Ecommerce Chap 09

1© Prentice Hall, 2000

Chapter 9EC Strategy and

Implementation Plan


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


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.


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


Strategic Planning for EC

Industry and competitive

analysis

Strategy formulation

Strategy reassessment

Implement-ationplan


Industry and Competitive Analysis

Monitoring, evaluating, disseminating of information from the external and internal environments

SWOT Analysis

Strengths

Weaknesses

Opportunities

Threats


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.)


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


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


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.)


Value Analysis Questions


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?



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?”


Return on Investment and Risk Analysis


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


Return on Investment and Risk Analysis


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


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


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


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.)


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


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?


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


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


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


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


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


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


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


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


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


Web Hosting

Hosting Internally Vs. Hosting Using ISP

System Costbandwidth capabilities and specificationsfirewall systemwireless deliverybuy, rent, or leasemaintenance, upgrade, and service of the

equipment


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


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


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


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.)


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.)


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


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


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?


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?


Management Issues

Considering the strategic value of EC

Conducting strategic planning

Considering the risks

Integration

Pilot project

Education

Ecommerce Chap 09