Chapter 5 E-business strategy

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Chapter 5E-business strategy
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Learning outcomes

• Follow an appropriate strategy process model for
  e-business
• Apply tools to generate and select e-business
  strategies
• Outline alternative strategic approaches to
  achieve e-business.

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Management issues

• How does e-business strategy differ from
  traditional business strategy?
• How should we integrate e-business strategy with
  existing business and IS strategy?
• How should we evaluate our investment priorities
  and returns from e-business?

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Michael Porter on the Internet

• The key question is not whether to deploy
  Internet technology companies have no choice if
  they want to stay competitive but how to deploy
  it.

Porter, M. (2001) Strategy and the Internet,
Harvard Business Review, March 2001, 6278.
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Alternative definitions of strategy

• What is strategy?
• Defines how we will meet our objectives
• Sets allocation of resources to meet goals
• Selects preferred strategic options to compete
  within a market
• Provides a long-term plan for the development of
  the organization.

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Figure 5.1 Different forms of organizational
strategy
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e-Business development Going Forward
Environment Support Levels
Enterprise Development Levels
Taxation Finance
ICT adoption use
Legal Regulatory
Investment in e-Business
Security Trust
Growth in numbers of e-Businesses
Research Development
Numbers employed
E-business Development
E-Business Market Size
National Infrastructure
E-Government
Support Services
E-Business Export growth
Electronic Business Processes
Number of e-Commerce transcations
Skills
National Strategy
Education
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Key Technology Trendsand Strategies Going Forward
Supplier Integration
Full supply chain integration
Order taking, making and tracking
eBusiness evolution and business benefit
Intranet / Web-mail
eBusiness functionality implemented
Web page
INFORM INTERACT TRANSACT
INTEGRATE
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What is working?

• Pornography
• Travel / Tourism
• Retail - items that dont need personal touch -
  objectivity in product quality and performance
• music, books, gifts, Computers, electronic items
• Auctions
• Real Estate - houses and investment properties.
• Customer support services
• More efficient and effective processes between
  businesses (B 2 B)

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What is not working?

• Items which require touch and trial
• Luxury goods
• Clothes - beyond Tshirts
• Groceries - it works for some people but market
  is restricted
• Note Many OFF line factors determine success of
  Online service. Eg. Transport network, customer
  profiles,

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Sell-side E-commerce strategy (Chapters 8 9)or
E-marketing/E-CRM Strategy

• Sell-side e-commerce is a channel strategy
• Objectives for online contribution percentage
  should drive our strategy
• Our e-commerce strategy defines how we should
• Hit our channel leads sales targets
• Acquisition, Conversion, Retention, Service,
  Profitability
• Communicate benefits of using this channel
• Prioritise products available through channel
• Prioritise audiences targeted through channel
• Select partners for this channel
• Channel strategy thrives on differentials
• BUT, need to manage channel integration.

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Buy-side E-commerce strategy (Chapters 6 7)or
E-supply chain management strategy

• Buy-side e-commerce strategy is about maximizing
  operational efficiencies while improving customer
  service quality
• Operational efficiency KPIs should drive our
  strategy
• Our buy-side e-commerce strategy defines how we
  should
• Automate internal processes
• Link internal resource management systems with
  external purchasing systems
• Prioritize suppliers/partners collaborating using
  this channel
• Prioritize applications for E-SCM create a
  roadmap
• Involves selection of appropriate strategic
  partners.

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E-business strategy

• For me, an IS strategy or change management
  strategy (Chapter 10) which ensures resources are
  managed effectively to achieve opportunities from
  Buy-side and Sell-side e-commerce. Also involves
  deploying IS to manage administrative internal
  process and employee knowledge
• Involves management of information systems
  resources (e-business applications,
  infrastructure/hardware and people/change/
  knowledge management).

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Figure 5.2 Relationship between e-business
strategy and other strategies
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Business and E-commerce Strategy

• E-commerce has changed business strategy.
• A strategy is a broad-based formula for how a
  business is going to compete, what its goals
  should be, and what plans and policies will be
  needed to carry out those goals.1

1Michael Porter What is Strategy, Harvard
Business Review, November 1996, pp. 69-84.
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E-commerce Strategy

• An e-commerce strategy is a
• To build an e-commerce strategy requires two view
  of an organizations strategy what is wants to
  do (conceptual) and how it will do it (technology
  strategy).
• One strategy being used by many companies is
  customer relationship management which enables
  them to create to one-to-one marketing experience
  for their customers.
• Other e-commerce strategies include virtual
  showrooms, increased channel choices, wider
  component choice, and use of mobile technology.
• Mobile commerce is

