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7/30/2019 Chapter 9 : EC Strategy and Implementation
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Chapter 9
EC Strategy
and Implementation
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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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Essentials of a Business Strategy (cont.)
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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Essentials of a Business Strategy (cont.)
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
Uncovering Specific EC
Opportunities and Applications (cont.)
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Uncovering Specific EC
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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