Strategy Implementation (cont.) <ul><li>Strategy implementation issues </li></ul><ul><ul><li>Evaluating outsourcing </li></ul></ul><ul><ul><ul><li>Build an in-house EC infrastructure </li></ul></ul></ul><ul><ul><ul><li>Purchase a commercial EC software package or EC suite </li></ul></ul></ul><ul><ul><ul><li>Use a Web hosting company </li></ul></ul></ul><ul><ul><li>Partners’ strategy </li></ul></ul><ul><ul><li>How to coordinate B2B and B2C </li></ul></ul>
  48. 48. Strategy and Project Assessment <ul><li>Strategy assessment—the periodic formal evaluation of progress toward the organization's strategic goals; may include needed actions and strategy reformulation </li></ul><ul><li>Objectives of assessment </li></ul><ul><ul><li>Find out if EC project delivers what it was supposed to deliver </li></ul></ul><ul><ul><li>Adjust plans if necessary </li></ul></ul><ul><ul><li>Determine if EC project is still viable </li></ul></ul><ul><ul><li>Reassess initial strategy in order to learn from mistakes and improve future planning </li></ul></ul><ul><ul><li>Identify failing projects as soon as possible and determine reasons for failure </li></ul></ul>
  49. 49. Measuring Results & Using Metrics <ul><li>Metric—a measurable standard or a target against which actual performance is compared </li></ul><ul><ul><li>Response time to customers’ enquiries </li></ul></ul><ul><ul><li>Response quality </li></ul></ul><ul><ul><li>Security/trust level </li></ul></ul><ul><ul><li>Download time, </li></ul></ul><ul><ul><li>Timeliness of fulfillment </li></ul></ul><ul><ul><li>How up-to-date information </li></ul></ul><ul><ul><li>Availability </li></ul></ul><ul><ul><li>Site effectiveness, ease of use, and navigability </li></ul></ul>
  50. 50. Measuring Results & Using Metrics (cont.) <ul><li>Balanced scorecard—a structured methodology for measuring performance in organizations, using metrics in four areas </li></ul><ul><ul><li>Finance </li></ul></ul><ul><ul><li>Customers’ assessments </li></ul></ul><ul><ul><li>Internal business processes </li></ul></ul><ul><ul><li>Learning and growth </li></ul></ul>
  51. 51. Measuring Results & Using Metrics (cont.) <ul><li>Performance dashboard—a structured methodology proposed by Rayport and Jaworski (2001) for measuring EC performance using: </li></ul><ul><ul><li>Desired outcomes </li></ul></ul><ul><ul><li>Corresponding metrics </li></ul></ul><ul><ul><li>Leading and lagging indicators of performance </li></ul></ul>
  52. 52. EC Failures & Lessons Learned <ul><li>E-Tailing failures </li></ul><ul><ul><li>Lack of funding </li></ul></ul><ul><ul><li>Incorrect revenue model </li></ul></ul><ul><li>Exchange failures </li></ul><ul><ul><li>Revenue growth too slow </li></ul></ul><ul><ul><li>Need to move to new business model </li></ul></ul><ul><li>EC initiatives failures </li></ul><ul><ul><li>Levi Strauss stopped online direct sales of its apparel (levistrauss.com) when major distributors and retailers put pressure on the company not to compete with their brick-and-mortar outlets </li></ul></ul>
  53. 53. Success Stories & Lessons Learned <ul><li>Reasons for success: </li></ul><ul><ul><li>Brick-and-mortar companies add online channels </li></ul></ul><ul><ul><li>Mergers and acquisitions </li></ul></ul><ul><ul><li>Peter Drucker: </li></ul></ul><ul><ul><ul><li>Analyze the opportunities </li></ul></ul></ul><ul><ul><ul><li>Go out to look </li></ul></ul></ul><ul><ul><ul><li>keep it focused </li></ul></ul></ul><ul><ul><ul><li>Start small (one thing at a time) </li></ul></ul></ul><ul><ul><ul><li>Aim at market leadership </li></ul></ul></ul>
