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EBusiness Strategies

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Title: EBusiness Strategies


1
E-Business Strategies
E-Commerce Impacting the Way We do
Business October 1-2, 2001, Nashville TN
  • Bob Smith
  • Associate Professor/Extension Specialist
  • Dept. of Wood Science and Forest Products
  • Virginia Tech

2
Outline
  • Why the Internet
  • E-business Strategy ???
  • Determining Competitive Advantage
  • Implementing Strategy

3
Why the Internet?
4
  • When history is written, the creation of the
    Internet may be ranked alongside Johann
    Gutenbergs printing press and Marconis radio as
    among the major advancements in human
    communication.
  • Roanoke Times, March 1, 1997

5
What do these technologies have in common with
the Internet?
  • Printing press
  • Telephone
  • Automobile
  • Airplane
  • Television
  • Over-night delivery
  • Facsimile machine
  • Cellular phone
  • Personal computer

6
Printed Material
  • Mass reproduction
  • Unknown audience
  • Wider geographical area
  • One-way communication

7
Telephone
  • Immediate communication
  • Interactive two-way communication
  • Customer prospecting
  • Wider geographical area

8
Planes, Trains Automobiles
  • Personal communication
  • Wider geographical base
  • Two-way communication
  • Perception of above- average service

9
Television
  • Wide, mass audience
  • One-way communication
  • 60 second sound bite
  • First visual electronic medium

10
Over-night Delivery
  • Provide immediate service
  • Create perception of customer care
  • JIT management systems

Federal Express
11
FAX - iT
  • Immediate transfer of written information
  • Above average service
  • One-way promotion
  • Closer to the customer

12
Cellular Phone
  • Mobility
  • Instant access to customers
  • Above average service
  • 24 hour contact

13
Personal Computer
  • Faster service
  • Customer information
  • Data bases
  • Instant communication

14
What do they have in Common?
  • Wider distribution of information
  • Uniform information
  • Assist in marketing function of company
  • Many were interactive
  • Allow for impression of above average service
  • They all have become standards in the industry

15
Internet
16
Definitions
  • Electronic Commerce (EC) is where business
    transactions take place via telecommunications
    networks, especially the Internet.
  • Electronic commerce describes the buying and
    selling of products, services, and information
    via computer networks including the Internet.
  • The infrastructure for EC is a networked
    computing environment in business, home, and
    government.
  • E-Business describes the broadest definition of
    EC. It includes customer service and
    intrabusiness tasks. It is frequently used
    interchangeably with EC.

Electronic Commerce, 2000
17
What is an Intranet?
  • When internet technology is used to create a
    private network within a company an intranet is
    formed.
  • Allows for immediate transfer of technology
    between locations.
  • Provides information such as product pricing,
    inventory lists, production schedules, and data
    bases for remote employees.

18
What is an Extranet?
  • An extranet is formed when the company allows
    outsiders into the intranet pages.
  • Customers can order on line.
  • Reduces paperwork
  • Minimizes errors
  • Provides better customer services
  • Shortens delivery times
  • Support distributors

19
Whats Needed
  • Designated computer
  • Software to communicate with Internet
  • A connection into a network that accesses the
    Internet

Or Hire a commercial service and have a
connection to the network
20
Cost
  • 1500 computer
  • 300 Software
  • Home page design - 100/hr - ?
  • Commercial Internet access - gt100/month

21
Current Users
  • Average age is 40
  • 45 female
  • 45 married
  • 1/3 computer field, 1/4 educational 20
    professional
  • gt40 have made purchase over 100

Source www.gvu.gatech.edu/user_surveys/survey-199
9
22
Whats Being Sold
  • Computer software
  • Computer hardware
  • Books
  • Music
  • Gifts
  • Travel
  • Clothes
  • gt100 billion sold in 1999


23
Whats Being Sold?
Source Forester Research Inc. 1998
24
Technology Update (It took this many years to
reach 50 million users)
  • Radio - 38 years
  • Television - 13 years
  • Internet - 4 years

25
Why an E-Commerce Strategy
26
The Benefits of Electronic Commerce
  • Benefits to Organizations
  • Expands the marketplace to national and
    international markets
  • Decreases the cost of creating, processing,
    distributing, storing and retrieving paper-based
    information
  • Allows reduced inventories and overhead by
    facilitating pull type supply chain management
  • The pull type processing allows for customization
    of products and services which provides
    competitive advantage to its implementers

Electronic Commerce, 2000
27
Benefits to Organizations
  • Reduces the time between the outlay of capital
    and the receipt of products and services
  • Supports business processes reengineering (BPR)
    efforts
  • Lowers telecommunications cost - the Internet is
    much cheaper than value-added networks (VANs)

Electronic Commerce, 2000
28
Benefits to Customers
  • Enables customers to shop or do other
    transactions 24 hours a day, all year round from
    almost any location
  • Provides customers with more choices
  • Provides customers with less expensive products
    and services by allowing them to shop in many
    places and conduct quick comparisons
  • Allows quick delivery of products and services in
    some cases, especially with digitized products

Electronic Commerce, 2000
29
Benefits to Customers
  • Customers can receive relevant and detailed
    information in seconds, rather than in days or
    weeks
  • Makes it possible to participate in virtual
    auctions
  • Allows customers to interact with other customers
    in electronic communities and exchange ideas as
    well as compare experiences
  • Electronic commerce facilitates competition,
    which results in substantial discounts.

