chapter 9 : ec strategy and implementation

7/30/2019 Chapter 9 : EC Strategy and Implementation

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Chapter 9

EC Strategy

and Implementation

www.prestonians.webnode.com


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IBMs E-Business Strategy

Following four goals:

Lead IBMs strategy to transform itself into e-

businessAct as a catalyst to help facilitate thattransformation

Help business units become more effective intheir use of the Internet/intranet

Internally

With their customers



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IBMs E-Businesss Strategy (cont.)

Establish a strategy for the corporate Internetsite

Including definition of how it should look,feel and be navigated

Create an online environment mostconducive to customers doing business withIBM

Leverage the wealth of e-businesstransformational case studies within IBM tohighlight the potential of e-business to IBMscustomers



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IBMs E-Business Strategy (cont.)

IBM focused on key initiatives:

E-commerceselling more goods via the WebE-care for customersproviding all kinds ofcustomer support online

E-care for business partnersdedicated

services providing faster, better informationfor these important groups



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IBMs E-Business Strategy (cont.)

E-care for employeesimproving theeffectiveness of IBMers by making the right

information and services available to themE-procurementworking closely with IBM'scustomers and suppliers to improve thetendering process and to better administer the

huge number of transactions involvedE-marketing communicationsusing the internetto better communicate IBMs marketing stance



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Essentials of a Business Strategy

Strategysearch for revolutionary actionsthat will significantly change the current

position of a company, shaping its futureFinding the position in marketplace that best fitsthe firms skills

Companys choice of new position that must be

driven by its ability to find new trade-offs andleverage a new system of complementaryactivities into sustainable advantage



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Essentials of a Business Strategy (cont.)

Levels of strategy

Corporate (or

organizational)strategy

IT strategy

EC strategy

EC functionalstrategies

These are interrelated

Types of strategy

Strategic planning

Strategic response

Strategicinnovation



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Figure 9-1

EC Strategy Alignment



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Elements of a strategy

Forecasting

Resource allocationCore competency

Strategyformulation

Environmentalanalysis

Company analysis

Strategy landscape

Strategy initiation

Strategy formulationStrategyimplementation

Strategy assessment

Four major steps

Basis for chapterorganization



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Figure 9-2

The Landscape of EC Strategy



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Information technology (IT) strategystronglycorrelated with EC strategy because:

IT provides much of the infrastructure for ECEC applications must be integrated with ITapplications

EC applications may replace or improve existing IT

applicationsEC organization may report to CIO

Employees in IS department work on ECapplications



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Strategy Initiation

First step is to review the organizationsbusiness and IT vision and mission

Then, a vision and mission for EC can begenerated

Although these statements are usually veryvague, they provide a springboard for

generating more specific goals andobjectives

Begin with industry and competitive analysis



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Industry Analysis

Analyze position of the company in itsindustry and the competition

Required for assessing the changes that ECproject may introduce and its chances for

success



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Industry Assessment

What industry is the ECinitiative related to?

Who are the customers?

What are the currentpractices of selling andbuying?

Who are the major

competitors? (Howintense is thecompetition?)

What e-strategies areused, by whom?

How is value addedthroughout the valuechain?

What are the majoropportunities andthreats?

Are there any metricsor best practices in

place?What are the existingand potentialpartnerships for EC?



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Industry and Competitive Analysis

Monitoring, evaluating, disseminating ofinformation from the external and internalenvironments

SWOT AnalysisStrengths

OpportunitiesWeaknesses

Threats



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Strengths (S) Weaknesses (W)

Opportunities (O)

Threats (T)

INTERNAL

FACTORSEXTERNAL

FACTORS

SO Strategies

Generate strategies

here that use

strengths to take

advantages of

opportunities

WO Strategies Generatestrategies here that take

advantage of

opportunities by

overcoming weaknesses

ST Strategies

Generate strategies

here that use

strengths to avoid

threats

WT Strategies

Generate strategies

here that minimize

weaknesses and avoid

threats

Figure 9-4

SWOT Diagram



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Strategy Formulation

Strategy formulationDevelopment of long-range plans

Organizations missionPurpose or reason for the organizations existence

3 main reasons for establishing Web siteMARKETING, CUSTOMER SUPPORT, and SALES

Products with good fit for ECShipped easily or transmitted electronically

Targets knowledgeable buyers

Price falls within certain optimum rangeswww.prestonians.webnode.com


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EC Critical Success Factors

Special products or services traded

Top management support

Project team representing various functionalareas

Appropriate technical infrastructure

Must have customer acceptanceUser-friendly Web interface

Integration with the corporate legacy systems



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EC Critical Success Factors (cont.)

