Chapter 9
EC Strategy
and Implementation
1
IBM’s E-Business Strategy
Following four goals:
Lead IBM’s strategy to transform itself into ebusiness
Act as a catalyst t...
IBM’s E-Business’s Strategy (cont.)
Establish a strategy for the corporate Internet site
Including definition of how it sh...
IBM’s E-Business Strategy (cont.)
IBM focused on key initiatives:
E-commerce—selling more goods via the Web
E-care for cus...
IBM’s E-Business Strategy (cont.)
E-care for employees—improving the
effectiveness of IBMers by making the right
informati...
Essentials of a Business Strategy
Strategy—search for revolutionary actions
that will significantly change the current
pos...
Essentials of a Business Strategy (cont.)
Levels of strategy

Corporate (or
organizational)
strategy
IT strategy
EC strate...
Figure 9-1
EC Strategy Alignment

8
Essentials of a Business Strategy (cont.)

Elements of a strategy
Forecasting
Resource
allocation
Core competency
Strategy...
Figure 9-2
The Landscape of EC Strategy

10
Essentials of a Business Strategy (cont.)
Information technology (IT) strategy—strongly
correlated with EC strategy becaus...
Strategy Initiation
First step is to review the organization’s
business and IT vision and mission
Then, a vision and missi...
Industry Analysis

Analyze position of the company in its
industry and the competition
Required for assessing the changes ...
Industry Assessment
What industry is the EC
initiative related to?
Who are the
customers?
What are the current
practices o...
Industry and Competitive Analysis
Monitoring, evaluating, disseminating of
information from the external and internal
envi...
Figure 9-4
SWOT Diagram
INTERNAL
EXTERNAL FACTORS
FACTORS

Strengths (S)

Opportunities (O)

SO Strategies
Generate strate...
Strategy Formulation
Strategy formulation

Development of long-range plans

Organization’s mission

Purpose or reason for ...
EC Critical Success Factors
Special products or services traded
Top management support
Project team representing various f...
EC Critical Success Factors (cont.)
Security and control of the EC system
Competition and market situation
Conduct pilot p...
EC Opportunities
3 common mistakes in allocating EC
investment
Let a thousand flowers bloom—fund many
projects indiscrimin...
EC Opportunities (cont.)
Approaches to finding individual EC initiatives
Problem-driven—attempt to solve a problem
such as...
EC Opportunities (cont.)
Approaches to finding individual EC initiatives
(cont.)
All can fail
Market-driven—waiting to see...
Figure 9-5
Approaches for Finding EC Opportunities

23
Uncovering Specific EC
Opportunities and Applications
Understand:

How digital markets operate
How Internet customers beha...
Uncovering Specific EC
Opportunities and Applications (cont.)
Opportunities for EC businesses
Matchmaking—matching buyers’...
Uncovering Specific EC
Opportunities and Applications (cont.)
Smart needs adviser—if you want …, then you
should…
Negotiat...
Value Analysis and Proposition
A Value Analysis Approach

Value chain—a series of activities a company
performs to achieve...
Value Analysis and Proposition (cont.)
Value Analysis Questions
Representative Questions for Clarifying Value Chain
Statem...
Value Analysis and Proposition (cont.)
Value Analysis Questions (cont.)

Representative question for creating new values

...
Return on Investment (ROI)
Return on Investment and Risk Analysis
A ratio of resources required and benefits
generated by ...
Return on Investment
and Risk Analysis
IT values
Financial values—measurable to some degree
Strategic values—competitive a...
Return on Investment
and Risk Analysis (cont.)
IT risks risks
Competitive strategy risk—external, due to
joint venture, al...
Risk Analysis
Risk analysis program
should
Identify all
potential risks
Assess potential
damage
Evaluate possibility
of pr...
EC Scenarios
Scenario planning is a methodology used
in planning situations that involve much
uncertainty, like that of EC...
EC Scenarios (cont.)
Four scenarios described by Hutchinson:
Open, global commerce scenario—removal of
intermediaries flat...
EC Scenarios (cont.)
4 scenarios described by Hutchinson (cont.)
Consumer marketing channels scenario—
traditional methods...
Strategic Planning Framework
EC appears in three levels:
Level 1: Basic presence—company uses the
Internet to feature comp...
Strategic Planning Framework (cont.)
Level 3: Business integration—more features
added
EC transaction capabilities
Customi...
Strategic Planning Framework (cont.)
Generic competitive strategy vs.
cooperarative strategy