  54. 54. Success Stories & Lessons Learned (cont.) <ul><ul><li>Asian CEOs CSFs: </li></ul></ul><ul><ul><ul><li>Select robust business models </li></ul></ul></ul><ul><ul><ul><li>Understand dot-com future </li></ul></ul></ul><ul><ul><ul><li>Foster e-innovation </li></ul></ul></ul><ul><ul><ul><li>Evaluate a spin-off strategy </li></ul></ul></ul><ul><ul><ul><li>Co-brand </li></ul></ul></ul><ul><ul><ul><li>Employ ex-dot-com staffers </li></ul></ul></ul><ul><ul><ul><li>Focus on the e-generation as your market </li></ul></ul></ul><ul><ul><li>Get the technology right, avoid expensive technology and technology malfunctions </li></ul></ul>
  55. 55. Virtual Communities <ul><li>Virtual community—a group of people with similar interests who interact with one another using the Internet </li></ul><ul><li>Elements of interaction: </li></ul><ul><ul><li>Communication—bulletin boards, chat rooms/threaded discussions, e-mail and instant messaging </li></ul></ul><ul><ul><li>Information—directories and yellow pages, search engine, member-generated content </li></ul></ul><ul><ul><li>EC elements—e-catalogs, shopping carts, ads, auctions of all types </li></ul></ul>
  56. 56. Virtual Communities (cont.) <ul><li>Communities of transactions—facilitate buying and selling </li></ul><ul><li>Communities of interest—people interact with each other on a specific topic </li></ul><ul><li>Communities of relations (practice)—organized around certain life experiences </li></ul><ul><li>Communities of fantasy—share imaginary environments </li></ul>
  57. 57. Virtual Communities (cont.) <ul><li>Commercial aspects of community: </li></ul><ul><ul><li>Understand a particular niche industry </li></ul></ul><ul><ul><li>Build a site that provides valuable information </li></ul></ul><ul><ul><li>Site should mirror the steps a user goes through in the information-gathering and decision-making process </li></ul></ul><ul><ul><li>Build a community that relies on the site for decision support </li></ul></ul><ul><ul><li>Start selling products and services that fit into the decision-support process </li></ul></ul>
  58. 58. Exhibit 11.9 Value Creation in E-Communities
  59. 59. Virtual Communities (cont.) <ul><li>Financial viability of communities </li></ul><ul><ul><li>Based on sponsorship and advertisement </li></ul></ul><ul><ul><li>Expenses are very high because of the need to provide: </li></ul></ul><ul><ul><ul><li>Fresh content </li></ul></ul></ul><ul><ul><ul><li>Free services </li></ul></ul></ul><ul><ul><ul><li>Free membership </li></ul></ul></ul><ul><ul><li>This model did not work well, many companies sustained heavy losses in 2000-2001; too few members, too few purchases </li></ul></ul>
  60. 60. Virtual Communities (cont.) <ul><li>Key strategies for successful online communities </li></ul><ul><ul><li>Increase traffic and participation </li></ul></ul><ul><ul><li>Focus on the needs of the members (facilitators and coordinators) </li></ul></ul><ul><ul><li>Encourage free sharing of opinions and information </li></ul></ul><ul><ul><li>Financial sponsorship is a must </li></ul></ul><ul><ul><li>Consider the cultural environment </li></ul></ul><ul><ul><li>Provide tools and activities for member use </li></ul></ul><ul><ul><li>Community members involved in activities and recruiting </li></ul></ul><ul><ul><li>Guide discussions, provoke controversy, and raise sticky issues </li></ul></ul>
  61. 61. Going Global <ul><li>Decision to go global is a strategic one </li></ul><ul><ul><li>Geographical borders are falling </li></ul></ul><ul><ul><li>Artificial borders are being erected through </li></ul></ul><ul><ul><ul><li>Local language preferences, </li></ul></ul></ul><ul><ul><ul><li>Local regulations </li></ul></ul></ul><ul><ul><ul><li>Access limitations </li></ul></ul></ul>
