acs 3907 e-commerce · •competitor analysis •competitive profile matrix •knowledge...

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ACS 3907E-Commerce

Lecture 3-1

Instructor: Kerry Augustine


Business Strategy for E-Commerce (EC)


Business Strategy for EC• Set of plans for achieving superior long-term returns on

capital invested in business

• Plan for making profit in competitive environment over time

• Fundamental questions:– What is the long-term direction of the organization?

– What is the overall plan for deploying the organization’s resources?

– What trade-offs are necessary?

– What is the unique positioning in comparison to the competitors?

• Find position in marketspace that best fits firm’s skills

• Four phases:– Strategy initiation

– Strategy formulation

– Strategy implementation

– Strategy assessment

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Strategy Initiation

• Business prepares info on its vision, mission, purpose, contribution that EC would make

• Exercises:– Industry analysis

• What is the industry? Who are the customers? What are the current practices of buying/selling? Who are the major competitors? What are the major opportunities and risks in this industry?

– Company analysis and core competencies

• What is the current business strategy, customers, partners, performance? What are the strengths/weaknesses in business processes, people, information flows, technology support?

– Forecasts (business, technological, political, economic)

– Competitor analysis (direct, indirect, and potential competitors)

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Strategy Formulation

• Development of strategies to exploit opportunities and manage threats in light of corporate strengths and weaknesses

• “What we do”

• Exercises:– Identify business opportunities and possibly new revenue models

– Cost/benefits analysis for each opportunity

– Risk analysis for each opportunity

– Business plan (to ensure approach is realistic)

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Strategy Implementation

• Detailed short-term action plans

• “How we do it”

• Project planning– Define project or series of projects to implement strategy

– Need project plan for each project: objectives, schedule

• Resource allocation– Allocation of human, financial, technological, time, and managerial

resources

• Project execution– Staff hires, equipment purchases, software licenses, etc.

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Strategy Assessment

• Continual assessment of progress toward strategic goals

• May lead to corrective actions or strategy reformulation

• Metrics = measurable standard to compare actual performance

• Examples:– % reduction in selling costs

– % reduction in warehouse space

– % reduction in obsolete stock write-offs

– Reduction in average days to delivery

– Rate of addition of new customers

– Reduction in cost of email compared to surface mail

– Response rate to email compared to surface mail

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Developing a Strategy for a Business Plan

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The roadmap for a business strategy implementation addresses nine interrelated issues

What are the customer segment(s) to target and what is our value proposition to each segment?

What is the vision for our company?Vision1

Objectives What are the objectives of our business strategy?2

Value creation What value do we want to offer through our business strategy?3

Target segment(s)4

What organisational model should we apply?Organisational model7

External partners Should we implement our e-business strategy alone or with external partners?

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Strategy alignment How is our e-commerce strategy aligned with our business strategy?

Revenue and cost model What is our cost and revenue model?8

Privacy, ethical and legal issues

What kind of privacy concerns, ethical and legal issues do we need to consider?

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Developing a Competitive Business Strategy

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Developing a Strategic Plan

• Use a short planning horizon-2 yrs or less

• Be informal, use shirtsleeve approach

• Encourage participation of others

• Do not begin with setting objectives

• Maintain flexibility-conditions change too fast

• Focus on strategic thinking, not planning

• Planning will be an ongoing process

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The Strategic Management Process

• Develop a clear vision-translate into mission• Assess companies’ strengths and weaknesses• Scan the environment-opportunities and threats• Identify key factors for success• Analyze competition• Formulate strategic options and select• Translate strategic plans into goals, objectives, and

action plans• Create company goals and objectives• Establish controls

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Vision Statement

The result of an entrepreneur’s dream of something that does not exist yet and the ability to paint a compelling picture of that dream for everyone else to see

• Provides direction

• Determines decisions

• Motivates people

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Mission Statement

What business are we in?

• What are we in business to accomplish?

• How are we going to accomplish that purpose?

• What principles and beliefs form the foundation of the way we do business?

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SWOT Analysis

• Technique for analyzing and evaluating business opportunities

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Strengths•What does the company do well?•Is the company strong in its market?•Does the company have a strong sense of purpose and the culture to support that purpose?

Weaknesses•What does the company do poorly?•What problems could be avoided?•Does the company have serious financial liabilities?

Opportunities•Are industry trends moving upward?•Do new markets exist for the company’s products/services?•Are there new technologies that the company can exploit?

Threats•What are the competitors doing well?•What obstacles does the company face?•Are there troubling changes in the company’s business environment (technologies, laws, regulations)?


Analyze the Competition

• Competitive intelligence

• Competitor analysis

• Competitive profile matrix

• Knowledge management-the practice of gathering, organizing, and disseminating the collective wisdom and experience of a company’s employees for the purpose of strengthening competitive position

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Key Success Factors (KSF’s)

• The factors that determine a company’s ability to compete successfully in an industry

• Build a Successful Marketing Plan - 15 Key Business Success Factors

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http://www.acs.uwinnipeg.ca/3907/Build%20a%20Successful%20Marketing%20Plan.htm


Formulate Strategic Options/Select Strategies

Strategy-a roadmap of the actions an entrepreneur draws up to fulfill a company’s mission, goals, and objectives

• Cost leadership

• Differentiation

• Focus on Market Niche

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• Cost leadership - a strategy in which a company strives to be the lowest-cost producer relative to its competitors in the industry

• Differentiation - a strategy in which a company seeks to build customer loyalty by positioning its goods and services in a unique or different fashion

• Focus on Market Niche - strategy in which a company selects one or more market segments, identifies customers’ needs, wants, and interests, and approaches them with a good or service designed to excel in meeting those needs, wants and interests

Formulate Strategic Options/Select Strategies

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Create Company Goals and Objectives

• Goals - the broad, long-range attributes a business seeks to accomplish, tend to be general and sometimes abstract

• Objectives - more specific targets of performance, commonly addressing areas such as profitability, productivity, growth, and other key aspects of business

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• Most goals define positive outcomes that you want your business to achieve, but sometimes you also want to set goals to avoid pitfalls and to eliminate a few weaknesses. To help develop goals that cover all the bases, use the acronym ACES as you tick through the following key questions:

• Achieve: What do you want to attain in the future?

