1. Chapter 14 E-Commerce Strategy and Global EC

2. Learning Objectives Describe the strategic planning process.
Describe the purpose and content of a business plan.
Understand how e-commerce impacts the strategic planning process.
Understand how to formulate, justify, and prioritize EC applications.
Describe strategy implementation and assessment, including the use of metrics.
Evaluate the issues involved in global EC.
Analyze the impact of EC on small and medium-sized businesses.

3. Planning is everything ...
Vision
develop
Customers,
market,
competition
guide
Strategy
create
Tactic
Knowledge ---> Intelligence ---> Wisdom
Attention economy:
Time and attention are the scarcest resource. The completion for available attention is heating up; investing it wisely became a competence of increasing value.
Only wisdom can guide effective decisions on how we invest our attention.
Experience economy:
Today’s customers are looking for more than products/services; they want to have a memorable experience of buying and using them for achieving their aspirations.
One of the largest buying powers in the US, “cultural creative” value transformation higher than other types of market offers.
Products,
Services N

4. 14.1 Organizational Strategy: Concepts and Overview
Strategy: A broad-based formula for how a business is going to compete, what its goals should be, and what plans and policies will be needed to carry out those goals
Strategy is also about making strong decisions about what not to do

5. Organizational Strategy (cont.)
Profitability and economic value is determined by establishing a unique value proposition
Strategy is focused on questions about:
organizational fit
profitability
value
Value proposition: The benefit that a company’s products or services provide to customers; the consumer need that is being fulfilled

6. Organizational Strategy: Concepts and Overview
Strategy and the Web Environment
e-commerce strategy (e-strategy)
The formulation and execution of a vision of how a new or existing company intends to do business electronically

7. Organizational Strategy: Concepts and Overview
Strategy and the Web Environment
strategic information systems planning (SISP)
A process for developing a strategy and plans for aligning information systems (including e-commerce applications) with the business strategies of an organization

8. Organizational Strategy
Exhibit The Strategic planning Process
Strategy
Initiation
(section 14.4)
Strategy
Assessment
(section 14.7)
Strategy
Formulation
(section 14.5)
Strategy
Implementation
(section 14.6)

9. Systems Development Life Cycle (SDLC)
Systems Investigation
Product:
Feasibility Study
Understand the
Business
Problem or
Opportunity
Systems Analysis
Product:
Functional Requirements
Develop an
Information
System
Solution
Systems Design
Product:
System Specifications
The traditional information systems development cycle is based upon the stages in the systems approach to problem solving, where each step is interdependent on the previous step:
Systems Investigation. This stage may begin with a formal information systems planning process to help sort out choices from many opportunities. Typically, due to the expense associated with information systems development this stage includes a cost/benefit analysis as part of a feasibility study.
Systems Analysis. This stage includes an analysis of the information needs of end users, the organizational environment, and any system currently used to develop the functional requirements of a new system.
Systems Design. This stage develops specifications for the hardware, software, people, network, and data resources of the system. The information products the system is expected to produce are also designated.
Systems Implementation. Here the organization develops or acquires the hardware and software needed to implement the system design. Testing of the system and training of people to operate and use the system are also part of this stage. Finally, the organization converts to the new system.
Systems Maintenance. In this stage, management uses a postimplementation review process to monitor, evaluate, and modify the system as needed.
Implement
the Information
System
Solution
Systems Implementation
Product:
Operational System
Systems Maintenance
Product:
Improved System

10. Strategic planning process
Strategy initiation: The initial phase of strategic planning in which the organization examines itself and its environment
Value proposition: The benefit that a company’s products or services provide to customers; the consumer need that is being fulfilled