  62. 62. Benefits and Extent of Operations <ul><li>Major advantage of EC—ability to do business any time, anywhere, rapidly at a reasonable cost </li></ul><ul><li>Success stories </li></ul><ul><ul><li>E*TRADE or boom.com as your broker for stock trading </li></ul></ul><ul><ul><li>Amazon.com </li></ul></ul><ul><ul><li>Small companies sell to hundreds of customers worldwide (virtualvine.com) </li></ul></ul><ul><ul><li>Increasing number of out-of-the-country vendors participate in electronic requests for quotes </li></ul></ul><ul><ul><li>Successful employees recruitment </li></ul></ul><ul><ul><li>Successful collaboration in B2B exchanges </li></ul></ul>
  63. 63. Barriers to Global Electronic Commerce <ul><li>Legal Issues </li></ul><ul><ul><li>Uncoordinated actions must be avoided and an international policy of cooperation should be encouraged </li></ul></ul><ul><li>Market Access Issues </li></ul><ul><ul><li>Companies starting e-commerce need to evaluate bandwidth needs by analyzing the data required, time constraints, access demands, and user technology limitations </li></ul></ul><ul><li>Financial Issues </li></ul><ul><ul><li>Customs and taxation </li></ul></ul><ul><ul><li>Electronic payment systems </li></ul></ul>
  64. 64. Small Business Goes Global <ul><li>Cardiac Science—trying to break into the international market for years </li></ul><ul><ul><li>Within 2 years after Internet inception in the company, it was shipping its products to 46 countries </li></ul></ul><ul><ul><li>Today, 85 percent of the company’s revenue is international, much of this is executed at (cardiacscience.com) </li></ul></ul>
  65. 65. Small Business Goes Global (cont.) <ul><li>Advice for small businesses going global at: </li></ul><ul><ul><li>Universal Business Exchange ( unibex.com ) </li></ul></ul><ul><ul><li>Several government agencies ( stat-usa.gov ) </li></ul></ul><ul><li>Cardiac’s CEO “crafting a solid export strategy takes a lot more commitment than putting up a snazzy Web site and waiting for the world to show up at our door. It’s all about building relationships.” </li></ul>
  66. 66. Barriers to Global Electronic Commerce (cont.) <ul><li>Other Issues </li></ul><ul><ul><li>Language and translation </li></ul></ul><ul><ul><ul><li>Primary problems are cost, speed, inaccuracy </li></ul></ul></ul><ul><ul><li>Localization </li></ul></ul><ul><ul><ul><li>Adapt local business practices </li></ul></ul></ul><ul><ul><li>Culture </li></ul></ul><ul><ul><ul><li>Multiple cultures warrant different marketing approaches </li></ul></ul></ul>
  67. 67. Attracting Japanese Customers to Your Site <ul><li>English-Japanese Promotion ( ajpr.com ) </li></ul><ul><ul><li>Helps clients avoid the mistakes often made when they selling to the Japanese customers </li></ul></ul><ul><ul><li>Target audience uses Japanese-only Web search engines </li></ul></ul><ul><ul><li>Alert companies when logos or themes are likely to strike a sour chord with Japanese sensibilities </li></ul></ul>
  68. 68. Japanese Customers (cont.) <ul><ul><li>Japanese respond well to symbols or characters </li></ul></ul><ul><ul><li>Product should be geared to Japanese males in their twenties and thirties </li></ul></ul><ul><li>Ajpr.com also provides help to Japanese companies develop English versions of their sites </li></ul><ul><ul><li>Provides localization advice </li></ul></ul><ul><ul><li>Advertising </li></ul></ul><ul><ul><li>Document translation </li></ul></ul><ul><ul><li>Consulting services </li></ul></ul>
