2 ebusiness strategies

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eBusiness Lecture 2

Dr Ailsa Kolsaker



Value and Strategy

Strategic concepts and theories in the contextof e-business

• User motivations

• Concept of ‘value’ in the new economy

• Value creation

• Using value to create competitive advantage

• Strategy and the Internet by Michael Porter (2001)

• E-commerce application (Turban et al, 2006)



Business motivations

Cost reductions through automation,standardisation, integration and real-timecommunications

AND Enhance ‘reach’ and market exposure Revenue-generation opportunities Reinforce company and brand positioning Accelerate consumer decision-making Enhance relationships with consumers



Consumer motivations

Information search:• Convenience – reduce search costs, both time and

energy

• Access – to information about products and companies

• Availability – 24/7

Evaluation of alternatives:• Increased number of alternatives

• Enhanced transparency – facilitates comparison

Decision-making:• Third party expertise

• Enhanced confidence



Government motivations (e-Gov)

Reduce costs of service provision

Streamline internal processes

Enhance international competitiveness

(improve the country’s profile and improvebusiness performance)

Enhance service delivery

Reduce distance between government andcitizens

Improve participation



Strategy is...

The pattern of major objectives,purposes or goals, and essential policiesor plans for achieving these goals,stated in such a way as to define whatbusiness the company is in or is to be inand the kind of company it is or is to be.Andrews, K (1971) “The Concept of Corporate Strategy”, Irwin,

Homewood, IL., p28



Strategic Considerations……

In Chaffey, 2007:30



E-Business As a System

Goal: Seamless value delivery to end customer

• Integration emphasis [Systems Theory]

Processes

Control

Buy sideInternal systems

External environment

Sell side



E-Business: A System (1)

A set of interdependent components that are structured andorganised as a coherent system to provide a stable environment foractivities and processes to achieve

Expressed as an input-process-output model (earlier slide)

Consists sub-systems e.g. information-technology systems,financial systems & human activity systems or social systems.

Extent of boundary erosion

• Movement towards ‘open’ rather than ‘closed’ systems

•Networks, virtual partnering, extended enterprises, web-enterprises

Subject to externalities (outside environment)



E-Business: A System (2)

Central premise: holistic approach

E-Business Strategy as a ‘whole’ valuecreation system:

• The Identity (own/partner service & branding)

• The Organisation (infrastructure, technology,

procedures)• The Channel (offline online mobile )



Integrated Value System

Extensive Collaboration/Partnering:

• Design becomes part of the production processwhich is inter-weaved through a series of internal

and external partnerships to procurement, stockcontrol, marketing, financial management, salesand after-sales support, supplier and customerrelationship management





Collaboration & Integration



Reshaping the Value Chain

The traditional value chain – a series of value-adding activities in a company’sprocesses, from inbound logistics andproduction through to sales and marketing

Inbound

logistics R&D Production Sales &distribution

After-

sales;

CRM



Towards An Electronic ValueChain

The value chain no longer takes its linear shape

It is more likely to resemble a jigsaw puzzle or atits most cohesive, a molecular structure.

OR



Front-end infrastructure

Customer facing IS:

Sales

Marketing

Distribution

After-sales

CRM

Management facing IS:

MIS

EIS

Decision support

Supplier facing IS:

Inbound logisticsProcurements

SRM/PRM

Employee facing IS:

HRM

Production



DBMS

Database

Customer facing Employee facing Supplier facing

Internet Intranet Extranet

Customer Employee Supplier

Client tier

Business tier

Data tier

Front end infrastructure

DB / Web

integration

D i s t r i b u t i o n

Beynon-Davies, 2004



Back-end infrastructure

Agent Data flow

Process

Data store

ModellingCore systems

Salesorder

processing

Accounting

Stock

control

Purchase

order

processing

Payroll

Sales &

after-sales

Planning

Procurement

HRM



Optimal Reshaping?

Greatest cost savings occur where front-end and back-end are integrated:

• Eliminates duplication and waste

• Reduce staffing requirements• Automate and standardise – reduce errors

However, may encounter employeeresistance or (in severe cases), industrialdisruption (trade unions)



ra egy rocess:



- ra egy rocess:Starting with the FundamentalQuestions

• Where are we now?

• Where do we want to

go?

• How do we get there?



Strategy Definition

Key strategic decisions:

• 1. eBusiness channel priorities

• 2. Organisational restructuring & capabilities• 3. Business, service and revenue models

• 4. Marketplace restructuring

• 5. Market & product development strategies

• 6. Positioning & differentiation strategies



In Search of SuperiorPerformance

Distinctive

Competences

EfficiencyCustomer

responsive-

ness

InnovationQuality

•Low Cost•Differentiation

•Niche



Disintermediating the Value Chain

Producer

Wholesaler

Retailer

Customer

Removing others along the channel structure by

internalising part of the value chain



Example



Example



Airline Tickets

Airlines Reservation

systems

Travel

agents

Customers

Old style ticket distribution

Airlines

Reservation

systems

Travel

agentsCustomers

Cybermediaries

New style distribution

Physical

Electronic

Source: O’Keefe, 2003



Barriers

Technophobia – ‘won’t use’ Digital divide – ‘can’t use’ Myopia – ‘if we can do it, everyone can’ Cost

Shortcomings of technology – compatibility,functionality, reliability

Shortcomings of staff – management competence,employee knowledge & expertise

Consumer concerns – confidentiality, security, risk,trust Business concerns – ownership, authority, trust,

competitive advantage



Technology Acceptance Model

External

variables

Perceived

usefulness

Perceived

ease of use

Attitude

towards

use

Behavioural

intention

Actual

use

Davis, 1999

Based upon Azjen’s

TRA: 1985, 1988, 1991



Challenges

Top 10 Technical Challenges:

• Security

• Adequate infrastructure

• Data access

• Back-end system integration

• Bandwidth

• Network connectivity

• Uptime

• Data warehousing and mining

• Systems that do not scale

• Content distributionTurban et al, 2004



Challenges

Top 10 Managerial Challenges:

• Unrealistic management expectations

• High cost of capital expenditures

• Budgets

• Keeping up with technology

• Project deadlines

• Reaching new customers

• Improving customer ordering services

• Privacy issues• Employee resistance

• Training

Turban et al, 2004 - adapted



eBay Case Study

Consider: What value does eBay offer?

(define ‘value’) How is that value created?

Who are eBay’s competitors? How does it contribute

to eBay’s competitiveadvantage?

How sustainable is it?



Jelassi, T. and Enders, A. (2005), J&Ech. 5 (pp.95-119)

Jelassi, T. and Enders, A. (2005), CaseStudy 15 (pp.400-419)

Jelassi, T. and Enders, A. (2005), eBayCase Studies 22-24

Supplementary Reading

Documents

2 ebusiness strategies