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1© Prentice Hall, 2000
Chapter 9EC Strategy and
Implementation Plan
2© Prentice Hall, 2000
Learning Objectives
Describe what a business strategy and implementation plan are
Understand the process of formulating EC strategies
Explain the issues involved in EC implementation planning
Experience the role of intelligent agents in the strategic perspective
Characterize how the strategic planning evolves throughout the business cycle
Describe the key management issues in the strategic planning
3© Prentice Hall, 2000
IBM’s E-Business’s StrategyFollowing four goals:
To lead IBM’s strategy to transform itself into e-business and to act as a catalyst to help facilitate that transformation.
To help out business units become more effective in their use of the Internet/intranet, both internally and with their customers.
To establish a strategy for the corporate Internet site. This would include a definition of how it should look, ‘feel’ and be navigated. In short, to create an online environment most conducive to customers doing business with IBM.
To leverage the wealth of e-business transformational case studies there are within IBM to highlight the potential of e-business to IBM’s customers.
4© Prentice Hall, 2000
IBM focused on key initiatives:
IBM’s E-Business’s Strategy (cont.)
e-commerce— selling more goods via the Web e-care for customers— providing all kinds of customer
support on-line e-care for business partners— dedicated services providing
faster, better information for these important groups e-care for employees— improving the effectiveness of IBMers
by making the right information and services available to them e-procurement— working closely with IBM’s customers and
suppliers to improve the tendering process and to better administer the huge number of transactions involved
e-marketing communications— using the Internet to better communicate IBM’s marketing stance
5© Prentice Hall, 2000
Strategic Planning for EC
Industry and competitive
analysis
Strategy formulation
Strategy reassessment
Implement-ationplan
6© Prentice Hall, 2000
Industry and Competitive Analysis
Monitoring, evaluating, disseminating of information from the external and internal environments
SWOT Analysis
Strengths
Weaknesses
Opportunities
Threats
7© Prentice Hall, 2000
Strengths (S) Weaknesses (W)
Opportunities (O)
Threats (T)
INTERNAL FACTORSEXTERNAL
FACTORSSO Strategies
Generate strategies here that use
strengths to take advantages of opportunities
WO Strategies Generate strategies
here that take advantage of
opportunities by overcome weaknesses
ST Strategies Generate strategies
here that use strengths to avoid
threats
WT Strategies Generate strategies here that minimize
weaknesses and avoid threats
Industry and Competitive Analysis (cont.)
8© Prentice Hall, 2000
Strategy Formulation
Strategy formulation Development of long-range plans
Organization’s mission Purpose or reason for the organization’s existence
3 main reasons for establishing Web site MARKETING, CUSTOMER SUPPORT, and SALES
Products with good fit for EC Shipped easily or transmitted electronically Targets knowledgeable buyers Price falls within certain optimum ranges
9© Prentice Hall, 2000
EC Critical Success Factors
Special products or services traded Top management support Project team reflecting various functional areas Technical infrastructure Customer acceptance User friendly Web interface Integration with the corporate legacy systems Security and control of the EC system Competition and market situation Pilot project and corporate knowledge Promotion and internal communication Cost of the EC project Level of trust between buyers and sellers
10© Prentice Hall, 2000
A Value Analysis Approach Value chain
a series of activities a company performs to achieve its goal(s)
Value addedcontributes to profit and enhances the asset value
as well as the competitive position of the company in the market
to create additional value using EC channels, a company should consider the competitive market and rivalry in order to best leverage its EC assets
EC Critical Success Factors (cont.)
11© Prentice Hall, 2000
Value Analysis Questions
EC Critical Success Factors (cont.)
Representative Questions for Clarifying Value Chain StatementsCan I realize significant margins by consolidating
parts of the value chain to my customers?Can I create significant value for customers by
reducing the number of entities they have to deal with in the value chain?
Representative Question for Creating New ValuesCan I offer additional information of transaction
service to my existing customer base?Can I use my ability to attract customers to generate
new sources of revenue, such as advertising or sales of complementary products?
12© Prentice Hall, 2000
EC Critical Success Factors (cont.)
Gartner’s Model of Customer Interaction
CustomersExtension
CustomersRetention
CustomersSelection
CustomersAcquisition
RelationshipMarketing
“What criteria determine who will be our most profitable customers?”
“How can we acquire this customer in the most efficient and effective way?
“How can we keep this customer for as long as possible?”
“How can we increase the loyalty and the profitability of this customer?”
13© Prentice Hall, 2000
Return on Investment and Risk Analysis
EC Critical Success Factors (cont.)
A ratio of resources required and benefits generated by an EC project
Includes both quantifiable items (cost of resources, computed monetary savings) and non quantifiable items
Some intangible benefitseffective marketing channelincreased salesimproved customer service
14© Prentice Hall, 2000
Return on Investment and Risk Analysis
EC Critical Success Factors (cont.)
