Chapter 9: EC Strategy and Implementation

Chapter 9
EC Strategy and Implementation

www.prestonians.webnode.com 1
IBMs E-Business Strategy

Following four goals:
Lead IBMs strategy to transform itself into ebusiness Act as a catalyst to help facilitate that transformation Help business units become more effective in their use of the Internet/intranet
Internally With their customers
www.prestonians.webnode.com
IBMs E-Businesss Strategy (cont.)

Establish a strategy for the corporate Internet site
Including definition of how it should look, feel and be navigated Create an online environment most conducive to customers doing business with IBM
Leverage the wealth of e-business transformational case studies within IBM to highlight the potential of e-business to IBMs customers
IBMs E-Business Strategy (cont.)

IBM focused on key initiatives:
E-commerceselling more goods via the Web E-care for customersproviding all kinds of customer support online E-care for business partnersdedicated services providing faster, better information for these important groups
IBMs E-Business Strategy (cont.)

E-care for employeesimproving the effectiveness of IBMers by making the right information and services available to them E-procurementworking closely with IBM's customers and suppliers to improve the tendering process and to better administer the huge number of transactions involved E-marketing communicationsusing the internet to better communicate IBMs marketing stance
Essentials of a Business Strategy

Strategysearch for revolutionary actions that will significantly change the current position of a company, shaping its future
Finding the position in marketplace that best fits the firms skills Companys choice of new position that must be driven by its ability to find new trade-offs and leverage a new system of complementary activities into sustainable advantage
Essentials of a Business Strategy (cont.)

Levels of strategy
Corporate (or organizational) strategy IT strategy EC strategy EC functional strategies
Types of strategy
Strategic planning Strategic response Strategic innovation
These are interrelated

Figure 9-1 EC Strategy Alignment

Elements of a strategy
Forecasting Resource allocation Core competency Strategy formulation Environmental analysis Company analysis
Strategy landscape
Strategy initiation Strategy formulation Strategy implementation Strategy assessment
Four major steps Basis for chapter organization

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Figure 9-2 The Landscape of EC Strategy
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Information technology (IT) strategystrongly correlated with EC strategy because:
IT provides much of the infrastructure for EC EC applications must be integrated with IT applications EC applications may replace or improve existing IT applications EC organization may report to CIO Employees in IS department work on EC applications
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Strategy Initiation
First step is to review the organizations business and IT vision and mission Then, a vision and mission for EC can be generated Although these statements are usually very vague, they provide a springboard for generating more specific goals and objectives Begin with industry and competitive analysis
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Industry Analysis
Analyze position of the company in its industry and the competition Required for assessing the changes that EC project may introduce and its chances for success
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Industry Assessment
What industry is the EC initiative related to? Who are the customers? What are the current practices of selling and buying? Who are the major competitors? (How intense is the competition?) What e-strategies are used, by whom? How is value added throughout the value chain? What are the major opportunities and threats? Are there any metrics or best practices in place? What are the existing and potential partnerships for EC?
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Industry and Competitive Analysis

Monitoring, evaluating, disseminating of information from the external and internal environments SWOT Analysis
Strengths Opportunities Weaknesses Threats
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Figure 9-4 SWOT Diagram

INTERNAL EXTERNAL FACTORS FACTORS
Strengths (S)
SO Strategies Generate strategies here that use strengths to take advantages of opportunities ST Strategies Generate strategies here that use strengths to avoid threats
Weaknesses (W)
WO Strategies Generate strategies here that take advantage of opportunities by overcoming weaknesses
Opportunities (O)
Threats (T)
WT Strategies Generate strategies here that minimize weaknesses and avoid threats
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Strategy Formulation
Strategy formulation
Development of long-range plans
Organizations mission
Purpose or reason for the organizations 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
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EC Critical Success Factors

Special products or services traded Top management support Project team representing various functional areas Appropriate technical infrastructure Must have customer acceptance User-friendly Web interface Integration with the corporate legacy systems
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EC Critical Success Factors (cont.)

Security and control of the EC system Competition and market situation Conduct pilot project and capture corporate knowledge Use promotion and internal communication Cost of the EC project must be reasonable Need sufficient level of trust between buyers and sellers
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EC Opportunities
3 common mistakes in allocating EC investment
Let a thousand flowers bloomfund many projects indiscriminately Bet it allput everything on a single high-stake initiative Trend-surffollow the crowd toward the next big thing
All of the above can be risky and costly

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EC Opportunities (cont.)
Approaches to finding individual EC initiatives
Problem-drivenattempt to solve a problem such as:
Excess inventory Delivery delays
Technology-driventrying to use existing applications

Find problems no one knew existed Used by first movers
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EC Opportunities (cont.)
Approaches to finding individual EC initiatives
(cont.)
All can fail Market-drivenwaiting to see what the competitors will do Fear or greed-driven
Afraid if they do not practice EC they will be big losers Think they can make lots of money going into EC
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Figure 9-5
Approaches for Finding EC Opportunities
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Uncovering Specific EC Opportunities and Applications

Understand:
How digital markets operate How Internet customers behave How competition is created and what infrastructure is needed What the dynamics of EC are
Map opportunities that match current competencies and markets

Many opportunities to create new products and services
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Uncovering Specific EC Opportunities and Applications (cont.)