11. … IT Role? Value propositions fulfill Strategic intent Strategy
competition
structure/
culture
Essentials for a Successful Enterprise
Value propositions
1. Business model
Business landscape
Internal/
External
Consistent
fulfill
2. Core competencies
Strategic intent
future positioning
Finance
Management
Process
H/R
Technology …
Analysis
(Porter, SWOT)
Strategy
Positioning
Corporate strategy
Business strategy
Functional strategy
Positioning on product/market
Differentiation/choice of competitive advantage
Competitive posture
Industry characteristics，
Market growth，
Demand characteristics，
Barrier of entry，etc.
Business model is a means (way)of creating business value.
-- In order to be successful and prosperous for a company, it should have a suitable, profitable model within its industry and business.
Business landscape is the relationships (pos. and negative) among the members of value chain and/or value net.
Strategic intent is the “future positioning” of an enterprise
Differentiation (BPR, Benchmarking, Best Practices): KSF - K_Survival_F - Strategic convergence - KSF
-- competitive advantage, sustainability, imitability
Competitive posture: collaboration or competition based on 产业特性, 市场的增长率，需求特性，进入障碍，等
3. Execution
IT Role? N

12. Strategic planning process (cont.)
Outcomes from strategy initiation phase
Company analysis (including value proposition)
Core competencies
Forecasts
Competitor (industry) analysis
Company analysis (including value proposition)
-- include the vision, purpose, value proposition, capabilities, constraints, strengths, and weaknesses of the company
Core competencies
-- it refers to the unique combination of the resources and experiences of a particular firm
Forecasts
Competitor (industry) analysis
-- SWOT

13. Strategic planning process (cont.)
Strategy formulation: The development of strategies to exploit opportunities and manage threats in the business environment in light of corporate strengths and weaknesses
Specific activities and outcomes from strategy formulation phase:
Business opportunities
Cost-benefit analysis
Risk analysis, assessment, and management

14. Strategic planning process (cont.)
Strategy implementation: The development of detailed, short-term plans for carrying out the projects agreed on in strategy formulation
Specific activities and outcomes from strategy implementation phase:
Business planning
Resource allocation
Project management

15. Strategic planning process (cont.)
Strategy assessment: The continuous evaluation of progress toward the organization’s strategic goals, resulting in corrective action and, if necessary, strategy reformulation
Specific measures called metrics are used to assess the progress of the strategy

16. Strategic planning tools
1. SWOT analysis: A methodology that surveys external opportunities and threats and relates them to internal strengths and weaknesses
Weaknesses
Opportunities
Threats
Strengths

17. Strategic planning tools (cont.)
2. Competitor analysis grid: A strategic planning tool that highlights points of differentiation between competitors and the target firm
3. Scenario planning: A strategic planning methodology that generates plausible alternative futures to help decision makers identify actions that can be taken today to ensure success in the future

18. Strategic planning tools (cont.)
4. Balanced scorecard: An adaptive tool that assesses organizational progress toward strategic goals by measuring performance in a number of different areas
5. (extra) Return on investment (ROI): A ratio of required costs and perceived benefits of a project or an application

19. showing the 4 P’s of a Marketing Mix
A Marketing Strategy –
showing the 4 P’s of a Marketing Mix
Product
Place C
Price
Promotion
Q: ask students how to sell (promote) a new product. Then try to direct the answers cover this 4P’s
Summary Overview (Exhibit 2-8)
Production and marketing work together to create utility: the power to satisfy human needs. There are five kinds of economic utility.
Key Issues
Form utility: provided when someone produces something tangible.
Task utility: provided when someone performs a task for someone else.
Time utility: having the product available when the customer wants it.
Place utility: having the product available where the customer wants it.
Discussion Question: Can you think of examples of businesses that excel in providing time and place utility?
Possession utility: obtaining a good or service and the right to use or consume it.

20. Overview of Marketing Strategy Planning Process
Narrowing down to focused strategy with quantitative and qualitative screening criteria
Customers
Needs and other
Segmenting
Dimensions
Place
Product
Price
Promotion C S. W. O. T.
Segmentation &
Targeting
Company
Objectives
&
Resources
Segmentation &
Positioning
Summary Overview (P;Exhibit 3-1)
In contrast to micro-marketing, macro-marketing’s emphasis is on how the whole marketing system works.
Key Issues
Every economy needs a macro-marketing system, because:
every consumer has a different set of needs;
variation exists among the types of producers that can meet needs;
system must efficiently match consumers and producers.
Macro marketing systems should be effective and fair, based on the perceptions of people in that particular economy.
Discussion Question: Which countries’ macro-marketing systems might be viewed by Americans as unfair or ineffective? Which countries’ citizens might think that the American macro-marketing system is unfair or ineffective? Try to think of specific mismatches between customer needs and the outputs of producers.
Competitors
Current
&
Prospective
External Market Environment
Technologies Political and Legal Cultural and Social Economic