Classified generic IT values and risks falls into the following five categoriesValues
• Financial values— measurable to some degree• Strategic values— competitive advantage in the market and
benefits generated by business procedures• Stakeholder values— reflections of organizational redesign,
organizational learning, empowerment, information technology architecture of a company, etc.
Risks• Competitive strategy risk— external, due to joint venture,
alliances, or demographic changes among others• Organizational risk and uncertainty— internal to company
15© Prentice Hall, 2000
Electronic Commerce Scenarios
Open, Global Commerce ScenarioIT Events : Internet standards,newmedia, proprietary solutions marginalized,intranets, highly distributed, fat-clientarchitectures prevailBusiness Events : Global trade, logistics onthe Internet, pay bills electronically, digitalcash widely used, smart cards, and fewerwholesaler/salespeople
Members-Only Subnets ScenarioIT Events : Standards vary betweenindustries, objective measures of Internetsecurity, EDI standards widely adoptedBusiness Events : High-performanceinformation networks, cumbersome globalEC
Electronic Middlemen ScenarioIT Events : Transaction processing andinterface, distributor drive EC, EC activityexpands rapidly, and transaction securitydeeply embeddedBusiness Events : One-stop shoppingpopular, professional services popular withsmaller enterprises
New Consumer Marketing Channels ScenarioIT Events : Activity oriented to consumers,price of wireless drops, and growth ofnetworked multimediaBusiness Events : Online transactions seenas less convenient, security not widelytrusted, basic international norms accepted,and wireless links increase sales productivity© Prentice Hall, 2000
16© Prentice Hall, 2000
Competitive Strategy
Offensive strategy— usually takes place in an established competitor’s 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 competitor’s 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
17© Prentice Hall, 2000
Defensive strategies— takes place in the firm’s 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
Competitive Strategy (cont.)
18© Prentice Hall, 2000
Cooperative 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
19© Prentice Hall, 2000
EC Strategy in Action
What questions should a strategic plan answer?
How is Electronic Commerce going to change our business?
How do we uncover new types of business opportunities? How can we take advantage of new electronic linkages with
customers and trading partners? Will intermediaries be eliminated in the process? Or do we become
intermediaries ourselves? How do we bring more buyers together electronically (and keep
them there)?
How do we change the nature of our products and services?
Why is the Internet affecting other companies more than ours?
How do we manage and measure the evolution of our strategy?
20© Prentice Hall, 2000
The steps to Successful EC Programs
EC Strategy in Action (cont.)
Conduct necessary education trainingReview current distribution and supply chain modelsUnderstand what your customers and partners expect from
the WebReevaluate the nature of your products and servicesGive a new role to your human resources departmentExtend your current systems to the outsideTrack new competitors and market sharesDevelop a Web-centric marketing strategyParticipate in the creation and development of virtual
marketplaces Install electronic commerce management style
21© Prentice Hall, 2000
Competitive Intelligence on the Internet
Review competitor’s Web sitesAnalyze related newsgroupsExamining publicly available financial
documentsYou can give prizesUse an information delivery serviceUse research companiesSolicit opinions in a chat room
22© Prentice Hall, 2000
Using Push Technology for Competitive Intelligence
Competitive Intelligence on the Internet (cont.)
Allow users to request updates of topics and have the latest records automatically delivered to users’ e-mail address
Provide corporate snoopers with lots of information, save search time and monitoring time
Several ways push models can provide competitive intelligence information:broadcast modelselective pull modeldistributed push pull modelinteractive push model
23© Prentice Hall, 2000
Implementation EC Plan
Starts with organizing a project teamUndertake a few pilot projects (help discover
problems early)
Implementing EC Redesigning existing business processes Back-end processes must be automated as
much as possible Company must set up workflow applications by
integrating EC into existing accounting and financial back-ends
24© Prentice Hall, 2000
Uncovering Specific ECOpportunities and Application
Understand: How digital markets operate How Internet customers behave How competition is created and what infrastructure
is needed What are the dynamics of EC
Map opportunities that match current competencies and markets Many opportunities to create new products and
services
25© Prentice Hall, 2000
Opportunities
Uncovering Specific ECOpportunities and Application (cont.)
Matchmaking— matching buyers’ needs from seller without a priori knowledge of either one
Aggregation of services— combines several existing services to create a new service
Bid/ask engine— creates a demand/supply floating pricing system
Notification service— tells you when the service becomes available, or when it becomes cheaper
Smart needs adviser— if you want …, then you should… Negotiation— price, quantity, or features are negotiated Upsell— suggests an additional product or service Consultative adviser— provide tips on using the product
26© Prentice Hall, 2000
Finding IT applications
Uncovering Specific ECOpportunities and Application (cont.)