Opportunities for EC businesses
Matchmakingmatching buyers needs from seller without a prior knowledge of either one Aggregation of servicescombines several existing services to create a new service Bid/ask enginecreates a demand/supply floating pricing system Notification servicetells you when the service becomes available, or when it becomes cheaper
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Uncovering Specific EC Opportunities and Applications (cont.)

Smart needs adviserif you want , then you should Negotiationprice, quantity, or features are negotiated Up-sellsuggests an additional product or service Consultative adviserprovide tips on using the product
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Value Analysis and Proposition

A Value Analysis Approach
Value chaina series of activities a company performs to achieve its goal(s) Value added
Contributes 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
(Customers value proposition)

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Value Analysis and Proposition (cont.)

Value Analysis Questions
Representative Questions for Clarifying Value Chain Statements
Can 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?
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Value Analysis and Proposition (cont.)

Value Analysis Questions (cont.)
Representative question for creating new values
Can I offer additional information of transaction services 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?
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Return on Investment (ROI)

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 (intangibles) Some intangible benefits Effective marketing channel Increased sales Improved customer service
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Return on Investment and Risk Analysis

IT values
Financial valuesmeasurable to some degree Strategic valuescompetitive advantage in the market and benefits generated by business procedures Stakeholder valuesreflections of organizational redesign, organizational learning, empowerment, information technology architecture of a company, etc.
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Return on Investment and Risk Analysis (cont.)

IT risks risks
Competitive strategy riskexternal, due to joint venture, alliances or demographic changes among others Organizational risk and uncertaintyinternal to company
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Risk Analysis
Risk analysis program should
Identify all potential risks Assess potential damage Evaluate possibility of protection (insurance) Evaluate cost of protection vs. benefits
E-business risks
Strategic risks (e.g., competitive environment, wrong strategic direction) Financial risks (e.g., currency management and changes, unclear tax situations) Operational risks (e.g., technological changes and use of poor technology, security)
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EC Scenarios
Scenario planning is a methodology used in planning situations that involve much uncertainty, like that of EC (what-if)
Several different scenarios are created A team compiles several future events as possible influences on the outcome Securities are assessed and future projections are made Scenarios are compared
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EC Scenarios (cont.)
Four scenarios described by Hutchinson:
Open, global commerce scenarioremoval of intermediaries flattens the value chain Members-only subnet scenarioapplies mostly to B2B EC Electronic middlemen scenariobusiness and consumer market suppliers can make products/services available through independent third-party distribution channels
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EC Scenarios (cont.)
4 scenarios described by Hutchinson (cont.)
Consumer marketing channels scenario traditional methods collapse into a unified consumer-centric EC medium on the Internet
Broadcasting Advertising Consumer telephony
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Strategic Planning Framework

EC appears in three levels:
Level 1: Basic presencecompany uses the Internet to feature company information and provide brochures Level 2: Prospectingfeatures added
Search engine Extensive product information Links to services Ability to interact with the company Basic customer service
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Strategic Planning Framework (cont.)

Level 3: Business integrationmore features added
EC transaction capabilities Customization and personalization services Tools fostering creation of a community
Level 4: Business transformationsupplier and customer integration added

Multichannel integration Advanced customization and configuration Superb customer service
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Strategic Planning Framework (cont.)

Generic competitive strategy vs. cooperarative strategy
Competitive strategy assumes fighting against all competitors for the purpose of survival and winning Cooperarative strategy plans for working together with specific competitors to gain advantage against other competitors
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Generic Competitive Strategies

Offensive strategy usually takes place in an established competitors 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
Defensive strategies takes place in the firms own current market position as a defense against possible attack by a rival Raise structural barriers Lower the inducement for attack
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Generic 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
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Generic Cooperative Strategies (cont.)