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E-commerce Business Models (cont.)1
1Adapted from Micheal Rappa, http//digitalenterpr
ise.org/models/models.html.
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E-commerce Business Models (cont.)1
1Adapted from Micheal Rappa, http//digitalenterpr
ise.org/models/models.html.
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E-commerce Business Models (cont.)1
1Adapted from Micheal Rappa, http//digitalenterpr
ise.org/models/models.html.
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Web Sites Classified By Purpose
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Web Sites Classified By Purpose (Cont.)
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B2B Business Models

• Strategic sourcing is often carried out through a
  one-to-one business model, but company-centric
  and exchange models are also used.
• In the one-to-one business model
• In the company-centric business model
• The single company dominates the market and
  controls the information systems that supports
  the transactions. Electronic data interchange
  (EDI) or an extranet is often used to link
  trading partners.
• E-procurement is often the name for B2B
  e-commerce in the many-to-one business model.

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Company Centric Business Model
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Exchange Model

• In the exchange business model, many companies
  use an exchange to buy and sell from each other
  through spot-buying transactions.

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Mobile Commerce

• Mobile commerce (m-commerce) relies on the use of
  wireless devices, such as personal digital
  assistants, cell phones, and smart phones, to
  place orders and conduct business
• Issues confronting m-commerce
• User-friendliness of the wireless device
• Network speed
• Security

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What happens where there is no e-business
strategy?

• Missed opportunities for additional sales on the
  sell-side and more efficient purchasing on the
  buy-side
• Fall-behind competitors in delivering online
  services may become difficult to catch-up, e.g.
  Tesco, Dell
• Poor customer experience from poorly integrated
  channels.

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Electronic Payment Systems

• Digital certificate an attachment to an e-mail
  message or data embedded in a Web page that
  verifies the identity of a sender or a Web site
• Certificate authority (CA) a trusted third party
  that issues digital certificates
• Secure Sockets Layer (SSL) a communications
  protocol used to secure sensitive data
• Electronic cash an amount of money that is
  computerized, stored, and used as cash for
  e-commerce transactions

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Figure 5.3 BA communicates their online value
proposition (www.britishairways.com) Source
Based on Revolution (2005)
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Figure 5.4 A generic strategy process model
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Figure 5.5 Dynamic e-business strategy
model Source Adapted from description in
Kalakota and Robinson (2000)
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Figure 5.6 Elements of strategic situation
analysis for the e-business
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Figure 5.7 Summary applications of a portfolio
analysis for The B2B Company
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Figure 5.8 SWOT analysis for The B2B Company
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Figure 5.9 Customer demand for e-marketing
services for The B2B Company
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Figure 5.10 Competitive threats acting on the
e-business
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Porters five forces
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Activity impact of Internet

• For one of the industries below, assess how the
  Internet has changed the competitive forces, e.g.
  has it increased or decreased power of suppliers
  and customers
• Industries
• Banking
• Supermarkets
• Oil industry
• Rail industry

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Figure 5.11 Elements of strategic objective
setting for the e-business
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Figure 5.12 An evaluation tool relating
information to business value. An organizations
use of information on each axis can be assessed
from 1 (low useof information) to 10 (high use
of information) Source Marchand et al. eds (1999)
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Figure 5.13 Capital One web site
(www.capitalone.co.uk)
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Figure 5.14 Direct and indirect Internet
contributions for fast-growth companies inthe
USA Source PricewaterhouseCoopers (2000)
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Figure 5.15 Grid of product suitability against
market adoption for transactionale-commerce
(online purchases)
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Table 5.5 Vision of online revenue contribution
for The B2B Company
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Figure 5.16 Elements of strategy definition for
the e-business
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Figure 5.17 Strategic options for a company in
relation to the importance of the Internet as a
channel
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Right Channelling

• Right channelling can be summarized as
• Reaching the right customer
• Using the right channel
• With the right message or offering
• At the right time
• Examples
• B2B serve SMEs through e-channels and larger
  clients through personal service
• Encourage consumers to buy and serve through
  lower cost electronic channels
• Encourage offline fulfillment/conversion as
  appropriate
• Different levels of service/promotion for
  different customers.

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Figure 5.18 Liveperson an example of a service
to assist with right-channelling Source
www.liveperson.com
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Figure 5.19 Using the Internet to support
different growth strategies
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Figure 5.20 smile (www.smile.co.uk) Source
Reprinted by permission of The Co-operative Bank
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Figure 5.21 Dabs.com (www.dabs.com)
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Figure 5.22 Elements of strategy implementation
for the e-business