Brainstorming by a group of employees Soliciting the help of experts, such as consultants Review what the competitors are doing Ask the vendors to provide you with suggestions Read the literature to find out what’s going on Use analogies from similar industries or business
processes Use a conventional IS requirement analysis
approach
27© Prentice Hall, 2000
Organization and Staffing
Define the roles and responsibilities of: Gatekeepers Web team
Building System
Infrastructure
Web Page Design
Business Process
Reengineering
Security and Control
MarketingFinanceAccountingInformation Technology
EC Project Team
Senior management Web champion Webmaster
28© Prentice Hall, 2000
Evaluating Outsourcing
Factors to consider:
Ease of configuration and setup Database and scripting support Payment mechanism Sample storefronts Workflow management Documented database support Integration into existing accounting and
financial back ends
29© Prentice Hall, 2000
Web Hosting
Hosting Internally Vs. Hosting Using ISP
System Costbandwidth capabilities and specificationsfirewall systemwireless deliverybuy, rent, or leasemaintenance, upgrade, and service of the
equipment
30© Prentice Hall, 2000
Purchase a suite of software that claims to integrate storefront functions into a single box
Web Hosting (cont.)
iCat Corp.’s Electronic Commerce Suite and Commerce Publisher
Open Market’s Transact and LiveCommerce Microsoft Corp.’s Site Server Commerce Edition IBM Corp.’s Net. Commerce Pro Saqqara Systems’ StepSearch Professional AT&T
31© Prentice Hall, 2000
Making a Web catalog into a multimedia extravaganza
Web Hosting (cont.)
Not easy and expensive Lower end systems : begin at $25,000 High end systems : $250,000 to $2 million
32© Prentice Hall, 2000
Web Content Design
Content takes many shapes Will change dramatically More robust, comprehensive, and usable medium
Challenges in developing a successful online storefront Choosing the right software solution for your site 3 options
build your own softwarepurchase a commercial software productrent from a Web host
33© Prentice Hall, 2000
Web content design considerations The services wanted How much your company can
contribute to the site, from manpower to electronic content
The time to design your site The time to create and
program your site Extra fees for software
development Fees for off-the-shelf
applications tools The size of the site The amount of traffic the site
generates Vs. flat rate
Training requirements Installation and server
maintenance Programming On corporate site hosting Vs.
off-site Secure Server for financial
transactions Your bandwidth needs Your server capacity needs Location of your server at
the Web company or ISP company location
Web Content Design (cont.)
34© Prentice Hall, 2000
Web Application Features Electronic shopping mall Unique URL Electronic
commerce/financial transactions
Shopping cart software Online catalogs Direct order procedures Dynamic databases Static databases Multimedia Telephony
Audio Video FTP Forms Chat rooms VRML Statistics Customer tracking E-mail response and
forwarding Java applications Animation Security
Web Content Design (cont.)
35© Prentice Hall, 2000
Security and Control in EC
80% of all computer crimes reported involve the use of the Internet to break into computer systems
Effective guidelines would be needed to: Address the Internet features that must be
monitored for developing policy on access and use
Disclosure of information through the Internet
36© Prentice Hall, 2000
Strategy Reassessment
Webs grow in unexpected ways — e.g. Genentec and Lockheed Martin
Reasons for a not having a worthwhile project The goals were unrealistic The web server was inadequate to handle traffic The actual cost savings were not as much as expected
Important Develop a checklist Project Team compiles statistics that can be tracked CIOs and other executives are trying to extract the
business value from their investment in information technologies
37© Prentice Hall, 2000
Questions to Address in Order to Assess EC Project Effort and Outcome
What were the goals?
What were the expectations?What products and services did
your company want to offer?
Did unanticipated problems occur?If so, how were those handled?
What costs did you hope to reduce?Did other costs increase unexpectedly?
What were the sales objectives?Were those goals realistic?
Did you intend to reduce distribution costs?
Were your expectations reasonable?
Did you intend to reduce travel expenses for corporate staff?
Are Web and Internet communications reducing
traditional communication costs?Did you intend to improve customer relations?
If you did not, what went wrong?
How can those errors be corrected?
38© Prentice Hall, 2000
Revisit Each Phase of EC Project
Is each needed service performing as expected? Is each needed service still relevant? What, if any, additional services are needed? What do customers want that you are not providing? What impact will they have on the infrastructure, from bandwidth
to software? What will the additional services cost? What specific changes have taken place among your
competitors that might affect what you are trying to accomplish? Have your vendors provided adequate service? Has training of employees been adequate, or is more required? What new internal needs have arisen that need to be addressed?
39© Prentice Hall, 2000
Management Issues
Considering the strategic value of EC
Conducting strategic planning
Considering the risks
Integration
Pilot project