Security and control of the EC system

Competition and market situation

Conduct pilot project and capturecorporate knowledge

Use promotion and internalcommunication

Cost of the EC project must bereasonable

Need sufficient level of trust betweenbuyers and sellers



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EC Opportunities

3 common mistakes in allocating ECinvestment

Let a thousand flowers bloomfund manyprojects indiscriminately

Bet it allput everything on a single high-stakeinitiative

Trend-surffollow the crowd toward the nextbig thing

All of the above can be risky and costly



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EC Opportunities (cont.)

Problem-drivenattempt to solve a problem such

as:Excess inventory

Delivery delays

Technology-driventrying to use existing

applicationsFind problems no one knew existed

Used by first movers

Approaches to finding individual EC initiatives



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EC Opportunities (cont.)

All can failMarket-drivenwaiting to see what thecompetitors will do

Fear or greed-driven

Afraid if they do not practice EC they will bebig losers

Think they can make lots of money going intoEC

Approaches to finding individual EC initiatives(cont.)



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Figure 9-5

Approaches for Finding EC Opportunities



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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 currentcompetencies and markets

Many opportunities to create new products andservices



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Opportunities for EC businessesMatchmakingmatching buyers needs from

seller without a priorknowledge of either oneAggregation of servicescombines severalexisting services to create a new service

Bid/ask enginecreates a demand/supply

floating pricing systemNotification servicetells you when the servicebecomes available, or when it becomes cheaper


Opportunities and Applications (cont.)



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Opportunities and Applications (cont.)

Smart needs adviserif you want , then youshould

Negotiationprice, quantity, or features arenegotiated

Up-sellsuggests an additional product orservice

Consultative adviserprovide tips on using theproduct



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A Value Analysis ApproachValue chaina series of activities a companyperforms to achieve its goal(s)

Value addedContributes to profit and enhances the assetvalue as well as the competitive position of thecompany in the market

To create additional value using EC channels, acompany should consider the competitivemarket and rivalry in order to best leverage itsEC assets

(Customers value proposition)

Value Analysis and Proposition



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Value Analysis Questions

Representative Questions for Clarifying Value Chain

Statements

Can I realize significant margins byconsolidating parts of the value chain to mycustomers?

Can I create significant value for customers byreducing the number of entities they have todeal with in the value chain?

Value Analysis and Proposition (cont.)



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Value Analysis and Proposition (cont.)

Value Analysis Questions (cont.)Representative question for creating new values

Can I offer additional information oftransaction services to my existing customerbase?

Can I use my ability to attract customers to

generate new sources of revenue, such asadvertising or sales of complementaryproducts?



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Return on Investment and Risk Analysis

Return on Investment (ROI)

A ratio of resources required and benefits

generated by an EC projectIncludes both quantifiable items (cost ofresources, computed monetary savings) andNon-quantifiable items (intangibles)

Some intangible benefits

Effective marketing channelIncreased salesImproved customer service



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Return on Investment

and Risk Analysis

IT values

Financial valuesmeasurable to some degree

Strategic valuescompetitive advantage in themarket and benefits generated by businessprocedures

Stakeholder valuesreflections oforganizational redesign, organizationallearning, empowerment, informationtechnology architecture of a company, etc.



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Return on Investment

and Risk Analysis (cont.)

IT risks risks

Competitive strategy riskexternal, due tojoint venture, alliances or demographicchanges among others

Organizational risk and uncertaintyinternal

to company



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Risk Analysis

Risk analysis programshould

Identify all potential

risksAssess potentialdamage

Evaluate possibilityof protection

(insurance)Evaluate cost ofprotection vs.benefits

E-business risksStrategic risks (e.g.,competitiveenvironment, wrongstrategic direction)

Financial risks (e.g.,currency managementand changes, uncleartax situations)

Operational risks(e.g., technologicalchanges and use ofpoor technology,security)



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EC Scenarios

Scenario planning is a methodology usedin planning situations that involve much

uncertainty, like that of EC (what-if)Several different scenarios are created

A team compiles several future events aspossible influences on the outcome

Securities are assessed and future projectionsare made

Scenarios are compared



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EC Scenarios (cont.)