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
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Implementation EC Plan
Starts with organizing a project team Undertake a pilot project (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
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The steps to successful EC programs

Step 1: Conduct Necessary Education and Training. Step 2: Review Current Distribution and Supply Chain Model. Step 3: Understand What Your Customers and Partners Expect from the Web. Step 4: Reevaluate the Nature of Your Products and Services. Step 5: Give a New Role to your Human Resources Department. Step 6: Extend Your Current Systems to the Outside. Step 7: Track New Competitors and Market Shares. Step 8: Develop a Web-centric Marketing Strategy. Step 9: Participate in the Creation and development of Virtual Marketplace. Step 10: Instill EC Management Style.
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Competitive Intelligence on the Internet

Internet can play a major role as a source of competitive information (competitive intelligence)
Review competitors Web sites Analyze related newsgroups Examine publicly available financial documents Ask the customersaward prizes to those who best describe your competitors strengths and weaknesses
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Competitive Intelligence on the Internet (cont.)

Information delivery services
Find out what it published on the Internet
Newsgroups Information about your competitors and their products
Known as push technologies
Corporate research companies provide information about your competitors:

Risk analysis Stock market analysts reports
Examine chat rooms

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Competitive Intelligence on the Internet (cont.)

Evolving experiences, need to be treated with care Overreliance on such information can be dangerous Using publicly available search engines is free, but may produce lots of irrelevant information Use specialty-build agents to search the overwhelming amount of information available
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Customized Competitive Intelligence

Current company information is available in their press releases and information published on their Web sites
Push technology services used to keep companies up-to-date by finding information for them
Searches should not replace in-depth background research Business intelligence companies offer packaged competitive analysis
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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 Which services to outsource
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Issues in Strategy Implementation

Partners strategy Many potential partners, may need several Companies that make B2B e-marketplaces consider:
Logistics Technology E-payment partners
How to coordinate B2B and B2C Selling direct is creating a B2C business Coordination between the two can be done in different ways
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Strategy and Project Assessment

Need for assessment
Find out if EC project delivers what it was supposed to deliver Adjust plans if necessary Determine if EC project is still viable Reassess initial strategy in order to learn from mistakes and improve future planning Identify failing projects as soon as possible and determine reasons for failure
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Strategy and Project Assessment (cont.)

Measuring results; watch for:
Goals may be unrealistic
Web server was inadequate to handle demand Expected cost savings were now realized
Exploding application requests from various functional areas in the company may follow
Review requirements and design documents Develop thorough checklist Pose a set of questions to assess impact of EC project
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Strategy and Project Assessment (cont.)

Finalization and adjustments
Actual ROI can be computed and compared to the projected one If sales expectations were not met, review marketing efforts Web assessment based on collected information
Corrective steps might be required Product offerings to pricing strategy Web promotion to review software vendors
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Managerial Issues
Considering the strategic value of EC Considering the benefits and risks Integration is critical Metrics are beneficial Pilot projects are useful Implementing policies and strategies must be written
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Chapter 9: EC Strategy and Implementation

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Chapter 9: EC Strategy and Implementation

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Chapter 9

EC Strategy and Implementation

IBMs E-Business Strategy

IBMs E-Businesss Strategy (cont.)

IBMs E-Business Strategy (cont.)

IBMs E-Business Strategy (cont.)

Essentials of a Business Strategy

Essentials of a Business Strategy (cont.)

These are interrelated

Figure 9-1 EC Strategy Alignment

Essentials of a Business Strategy (cont.)

Four major steps Basis for chapter organization

Figure 9-2 The Landscape of EC Strategy

Essentials of a Business Strategy (cont.)

Industry and Competitive Analysis

Figure 9-4 SWOT Diagram

3 main reasons for establishing Web site

Products with good fit for EC

EC Critical Success Factors

EC Critical Success Factors (cont.)

All of the above can be risky and costly

Technology-driventrying to use existing applications

Uncovering Specific EC Opportunities and Applications

Map opportunities that match current competencies and markets

Uncovering Specific EC Opportunities and Applications (cont.)

Uncovering Specific EC Opportunities and Applications (cont.)

Value Analysis and Proposition

(Customers value proposition)

Value Analysis and Proposition (cont.)

Value Analysis and Proposition (cont.)

Return on Investment (ROI)

Return on Investment and Risk Analysis

Return on Investment and Risk Analysis (cont.)

Strategic Planning Framework

Strategic Planning Framework (cont.)

Level 4: Business transformationsupplier and customer integration added

Strategic Planning Framework (cont.)

Generic Competitive Strategies

Generic Cooperative Strategies

Generic Cooperative Strategies (cont.)

The steps to successful EC programs

Competitive Intelligence on the Internet

Competitive Intelligence on the Internet (cont.)

Known as push technologies

Corporate research companies provide information about your competitors:

Examine chat rooms

Competitive Intelligence on the Internet (cont.)

Customized Competitive Intelligence

Issues in Strategy Implementation

Strategy and Project Assessment

Strategy and Project Assessment (cont.)

Strategy and Project Assessment (cont.)

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