  69. 69. Breaking down the Global EC Barriers <ul><li>Value the human touch </li></ul><ul><li>Be strategic </li></ul><ul><li>Know your audience </li></ul><ul><li>Be a perfectionist </li></ul><ul><li>Remember, it’s the Web </li></ul><ul><li>Integrate properly </li></ul><ul><li>Keep the site flexible and up-to-date </li></ul><ul><li>Synchronize content </li></ul><ul><li>OECD (oecd.org) read </li></ul><ul><li>“ Dismantling the Barriers to Global EC” </li></ul>
  70. 70. EC in SMEs <ul><li>Advantages/benefits of EC in SMEs </li></ul><ul><ul><li>Inexpensive </li></ul></ul><ul><ul><ul><li>Source of information </li></ul></ul></ul><ul><ul><ul><li>Advertising </li></ul></ul></ul><ul><ul><ul><li>Conducting market research </li></ul></ul></ul><ul><ul><ul><li>Build (or rent) a storefront </li></ul></ul></ul><ul><ul><ul><li>Low transaction costs </li></ul></ul></ul><ul><ul><ul><li>Niche markets are best </li></ul></ul></ul><ul><ul><ul><li>Provide catalogs </li></ul></ul></ul><ul><ul><ul><li>Way to reach worldwide customers </li></ul></ul></ul>
  71. 71. EC in SMEs (cont.) <ul><li>Disadvantages/risks </li></ul><ul><ul><li>Inability to use EDI, unless it is EDI/Internet </li></ul></ul><ul><ul><li>Lack of resources to fully exploit the Web </li></ul></ul><ul><ul><li>Lack of expertise in legal issues, advertisement </li></ul></ul><ul><ul><li>Less risk tolerance than a large company </li></ul></ul><ul><ul><li>Disadvantage when a commodity is the product (for example, CDs) </li></ul></ul><ul><ul><li>No more personal contact, which is a strong point of a small business </li></ul></ul><ul><ul><li>No advantage to being in a local community </li></ul></ul>
  72. 72. Critical Success Factors for SMEs <ul><li>Capital investment must be small </li></ul><ul><li>Inventory should be minimal or non-existent </li></ul><ul><li>Electronic payments scheme </li></ul><ul><li>Payment methods must be flexible </li></ul><ul><li>Logistical services must be quick and reliable </li></ul><ul><li>The Web site should be submitted to directory-based search engine services </li></ul><ul><li>Join an online service or mall and do banner exchange </li></ul><ul><li>Design a Web site that is functional and provides all needed services to consumers </li></ul>
  73. 73. Supporting Small Business <ul><li>Technical support from IBM (for a fee of only $25 per month) at ibm.com.search:businesscenter </li></ul><ul><li>Digital’s virtual stores </li></ul><ul><li>Microsoft’s Personal Web Server (PWS) </li></ul><ul><li>U.S. government at ecommerce.gov </li></ul><ul><li>Gartner Group provides access to online research material at gartner.com </li></ul>
  74. 74. Business Process Reengineering (BPR) <ul><li>Organizational transformation—the process of completely or drastically transforming an entire organization to a new mode of operation </li></ul><ul><li>Business process reengineering (BPR)—a methodology for comprehensive redesign of an enterprise’s processes </li></ul>
  75. 75. BPR (cont.) <ul><li>Redesign of the enterprise process and BPR </li></ul><ul><ul><li>Does not make sense to automate poorly designed process—so restructure </li></ul></ul><ul><ul><li>Necessary to change processes to fit commercially available software </li></ul></ul><ul><ul><li>Fit is required between systems and processes of different companies </li></ul></ul><ul><ul><li>Change processes to fit procedures and standards of public e-marketplaces </li></ul></ul><ul><ul><li>Adjust procedures and processes to align with available services (logistics, payments, security) </li></ul></ul><ul><ul><li>Changes to assure flexibility and scalability </li></ul></ul>