Competitive strategy assumes...
Generic Competitive Strategies
Offensive strategy—
usually takes place in an
established competitor’s
market
Frontal Assau...
Generic Cooperative Strategies
Collusion
Active cooperation of firms within an industry to reduce
output and increase pric...
Generic Cooperative Strategies (cont.)
Joint Venture
A way to temporarily combine the different strengths
of partners to a...
Implementation EC Plan
Starts with organizing a project team
Undertake a pilot project (help discover problems
early)

Imp...
The steps to successful EC programs
Step 1: Conduct Necessary Education and Training.
Step 2: Review Current Distribution ...
Competitive Intelligence on the Internet
Internet can play a major role as a source of
competitive information (competitiv...
Competitive Intelligence
on the Internet (cont.)
Information delivery services

Find out what it published on the Internet...
Competitive Intelligence
on the Internet (cont.)
Evolving experiences, need to be treated with
care
Overreliance on such i...
Customized Competitive Intelligence
Current company information is available in
their press releases and information
publi...
Evaluating Outsourcing
Factors to consider:

Ease of configuration and setup
Database and scripting support
Payment mechan...
Issues in Strategy Implementation
Partners’ strategy
Many potential partners, may need several
Companies that make B2B e-m...
Strategy and Project Assessment
Need for assessment

Find out if EC project delivers what it was
supposed to deliver
Adjus...
Strategy and Project Assessment (cont.)
Measuring results; watch for:
Goals may be unrealistic

Web server was inadequate ...
Strategy and Project Assessment (cont.)
Finalization and adjustments
Actual ROI can be computed and compared to
the projec...
Managerial Issues
Considering the strategic value of EC
Considering the benefits and risks
Integration is critical
Metrics...
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E-Commerce 09