Four scenarios described by Hutchinson:

Open, global commerce scenarioremoval of

intermediaries flattens the value chainMembers-only subnet scenarioapplies mostly toB2B EC

Electronic middlemen scenariobusiness and

consumer market suppliers can makeproducts/services available through independentthird-party distribution channels



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EC Scenarios (cont.)

4 scenarios described by Hutchinson (cont.)

Consumer marketing channels scenariotraditional methods collapse into a unifiedconsumer-centric EC medium on the Internet

Broadcasting

AdvertisingConsumer telephony



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Strategic Planning Framework

EC appears in three levels:

Level 1: Basic presencecompany uses the

Internet to feature company information andprovide brochures

Level 2: Prospectingfeatures added

Search engine

Extensive product informationLinks to services

Ability to interact with the company

Basic customer service



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Strategic Planning Framework(cont.)

Level 3: Business integrationmore featuresadded

EC transaction capabilities

Customization and personalization services

Tools fostering creation of a community

Level 4: Business transformationsupplier and

customer integration addedMultichannel integration

Advanced customization and configuration

Superb customer service



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Strategic Planning Framework(cont.)

Generic competitive strategy vs.cooperarative strategy

Competitive strategy assumes fighting againstall competitors for the purpose of survival andwinning

Cooperarative strategy plans for workingtogether with specific competitors to gainadvantage against other competitors



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Generic Competitive Strategies

Offensive strategyusually takes place in anestablished competitors

marketFrontal Assault attackermust have superiorresources and willingnessto persevere

Flanking Maneuverattack a part of themarket where thecompetitor is weak

Defensive strategiestakes place in thefirms own current

market position as adefense againstpossible attack by arival

Raise structuralbarriers

Lower theinducement forattack



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Generic Cooperative Strategies

Collusion

Active cooperation of firms within an industry to reduce

output and increase prices in order to get around thenormal economic law of supply and demand (illegal)

Strategic Alliance

Partnership of two or more corporations or businessunits to achieve strategically significant objectives thatare mutually beneficial



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Generic Cooperative Strategies (cont.)

Joint Venture

A way to temporarily combine the different

strengths of partners to achieve an outcome ofvalue to both

Value-Chain PartnershipA strong and close alliance in which one company

or unit forms a long-term arrangement with a keysupplier or distributor for mutual advantage



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Implementation EC Plan

Starts with organizing a project team

Undertake a pilot project (help discover problems

early)Implementing ECRedesigning existing business processes

Back-end processes must be automated as much

as possibleCompany must set up workflow applications byintegrating EC into existing accounting andfinancial back-ends



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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 VirtualMarketplace.

Step 10: Instill EC Management Style.



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Competitive Intelligence on the Internet

Internet can play a major role as a source ofcompetitive information (competitive

intelligence)Review competitors Web sites

Analyze related newsgroups

Examine publicly available financial documentsAsk the customersaward prizes to those whobest describe your competitors strengths andweaknesses



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Competitive Intelligence

on the Internet(cont.)

Evolving experiences, need to be treated withcare

Overreliance on such information can bedangerous

Using publicly available search engines is free,

but may produce lots of irrelevant informationUse specialty-build agents to search theoverwhelming amount of information available



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Issues in Strategy Implementation

Partners strategy

Many potential partners, may need several

Companies that make B2B e-marketplacesconsider:

Logistics

Technology

E-payment partners

How to coordinate B2B and B2CSelling direct is creating a B2C business

Coordination between the two can be done indifferent ways



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Strategy and Project Assessment

Need for assessmentFind out if EC project delivers what it was

supposed to deliverAdjust plans if necessary

Determine if EC project is still viable

Reassess initial strategy in order to learn from

mistakes and improve future planningIdentify failing projects as soon as possibleand determine reasons for failure



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Strategy and Project Assessment (cont.)

Measuring results; watch for:Goals may be unrealistic

Web server was inadequate to handledemand

Expected cost savings were now realized

Exploding application requests from variousfunctional areas in the company may follow

Review requirements and design documents

Develop thorough checklist

Pose a set of questions to assess impact ofEC project



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Strategy and Project Assessment (cont.)

Finalization and adjustments

Actual ROI can be computed and compared tothe projected one

If sales expectations were not met, reviewmarketing efforts

Web assessment based on collected information

Corrective steps might be requiredProduct offerings to pricing strategy

Web promotion to review software vendors



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chapter 9 : ec strategy and implementation

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