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eBusiness Lecture 2
Dr Ailsa Kolsaker
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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)
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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
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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
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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
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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
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Strategic Considerations……
In Chaffey, 2007:30
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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
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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)
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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 )
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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
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Collaboration & Integration
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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
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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
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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
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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
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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
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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)
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ra egy rocess:
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- ra egy rocess:Starting with the FundamentalQuestions
• Where are we now?
• Where do we want to
go?
• How do we get there?
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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
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In Search of SuperiorPerformance
Distinctive
Competences
EfficiencyCustomer
responsive-
ness
InnovationQuality
•Low Cost•Differentiation
•Niche
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Disintermediating the Value Chain
Producer
Wholesaler
Retailer
Customer
Removing others along the channel structure by
internalising part of the value chain
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Example
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Example
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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
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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
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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
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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
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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
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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?
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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