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E-Commerce 09

  1. 1. Chapter 9 EC Strategy and Implementation 1
  2. 2. IBM’s E-Business Strategy Following four goals: Lead IBM’s strategy to transform itself into ebusiness Act as a catalyst to help facilitate that transformation Help business units become more effective in their use of the Internet/intranet Internally With their customers 2
  3. 3. IBM’s E-Business’s Strategy (cont.) Establish a strategy for the corporate Internet site Including definition of how it should look, “feel” and be navigated Create an online environment most conducive to customers doing business with IBM Leverage the wealth of e-business transformational case studies within IBM to highlight the potential of e-business to IBM’s customers 3
  4. 4. IBM’s E-Business Strategy (cont.) IBM focused on key initiatives: E-commerce—selling more goods via the Web E-care for customers—providing all kinds of customer support online E-care for business partners—dedicated services providing faster, better information for these important groups 4
  5. 5. IBM’s E-Business Strategy (cont.) E-care for employees—improving the effectiveness of IBMers by making the right information and services available to them E-procurement—working closely with IBM's customers and suppliers to improve the tendering process and to better administer the huge number of transactions involved E-marketing communications—using the internet to better communicate IBM’s marketing stance 5
  6. 6. Essentials of a Business Strategy Strategy—search for revolutionary actions that will significantly change the current position of a company, shaping its future Finding the position in marketplace that best fits the firm’s skills 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 6
  7. 7. Essentials of a Business Strategy (cont.) Levels of strategy Corporate (or organizational) strategy IT strategy EC strategy EC functional strategies Types of strategy Strategic planning Strategic response Strategic innovation These are interrelated 7
  8. 8. Figure 9-1 EC Strategy Alignment 8
  9. 9. Essentials of a Business Strategy (cont.) Elements of a strategy Forecasting Resource allocation Core competency Strategy formulation Environmental analysis Company analysis Strategy landscape Strategy initiation Strategy formulation Strategy implementation Strategy assessment Four major steps Basis for chapter organization 9
  10. 10. Figure 9-2 The Landscape of EC Strategy 10
  11. 11. Essentials of a Business Strategy (cont.) Information technology (IT) strategy—strongly correlated with EC strategy because: IT provides much of the infrastructure for EC EC applications must be integrated with IT applications EC applications may replace or improve existing IT applications EC organization may report to CIO Employees in IS department work on EC applications 11
  12. 12. Strategy Initiation First step is to review the organization’s business and IT vision and mission Then, a vision and mission for EC can be generated Although these statements are usually very vague, they provide a springboard for generating more specific goals and objectives Begin with industry and competitive analysis 12
  13. 13. Industry Analysis Analyze position of the company in its industry and the competition Required for assessing the changes that EC project may introduce and its chances for success 13
  14. 14. Industry Assessment What industry is the EC initiative related to? Who are the customers? What are the current practices of selling and buying? Who are the major competitors? (How intense is the competition?) What e-strategies are used, by whom? How is value added throughout the value chain? What are the major opportunities and threats? Are there any metrics or best practices in place? What are the existing and potential partnerships for EC? 14
  15. 15. Industry and Competitive Analysis Monitoring, evaluating, disseminating of information from the external and internal environments SWOT Analysis Strengths Opportunities Weaknesses Threats 15
  16. 16. Figure 9-4 SWOT Diagram INTERNAL EXTERNAL FACTORS FACTORS Strengths (S) Opportunities (O) SO Strategies Generate strategies here that use strengths to take advantages of opportunities Threats (T) ST Strategies Generate strategies here that use strengths to avoid threats Weaknesses (W) WO Strategies Generate strategies here that take advantage of opportunities by overcoming weaknesses WT Strategies Generate strategies here that minimize weaknesses and avoid threats 16
  17. 17. Strategy Formulation Strategy formulation Development of long-range plans Organization’s mission Purpose or reason for the organization’s existence 3 main reasons for establishing Web site MARKETING, CUSTOMER SUPPORT, and SALES Products with good fit for EC Shipped easily or transmitted electronically Targets knowledgeable buyers Price falls within certain optimum ranges 17
  18. 18. EC Critical Success Factors Special products or services traded Top management support Project team representing various functional areas Appropriate technical infrastructure Must have customer acceptance User-friendly Web interface Integration with the corporate legacy systems 18
  19. 19. EC Critical Success Factors (cont.) Security and control of the EC system Competition and market situation Conduct pilot project and capture corporate knowledge Use promotion and internal communication Cost of the EC project must be reasonable Need sufficient level of trust between buyers and sellers 19
  20. 20. EC Opportunities 3 common mistakes in allocating EC investment Let a thousand flowers bloom—fund many projects indiscriminately Bet it all—put everything on a single high-stake initiative Trend-surf—follow the crowd toward the next “big thing” All of the above can be risky and costly 20