Electronic Commerce, 2000
30
Benefits to Society
  • Enables more individuals to work at home, and to
    do less traveling for shopping, resulting in less
    traffic on the roads, and lower air pollution
  • Allows some merchandise to be sold at lower
    prices benefiting the poor ones
  • Enables people in Third World countries and rural
    areas to enjoy products and services which
    otherwise are not available to them
  • Facilitates delivery of public services at a
    reduced cost, increases effectiveness, and/or
    improves quality

Electronic Commerce, 2000
31
Why?
  • Works 24 hours a day
  • Offers 2 way communication
  • Unlimited access
  • Interactive advertising
  • Supports current business efforts

32
Electronic Markets
  • A market is a network of interactions and
    relationships where information, products,
    services, and payments are exchanged. The market
    handles all the necessary transactions.
  • An electronic market is a place where shoppers
    and sellers meet electronically.
  • In electronic markets, sellers and buyers
    negotiate, submit bids, agree on an order, and
    finish the execution on- or off-line.

Electronic Commerce, 2000
33
Electronic Commerce is Interdisciplinary
  • Marketing
  • Computer sciences
  • Consumer behavior and psychology
  • Finance
  • Economic
  • Production/Logistic
  • Management information systems
  • Accounting and auditing
  • Management
  • Business law and ethics

Electronic Commerce, 2000
34
  • Major Business Pressures

Market and economic pressures
Strong competition Global economy Regional trade
agreements (e.g. NAFTA) Extremely low labor cost
in some countries Frequent and significant
changes in markets Increased power of consumers
Societal and environmental pressures
Changing nature of workforce Government
deregulation of banking and other
services Shrinking government budgets
subsides Increased importance of ethical and
legal issues Increased social responsibility of
organizations Rapid political changes
Rapid technological obsolescence Increase
innovations and new technologies Information
overload Rapid decline in technology cost vs.
performance ratio
Technological pressures
Electronic Commerce, 2000
35
Competition in Electronic Commerce
  • Impacts on competition
  • Lower buyers search cost
  • Speedy comparisons
  • Differentiation
  • Lower price
  • Customer service
  • Digital products lack normal wear and tear

Electronic Commerce, 2000
36
Competition in Electronic Commerce
  • Perfect competition
  • Enable many buyers and sellers to enter the
    market at little or no cost (no barriers to
    entry)
  • Not allowing any buyers and sellers to
    individually influence the market
  • Make certain products homogeneous (no product
    differentiation)
  • Supply buyers and sellers with perfect
    information about the products and the market
    participants and conditions

Electronic Commerce, 2000
37
Competition in Electronic Commerce
  • Observations regarding competitiveness
  • There will be many new entrants
  • The bargaining power of buyers is likely to
    increase
  • There will be more substitute products and
    services
  • The bargaining power of suppliers may decrease
  • The number of industry competitors in one
    location will increase

Electronic Commerce, 2000
38
What is Strategy
39
  • Strategy is the roadmap to success.
  • Strategy answers the question what business are
    you in?
  • Strategy determines how you compete within the
    market you are in.
  • Strategy focuses the company in a unified
    direction.

40
The goal is to develop a sustainable competitive
advantage. There are generally two forms of
competition, Operating effectiveness (production)
or Competitive position (marketing)
41
Competitive Advantage Can Be Achieved By
  • Concentrating on particular market segments
    (niche markets)
  • Offering products which differ from the
    competition (product differentiation)
  • Using alternative distribution channels and
    manufacturing processes
  • Employing selective pricing and fundamentally
    different cost structures

42
Generic Strategies Porter gives us a little more
help in strategy formulation by providing three
generic strategies which, if successfully
implemented, can allow a firm to stake out a
defended position in the marketplace. These
strategies are
  • Overall cost leadership
  • Differentiation
  • Focus

43
Overall Cost Leadership Efficient scale
facilities Vigorous cost reductions
  • Cost control
  • Overhead control
  • Avoid marginal accounts
  • Minimize RD
  • Minimize service
  • Minimize advertising

44
Differentiation Key idea Create something
about your product that is perceived industry
wide as being unique Bases for Differentiation
  • Quality
  • Delivery
  • Credit and Terms
  • Service
  • Training
  • Reputation / Brand Image
  • Tech. Information
  • The Actual Product
  • Price
  • Etc.