  76. 76. Workflow Technologies <ul><li>Workflow system—software programs that manage all the steps in a business process from start to finish, including all exception conditions </li></ul><ul><li>Two categories: </li></ul><ul><ul><li>Collaborative workflow—products address project-oriented and collaborative processes </li></ul></ul><ul><ul><li>Production workflow—tools address mission-critical, transaction-oriented processes </li></ul></ul>
  77. 77. Virtual Corporations <ul><li>Virtual corporation—an organization composed of several business partners (some of whom may be pure-play EC players) sharing costs and resources for the production or purchasing of a product or service </li></ul><ul><li>Major attributes of VCs: </li></ul><ul><ul><li>Utilization Excellence </li></ul></ul><ul><ul><li>Opportunism Lack of borders </li></ul></ul><ul><ul><li>Trust Adaptability to change </li></ul></ul><ul><ul><li>Technology </li></ul></ul>
  78. 78. The Future of EC <ul><li>Internet usage </li></ul><ul><li>Opportunities for buying </li></ul><ul><li>M-commerce </li></ul><ul><li>Purchasing incentives </li></ul><ul><li>Increased security and trust </li></ul><ul><li>Efficient information handing </li></ul><ul><li>Innovative organizations </li></ul><ul><li>Virtual Communities </li></ul><ul><li>Payment systems </li></ul><ul><li>Business-to-business </li></ul><ul><li>B2B exchanges </li></ul><ul><li>Auctions </li></ul><ul><li>Going global </li></ul><ul><li>E-government--comprehensive </li></ul><ul><li>Intrabusiness EC </li></ul><ul><li>E-learning </li></ul>
  79. 79. EC Technology Trends <ul><li>Clients </li></ul><ul><li>Embedded clients </li></ul><ul><li>Servers </li></ul><ul><li>Networks </li></ul><ul><li>Wireless communications </li></ul><ul><li>EC software and services </li></ul><ul><li>Search engines </li></ul><ul><li>P2P technology </li></ul><ul><li>Integration </li></ul><ul><li>Wearable devices </li></ul>
  80. 80. The Digital Divide <ul><li>Digital divide—the gap between those who have and those who do not have the ability to access electronic technology in general, and the Internet and EC in particular </li></ul>Digital Divide
  81. 81. Integrating Marketplace and Marketspace <ul><li>Click-and-mortar organization </li></ul><ul><ul><li>How to cooperate in planning, advertising, logistics, resource allocation </li></ul></ul><ul><ul><li>How to align the strategic plans </li></ul></ul><ul><ul><li>B2C ordering systems </li></ul></ul><ul><li>The impact of EC on our lives may be as much as, or more than that of the Industrial Revolution </li></ul>
  82. 82. Managerial Issues <ul><li>What is the strategic value of EC to the organization? </li></ul><ul><li>What are the benefits and risks of EC? </li></ul><ul><li>What metrics should we use? </li></ul><ul><li>Can we do a pilot project? </li></ul><ul><li>Do we have a community? </li></ul><ul><li>How can we go global? </li></ul><ul><li>Can we learn to love smallness? </li></ul><ul><li>Is restructuring needed? </li></ul>
  83. 83. Summary <ul><li>Importance of strategic planning for EC </li></ul><ul><li>The strategy planning and formulation process </li></ul><ul><li>Application discovery, justification, and prioritization </li></ul><ul><li>EC strategy implementation and assessment </li></ul>
  84. 84. Summary (cont.) <ul><li>Understanding failures and learning from them </li></ul><ul><li>The role and impact of virtual communities </li></ul><ul><li>Issues in global EC </li></ul><ul><li>Small businesses and EC </li></ul><ul><li>Restructuring and virtual organizations </li></ul><ul><li>The future of EC </li></ul>
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