  21. 21. EC Opportunities (cont.) Approaches to finding individual EC initiatives Problem-driven—attempt to solve a problem such as: Excess inventory Delivery delays Technology-driven—trying to use existing applications Find problems no one knew existed Used by first movers 21
  22. 22. EC Opportunities (cont.) Approaches to finding individual EC initiatives (cont.) All can fail Market-driven—waiting to see what the competitors will do Fear or greed-driven Afraid if they do not practice EC they will be big losers Think they can make lots of money going into EC 22
  23. 23. Figure 9-5 Approaches for Finding EC Opportunities 23
  24. 24. Uncovering Specific EC Opportunities and Applications Understand: How digital markets operate How Internet customers behave How competition is created and what infrastructure is needed What the dynamics of EC are Map opportunities that match current competencies and markets Many opportunities to create new products and services 24
  25. 25. Uncovering Specific EC Opportunities and Applications (cont.) Opportunities for EC businesses Matchmaking—matching buyers’ needs from seller without a prior knowledge of either one Aggregation of services— combines several existing services to create a new service Bid/ask engine—creates a demand/supply floating pricing system Notification service—tells you when the service becomes available, or when it becomes cheaper 25
  26. 26. Uncovering Specific EC Opportunities and Applications (cont.) Smart needs adviser—if you want …, then you should… Negotiation—price, quantity, or features are negotiated Up-sell—suggests an additional product or service Consultative adviser—provide tips on using the product 26
  27. 27. Value Analysis and Proposition A Value Analysis Approach Value chain—a series of activities a company performs to achieve its goal(s) Value added Contributes to profit and enhances the asset value as well as the competitive position of the company in the market To create additional value using EC channels, a company should consider the competitive market and rivalry in order to best leverage its EC assets (Customers’ value proposition) 27
  28. 28. Value Analysis and Proposition (cont.) Value Analysis Questions Representative Questions for Clarifying Value Chain Statements Can I realize significant margins by consolidating parts of the value chain to my customers? Can I create significant value for customers by reducing the number of entities they have to deal with in the value chain? 28
  29. 29. Value Analysis and Proposition (cont.) Value Analysis Questions (cont.) Representative question for creating new values Can I offer additional information of transaction services to my existing customer base? Can I use my ability to attract customers to generate new sources of revenue, such as advertising or sales of complementary products? 29
  30. 30. Return on Investment (ROI) Return on Investment and Risk Analysis A ratio of resources required and benefits generated by an EC project Includes both quantifiable items (cost of resources, computed monetary savings) and Non-quantifiable items (intangibles) Some intangible benefits Effective marketing channel Increased sales Improved customer service 30
  31. 31. Return on Investment and Risk Analysis IT values Financial values—measurable to some degree Strategic values—competitive advantage in the market and benefits generated by business procedures Stakeholder values—reflections of organizational redesign, organizational learning, empowerment, information technology architecture of a company, etc. 31
  32. 32. Return on Investment and Risk Analysis (cont.) IT risks risks Competitive strategy risk—external, due to joint venture, alliances or demographic changes among others Organizational risk and uncertainty—internal to company 32
  33. 33. Risk Analysis Risk analysis program should Identify all potential risks Assess potential damage Evaluate possibility of protection (insurance) Evaluate cost of protection vs. benefits E-business risks Strategic risks (e.g., competitive environment, wrong strategic direction) Financial risks (e.g., currency management and changes, unclear tax situations) Operational risks (e.g., technological changes and use of poor technology, security) 33
  34. 34. EC Scenarios Scenario planning is a methodology used in planning situations that involve much uncertainty, like that of EC (“what-if”) Several different scenarios are created A team compiles several future events as possible influences on the outcome Securities are assessed and future projections are made Scenarios are compared 34
  35. 35. EC Scenarios (cont.) Four scenarios described by Hutchinson: Open, global commerce scenario—removal of intermediaries flattens the value chain Members-only subnet scenario—applies mostly to B2B EC Electronic middlemen scenario—business and consumer market suppliers can make products/services available through independent third-party distribution channels 35
  36. 36. EC Scenarios (cont.) 4 scenarios described by Hutchinson (cont.) Consumer marketing channels scenario— traditional methods collapse into a unified consumer-centric EC medium on the Internet Broadcasting Advertising Consumer telephony 36
  37. 37. Strategic Planning Framework EC appears in three levels: Level 1: Basic presence—company uses the Internet to feature company information and provide brochures Level 2: Prospecting—features added Search engine Extensive product information Links to services Ability to interact with the company Basic customer service 37
  38. 38. Strategic Planning Framework (cont.) Level 3: Business integration—more features added EC transaction capabilities Customization and personalization services Tools fostering creation of a community Level 4: Business transformation—supplier and customer integration added Multichannel integration Advanced customization and configuration Superb customer service 38