• Conserve: What do you want to hang on to?

• Eliminate: What do you want to get rid of?

• Steer clear: What do you want to avoid?

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S.M.A.R.T ObjectivesS.M.A.R.T. Objectives: is an effective method of measuring performance of the business model to the plan. To qualify as S.M.A.R.T., an objective must be:

• SPECIFIC. Specific goals let people know exactly what's expected of them with no room for misinterpretation. Specific goals should be able to answer the following:

• Who is responsible?

• When must this be done?

• What is to be accomplished?

• Which requirements/constraints are involved?

• Where is this to be completed?

• Why is this important or beneficial?

• MEASURABLE. When setting goals, you must also set specific criteria for measuring progress against those

goals. This gives your employees a way to stay on track, aim for target dates, and reach milestones that

will serve as ongoing motivation.

• ATTAINABLE. Setting overly lofty goals that are truly unattainable serve to demotivate-rather than

motivate-your employees. By setting ambitious, yet realistic, goals, you will inspire your employees to fully

leverage their talents and all available opportunities in order to achieve them.

• RELEVANT. Employees must be able to see how a specific goal is relevant to them and the work they

perform every day. Plus by keeping goals relevant, you will help employees better understand their

connection to your company's objectives and the strategic importance of their individual goals.

• TIMELY. To be most effective, goals must be structured around a specific timeframe to provide a sense of

urgency. This serves to motivate individuals to begin working on their goals as soon as possible.24


Figure 3-2

This figure provides examples of systems for both primary and support activities of a firm and of its value partners that would add a margin of value to a firm’s products or services.

The Value Chain Model

Developing a Competitive E-Commerce Strategy

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Functional areas within an organization that process inputs and produce outputs. These activities may vary widely based on the unique requirements of a company’s industry

Primary Activities include:

• Inbound Logistics – receiving and stocking raw materials, parts, products

• Operations/Manufacturing – processing orders and raw materials into finished product

• Outbound Logistics – distribution of the finished product to customers

• Marketing and Sales – creating demand for the product (pre-sales activities)

• Customer Service – providing support for the product or customer (post-sales activities)

Developing a Competitive E-Commerce Strategy

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The Business Value Chain - Support Activities

Support activities are business activities that enable Primary Activities. These activities can be unique by industry but are generally more typical across industries.

Support Activities include:

• Infrastructure – hardware and software that must be implemented to support applications for primary activities

• Human Resources – employee management activities: hiring, interview scheduling, and benefits management

• Technology Development – the design and development of applications that support the organization

• Procurement – purchase of goods or services that are required as inputs to primary activities

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Traditional vs. Strategy Support Process

Example AVIS RENTA CARUsing handheld technology combined with a reengineered business process to create a competitive advantage

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Impact of the Web: Disintermediation

Manufactureror

Service Provider

Intermediary(Middleman)

Customer(Consumer

or Business)

Disintermediation• Removal of the intermediary (middleman) in a sale.• Companies can sell directly to customers (retail or wholesale)

without assistance using the Internet

Sell Direct = Disintermediation

Example• Airlines selling directly to flyers without a travel agent or customer

service representative

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The typical distribution channel has several intermediary layers, each of which adds to the final cost of a product, such as a sweater. Removing layers lowers the final cost to the consumer.

The Benefits of Disintermediation to the Consumer

Impact of the Web: Disintermediation

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Electronic Commerce Business Strategies

Business Strategies come in one of the following three types. All require a sound business model to be successful (see next)

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Brick-and-Mortar & Click-and-Mortar Strategies

Brick-and-Mortar

• Operate a firm solely in traditional physical markets

• Approach business activities traditionally by operating physical locations (e.g. stores, offices, manufacturing plants)

Click-and-Mortar

• Operate a firm in physical locations and has added an EC component to their business

• Requires maximization of business opportunities in both the physical and virtual environments

• This strategy requires a significant investment in systems and space

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Click-Only Strategy

• Business transactions are only conducted virtually

• Can require significant expertise and investment in technology and systems staff

• There are many different revenue models

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Strategy and Competitive Advantage

How to get Competitive Advantage *MC• Having the best-made product on the market• Delivering superior customer service• Achieving lower cost than rivals• Having proprietary manufacturing technology• Having shorter lead-times in developing and testing new products• Having a well-known brand name and reputation• Giving customers more value for their money

Achieving StrategyProviding support in a way that enables the firm to gain or sustain competitive advantage over rivals

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• Use the value chain to:

– Plan for a better way of meeting customer demands.

– Identifying processes that add value.

– Identifying processes that reduce value.


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How does a business optimize its value process?


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Differentiator – adding value to the process


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Value Chain Integration

ManufacturerSuppliers Distributor Retailer Consumer

From vertical integration ...

… to internet-driven Virtual Enterprise

Virtual Mfgr.Internet

Internet

InternetInternet

Suppliers Logistics Partner

Consumer

Mfg. Partner

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Team Exercises

Round 1 Team Exercise (2)

Round 2 Team Exercise (2)

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acs 3907 e-commerce · •competitor analysis •competitive profile matrix •knowledge...

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