45
Differentiation can provide insulation against
competitors because of brand loyalty by customers
and a resulting lower sensitivity to price
46
Focus Key Idea Focus on a particular buyer
group, segment of the product line, or geographic
market
47
This strategy is built around serving a
particular target market very well. The premise
is that a firm is able to serve its narrow
strategic target more effectively or efficiently
than competitors who are competing more
broadly By effectively implementing this
strategy a firm can achieve differentiation by
better meeting the market needs or lower costs
through specialization, or both
48
Focus your message Pick your theme to say
something special/unique about your firm, and
stick to it.
  • Unique product
  • Speedy Delivery
  • Super Service
  • ?
  • ?
  • Stay Committed!

49
Generic Strategies Summary
50
(No Transcript)
51
For Successful Strategic Competition, Select
Arenas That Are
  • Sheltered from changes in the business
    environment
  • Advantaged to provide protection from intense
    global competition

Electronic Commerce, 2000
52
Determining Competitive Advantage
53
Strategic Planning
Industry and competitive analysis
Electronic Commerce, 2000
54
Company and Competitive Analysis
  • Monitoring, evaluating, disseminating of
    information from the external and internal
    environments
  • SWOT Analysis

Weaknesses
Strengths
Threats
Opportunities
Electronic Commerce, 2000
55
SWOT
  • Strengths those factors of the company that
    provide for its success. A good reputation,
    quality products or low cost producer.
  • Weaknesses those factors that are a
    disadvantage for the company. A high cost
    producer, a high employee turnover, or much
    competition.
  • Opportunities those factors that are outside
    the companys control, but are areas in which
    they could capitalize. A changing demographic
    profile, competition closing plants or e-business
    allowing for wider distribution of products.
  • Threats those items outside the control of the
    company and that may hinder it. Items such as
    new laws, a recession or increased competition.

56
Company Analysis
INTERNAL FACTORS
Strengths (S)
Weaknesses (W)
Production
Marketing
Electronic Commerce, 2000
57
Competitive Analysis
EXTERNAL FACTORS
Production
Marketing
Opportunities (O)
Threats (T)
Electronic Commerce, 2000
58
Company and Competitive Analysis
INTERNAL FACTORS
Strengths (S)
Weaknesses (W)
EXTERNAL FACTORS
WO Strategies Generate strategies here that take
advantage of opportunities by overcoming
weaknesses
SO Strategies Generate strategies here that use
strengths to take advantages of opportunities
Opportunities (O)
ST Strategies Generate strategies here that use
strengths to avoid threats
WT Strategies Generate strategies here that
minimize weaknesses and avoid threats
Threats (T)
Electronic Commerce, 2000
59
Strategic Questions
  • The Company
  • What is your uniqueness?
  • Where are you vulnerable?
  • Why are you losing existing customers?
  • Where is the greatest value created in the
    company?
  • What are the most common objections you hear from
    customers?

Electronic Commerce, 2000
60
Strategic Questions
  • The competition
  • Who are the top 3 competitors?
  • What are their strengths?
  • Where are they vulnerable?
  • Where can you attack?
  • How do you compare on price, service, quality,
    etc?
  • The market
  • What are 3 important trends?
  • How is the industry changing?
  • How many market segments do you serve?
  • Where is the greatest growth potential?
  • Which of your customers are doing well and why?

Electronic Commerce, 2000
61
Competitive Strategies
  • Offensive strategy usually takes place in an
    established competitors 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
  • Bypass Attack cut the market out from under an
    established defender by offering a new type of
    product that makes the competitors product
    unnecessary
  • Encirclement greater product variety and/or
    serves more markets
  • Guerrilla Warfare use of small, intermittent
    assaults on different market segments held by the
    competitor

Electronic Commerce, 2000
62
Competitive Strategies
  • Defensive strategies takes place in the firms
    own current market position as a defense against
    possible attack by a rival
  • Lower the probability of attack
  • Divert attacks to less threatening avenues
  • Lessen the intensity of an attack
  • Make competitive advantage more sustainable

Electronic Commerce, 2000
63
Cooperative Strategies
Competitive 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
  • 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

Electronic Commerce, 2000
64
Strategic Summary
  • Focus your efforts!
  • Define your competitive advantage!
  • Have a clear strategy!
  • Do it!

65
Implementing Strategy
66
Questions
  • Savings
  • Competitive advantage
  • Presentation
  • Objectives
  • Benefits to customers
  • Current business

67
Questions
  • What are you producing and selling?
  • How are you unique?
  • Why should the customer buy from you?
  • How are you going to reach the customer?
  • Whats success?