  39. 39. Strategic Planning Framework (cont.) Generic competitive strategy vs. cooperarative strategy Competitive strategy assumes fighting against all competitors for the purpose of survival and winning Cooperarative strategy plans for working together with specific competitors to gain advantage against other competitors 39
  40. 40. Generic Competitive Strategies Offensive strategy— usually takes place in an established competitor’s market Frontal Assault— attacker must have superior resources and willingness to persevere Flanking Maneuver— attack a part of the market where the competitor is weak Defensive strategies — takes place in the firm’s own current market position as a defense against possible attack by a rival Raise structural barriers Lower the inducement for attack 40
  41. 41. Generic Cooperative Strategies Collusion Active cooperation of firms within an industry to reduce output and increase prices in order to get around the normal economic law of supply and demand (illegal) Strategic Alliance Partnership of two or more corporations or business units to achieve strategically significant objectives that are mutually beneficial 41
  42. 42. Generic Cooperative Strategies (cont.) Joint Venture A way to temporarily combine the different strengths of partners to achieve an outcome of value to both Value-Chain Partnership A strong and close alliance in which one company or unit forms a long-term arrangement with a key supplier or distributor for mutual advantage 42
  43. 43. Implementation EC Plan Starts with organizing a project team Undertake a pilot project (help discover problems early) Implementing EC Redesigning existing business processes Back-end processes must be automated as much as possible Company must set up workflow applications by integrating EC into existing accounting and financial back-ends 43
  44. 44. The steps to successful EC programs Step 1: Conduct Necessary Education and Training. Step 2: Review Current Distribution and Supply Chain Model. Step 3: Understand What Your Customers and Partners Expect from the Web. Step 4: Reevaluate the Nature of Your Products and Services. Step 5: Give a New Role to your Human Resources Department. Step 6: Extend Your Current Systems to the Outside. Step 7: Track New Competitors and Market Shares. Step 8: Develop a Web-centric Marketing Strategy. Step 9: Participate in the Creation and development of Virtual Marketplace. Step 10: Instill EC Management Style. 44
  45. 45. Competitive Intelligence on the Internet Internet can play a major role as a source of competitive information (competitive intelligence) Review competitors’ Web sites Analyze related newsgroups Examine publicly available financial documents Ask the customers—award prizes to those who best describe your competitors’ strengths and weaknesses 45
  46. 46. Competitive Intelligence on the Internet (cont.) Information delivery services Find out what it published on the Internet Newsgroups Information about your competitors and their products Known as push technologies Corporate research companies provide information about your competitors: Risk analysis Stock market analysts’ reports Examine chat rooms 46
  47. 47. Competitive Intelligence on the Internet (cont.) Evolving experiences, need to be treated with care Overreliance on such information can be dangerous Using publicly available search engines is free, but may produce lots of irrelevant information Use specialty-build agents to search the overwhelming amount of information available 47
  48. 48. Customized Competitive Intelligence Current company information is available in their press releases and information published on their Web sites Push technology services used to keep companies up-to-date by finding information for them Searches should not replace in-depth background research Business intelligence companies offer packaged competitive analysis 48
  49. 49. Evaluating Outsourcing Factors to consider: Ease of configuration and setup Database and scripting support Payment mechanism Sample storefronts Workflow management Documented database support Integration into existing accounting and financial back ends Which services to outsource 49
  50. 50. Issues in Strategy Implementation Partners’ strategy Many potential partners, may need several Companies that make B2B e-marketplaces consider: Logistics Technology E-payment partners How to coordinate B2B and B2C Selling direct is creating a B2C business Coordination between the two can be done in different ways 50
  51. 51. Strategy and Project Assessment Need for assessment Find out if EC project delivers what it was supposed to deliver Adjust plans if necessary Determine if EC project is still viable Reassess initial strategy in order to learn from mistakes and improve future planning Identify failing projects as soon as possible and determine reasons for failure 51
  52. 52. Strategy and Project Assessment (cont.) Measuring results; watch for: Goals may be unrealistic Web server was inadequate to handle demand Expected cost savings were now realized Exploding application requests from various functional areas in the company may follow Review requirements and design documents Develop thorough checklist Pose a set of questions to assess impact of EC project 52
  53. 53. Strategy and Project Assessment (cont.) Finalization and adjustments Actual ROI can be computed and compared to the projected one If sales expectations were not met, review marketing efforts Web assessment based on collected information Corrective steps might be required Product offerings to pricing strategy Web promotion to review software vendors 53
  54. 54. Managerial Issues Considering the strategic value of EC Considering the benefits and risks Integration is critical Metrics are beneficial Pilot projects are useful Implementing policies and strategies must be written 54

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