Chapter 12: Planning for Electronic Commerce Electronic Commerce, Seventh Annual Edition

Chapter 12:Planning for Electronic Commerce

Electronic Commerce, Seventh Annual

Edition

Electronic Commerce, Seventh Annual Edition 2

Objectives

In this chapter, you will learn about:

• Planning electronic commerce initiatives

• Strategies for developing electronic commerce Web sites

• Managing electronic commerce implementations


Planning Electronic Commerce Initiatives

• Objectives of electronic commerce:– Increasing sales in existing markets– Opening new markets– Serving existing customers better– Identifying new vendors– Coordinating more efficiently with existing vendors– Recruiting employees more effectively


Linking Objectives to Business Strategies

• Downstream strategies

– Used to improve the value that the business provides to its customers

• Upstream strategies

– Focus on reducing costs or generating value

• Work with suppliers or inbound shipping and freight service providers


Linking Objectives to Business Strategies (continued)

• Electronic commerce opportunities can inspire businesses to undertake activities such as:– Building brands– Enhancing existing marketing programs– Selling products and services– Selling advertising– Developing a better understanding of customer

needs


Measuring Benefits

• Tangible benefits of electronic commerce initiatives include:

– Increased sales

– Reduced costs

• Intangible benefits of electronic commerce initiatives include:

– Increased customer satisfaction



Managing Costs

• Total cost of ownership

– Includes costs of hardware, software, design work outsourced, and salaries

• Change management

– Process of helping employees cope with changes

• Opportunity costs

– Lost benefits from an action not taken


Web Site Costs• International Data Corporation and Gartner,

Inc. estimate that the cost for a large company to build and implement an entry-level electronic commerce site is about $1 million

• 79 percent of cost is labor related

• 10 percent is the cost of software

• 11 percent is the cost of hardware



Web Site Costs (continued)

• Experts agree that the annual cost to maintain and improve a site will be between 50 and 200 percent of the initial cost


Comparing Benefits to Costs

• Capital projects (capital investments)

– Major investments in equipment, personnel, and other assets

• Key part of creating a business plan for electronic commerce initiatives includes:

– Identifying potential benefits

– Identifying costs required to generate benefits

– Evaluating whether benefits exceed costs



Return on Investment (ROI)

• Return on investment techniques provide a quantitative expression of a comfortable benefit-to-cost margin

• Built-in biases that can lead managers to make poor decisions:– ROI requires that all costs and benefits be stated

in dollars

– Focus is on benefits that can be predicted

– Tends to emphasize short-run benefits over long-run benefits


Strategies for Developing Electronic Commerce Web Sites

• Typical early Web site

– Static brochure not updated frequently

– Seldom had any capabilities for helping the company’s customers

• Today’s Web site includes:

– Transaction-processing tools

– Automated homes for business processes of all kinds



Internal Development vs. Outsourcing

• Outsourcing– Hiring another company to provide outside support

for all or part of a project

• Internal team– Should include people with enough knowledge

about the Internet and its technologies– Should be creative thinkers

• Measuring achievements of internal team is very important


Early Outsourcing

• Outsource the initial site design and development to launch a project quickly

• Outsourcing team trains the company’s information systems professionals in the new technology

• It is best to have the company’s own information systems people working closely with the outsourcing team


Late Outsourcing

• Information systems professionals– Do initial design and development work

– Implement the system

– Operate the system until it becomes a stable part of the business operation

• Once a company has gained a competitive advantage, maintenance of the electronic commerce system can be outsourced


Partial Outsourcing

• Company identifies specific portions of the project that can be completely designed, developed, implemented, and operated by another firm

• Many smaller Web sites outsource their e-mail handling and response functions


Selecting a Hosting Service

• Factors to evaluate when selecting a hosting service include:

– Functionality

– Reliability

– Bandwidth and server scalability

– Security

– Backup and disaster recovery

– Cost


New Methods for Implementing Partial Outsourcing

• Incubators

– Company that offers start-up companies a physical location with:

• Offices, accounting, and legal assistance

• Computers and Internet connections

– Receive ownership interest in the company


New Methods for Implementing Partial Outsourcing (continued)

• Fast venturing– Existing company that wants to launch an

electronic commerce initiative joins external equity partners and operational partners

• Equity partners – Banks or venture capitalists

• Operational partners– Firms that have experience in moving projects

along and scaling up prototypes



Managing Electronic Commerce Implementations

• Project management– Formal techniques for planning and controlling

activities undertaken to achieve a specific goal

• Project plan– Includes criteria for cost, schedule, and performance

• Project management software products– Microsoft Project – Primavera Project Planner



Project Portfolio Management

• Each project is monitored as if it were an investment in a financial portfolio

• Chief Information Officer

– Records projects in a list

– Updates the list with current information about each project’s status

– Assigns a ranking for each project based on importance and level of risk


Staffing for Electronic Commerce

• General areas of staffing include:– Business managers– Project managers– Account managers– Applications specialists– Web programmers– Web graphics designers– Customer service– Systems administration


Staffing for Electronic Commerce (continued)

• Business manager – Should be a member of the internal team that sets

objectives for a project

• Project manager – Person with specific training or skills in tracking

costs and accomplishment of specific objectives

• Account manager – Keeps track of multiple Web sites in use by a

project



• Applications specialists – Maintain accounting, human resources, and

logistics software

• Web programmers– Design and write underlying code for dynamic

database-driven Web pages

• Web graphics designer– Person trained in art, layout, and composition– Understands how Web pages are constructed



• Customer service personnel– Help design and implement customer relationship

management activities

• Call center– Company that handles incoming customer

telephone calls and e-mails for other companies

• Systems administrator – Responsible for the system’s reliable and secure

operation


Postimplementation Audit

• Formal review of a project after it is up and running

• Gives managers a chance to examine:

– Objectives

– Performance specifications

– Cost estimates

– Scheduled delivery dates


Postimplementation Audit (continued)

• Allows internal team, business manager, and project manager to:

– Raise questions about the project’s objectives

– Provide feedback on strategies

• Final report should analyze:

– Project’s overall performance

– How well the project was administered

– Specific performance of the project team(s)


Summary• Plans for electronic commerce implementations

include:– Setting objectives

– Determining benefit and cost objectives which should be stated in measurable terms

• Project evaluation technique– Return on investment

• Determining an outsourcing strategy– Form an internal team that includes knowledgeable

individuals from within the company


Summary (continued)• Project management

– Formal way to plan and control specific tasks and resources used in a project

• Project portfolio management techniques– Used to track and make trade-offs among multiple

ongoing projects

• Critical staffing areas:– Business management– Application specialists– Systems administration

Documents

Chapter 12: Planning for Electronic Commerce Electronic Commerce, Seventh Annual Edition