68
Objectives
  • Introduce new product or service
  • Advertising existing business
  • Supplement existing business program
  • Reach broader customer base
  • Provide better service
  • Information exchange
  • Reduce transaction costs

69
Current Customers
  • Benefits
  • Easier access to information
  • Shipping schedules
  • Discounts
  • Invoicing
  • Inventories

70
Marketing Mix
  • Promotional Tool
  • Ads, publicity, sales tool
  • Pricing
  • Product Information
  • Distribution

71
Savings
  • Support time
  • Order entry
  • Promotion response
  • E-mail
  • Shipping and invoicing information
  • Customer lists


72
Home Page
  • KISS
  • Keep it simple, stupid

1. Decide what information you want to share 2.
Grab their attention quickly 3. Present
information in simple, logical fashion 4. Do not
put lots of graphics on first page 5. Should be
pleasant to the eye 6. Each page should have
company name, logo, e- mail address and
toll-free phone number
73
Promoting Your E-business
74
Why Do You Need Promotion?
  • Just because you build it, doesnt mean they will
    come.
  • You are competing against not only your market
    area, but the entire world.
  • Your current and future customers need to be able
    to find you.

75
HOW?
  • List homepage address on all current advertising.
  • Put on all publicity
  • newsletters
  • letterhead
  • business cards
  • billing statements
  • fax cover sheets
  • Register with search engines.
  • Link to other sites and your association sites.
  • Advertise on the web.

76
Link to?
  • Your trade associations
  • Suppliers
  • Customers
  • Complementary products

77
Advertising on the Web
  • To build awareness
  • Develop prospects
  • Meet customer needs
  • Generate orders
  • Build customer relations
  • Test market

78
Good Internet Advertising Includes
  • Clear message and identification on 1st page.
  • Facilitates easy access to further information.
  • The advertisement downloads quickly.
  • Provides the right information.
  • Product description, payment options, and contact
    information.

79
Common Search Engines
  • Submit it - www.submit-it.com
  • Yahoo - www.yahoo.com
  • Webcrawler - www.webcrawler.com
  • Infoseek - www.infoseek.go.com
  • Lycos - www.lycos.com
  • Google - http//www.google.com/

80
The Advantage for Small Businesses
  • Inexpensive source of information
  • Inexpensive way of advertising
  • Inexpensive way of conducting market research
  • Inexpensive way to build (or rent) a storefront
  • Lower transaction cost

Electronic Commerce, 2000
81
The Advantage for Small Businesses
  • Niche market, specialty products (cigars, wines,
    sauces) are the best
  • Image and public recognition can be accumulated
    fast
  • Inexpensive way of providing catalogs
  • Inexpensive way to reach worldwide customers

Electronic Commerce, 2000
82
The Risks and Disadvantages for Small Businesses
  • Disadvantage when a commodity is the product (for
    example, CDs)
  • No more personal contact which is a strong point
    of a small business
  • No advantage being in a local community

Electronic Commerce, 2000
83
The Risks and Disadvantages for Small Businesses
  • Lack of expertise in legal issues, advertisement
  • Lack of resources to fully exploit the Web
  • Less risk tolerance than a large company

Electronic Commerce, 2000
84
Success Factors for Small Businesses
  • Niche products
  • Small volume
  • Capital investment must be small
  • Inventory should be minimal or non-existent
  • Electronic payments schema exist
  • Payment methods must be flexible

Electronic Commerce, 2000
85
Success Factors for Small Businesses
  • Logistical services must be quick and reliable
  • The Web site should be submitted to
    directory-based search engine services like Yahoo
    in a correct way
  • Join an online service or mall and do banner
    exchange
  • Design a Web site that is functional and provides
    all needed services to consumers

Electronic Commerce, 2000
86
Summary
  • Successful firms will integrate the E-business
    into their companys strategy.
  • Used properly, E-business will be one more method
    of increasing income and profits.
  • It is just a matter of time before it will be as
    common as the fax, cell-phone and digital camera.

87
References
  • Electronic Commerce A Managerial Perspective.
    2000. By Efraim Turban, Jae Lee, David King, and
    H. Michael Chung. Prentice Hall, Upper Saddle
    Rivern New Jersey. (slides are marketed).
  • E-Business Revolution. 2000. By Daniel Amor.
    Prentice Hall,Upper Saddle Rivern New Jersey.
  • Strategic Internet Marketing. 1996. Tom Vassos.
    MacMillan Computer Publishing, Indianapolis, IN.
  • E-Business Readiness. 2001. By James Craig and
    Dawn Jutla. Anderson-Wesley. Upper Saddle Rivern
    New Jersey.
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