21. 14.2 Business Planning in E-Commerce
A written document that identifies the company’s goals and outlines how the company intends to achieve those goals

22. Business Planning in E-Commerce
Outline of a business plan
Executive Summary
Business Description
Operations Plan
Financial Plan
Marketing Plan
Competitor Analysis

23. Business Planning in E-Commerce
Business Plan Fundamentals
Purposes for business plan
To acquire funding
To acquire nonfinancial resources
To obtain a realistic approach to the business
business case
A business plan for a new initiative or large, new project inside an existing organization

24. 14.3 E-Commerce Strategy: Concepts and Overview

25. IT Planning: The Relationship Between Business, IS, and IT Strategies
Business Strategy
Business Decisions
Objectives and Direction
Change IT
Impact
and
potential
Where is the
business
going and
why
Supports
business
Direction for
business
IS Strategy
What is
required
Business Based
Demand Orientated
Application Focused
Infrastructure
And services
Needs and
priorities
IT Strategy
How it
can be
delivered
Activity Based
Supply Orientated
Technology Focused

26. 14.4 E-Strategy Initiation
Issues in E-Strategy Initiation
Be a First Mover or a Follower?
Born-on-the-Net or Move-to-the-Net?
Determining Scope
Have a Separate Online Company?
Have a Separate Online Brand?

27. When to Perform Activities
First Movers
Advantages
Disadvantages
Build brand recognition
Control scarce resources
Establish networks
Early Economies-of-Scale
Newer technology
Higher development costs
Reverse engineering by competitors

28. Winners vs. Losers
What separates winners from losers in creating (ultimate) strategic competitive advantage is neither bleeding-edge technology nor “timing for market entry.”
It is from “value innovation”
utility
align
Value
Innovation
Firm
Winners and Losers (p.13)
What separates winners from losers in creating blue oceans is neither bleeding-edge technology nor “timing for market entry.” Sometimes these exist; more often, however, they do not.
Value innovation occurs only when companies align innovation with utility (usefulness), price, and cost positions. If they fail to anchor innovation with value in this way, technology innovators and market pioneers often lay the eggs that other companies hatch.
Innovation
price
cost

29. 14.5 E-Strategy Formulation
Selecting EC Opportunities
Incorrect approaches to EC strategy selection:
Indiscriminately funding many projects and hoping for a few winners
Betting it all in a single, high-stakes initiative
“Trend-surfing”
Productive approaches to EC strategy selection
Problem-driven strategy
Technology-driven strategy
Market-driven strategy
E-business maturity model

30. E-Strategy Formulation
Determining an Appropriate EC Application Portfolio Mix
The BCG model
An Internet portfolio map for selecting applications

31. E-Strategy Formulation
Exhibit Internet Portfolio Map
High
Sell
project
Adopt
project
Viability of Project
Reject
project
Redesign
project
Source: Reprinted by permission of Harvard Business Review. From “Finally, a way to Put Your Internet Portfolio I n Order.” by A. K. Tjan. Harvard Business Review, 2001.
If both viability and fit are low—the project is rejected
If both are high—the project is adopted
If fit is high but viability is low—the project is redesigned
If the fit is low but the viability is high—the project is sold
Low
Company Fit
High

32. E-Strategy Formulation
Risk Analysis and Management
e-commerce (EC) risk
The likelihood that a negative outcome will occur in the course of developing and operating an electronic commerce strategy
Security issues

33. E-Strategy Formulation
Issues in Strategy Formulation
How to handle channel conflict
How to handle conflict between the off-line and online businesses
Pricing strategy
Price comparison is easier
Buyers sometimes set the price
Online and off-line goods are priced differently
Differentiated pricing can be a pricing strategy
versioning
Selling the same good, but with different selection and delivery characteristics

34. 14.6 E-Strategy Implementation
Create a Web Team
project champion
The person who ensures the EC project gets the time, attention, and resources required and defends the project from detractors at all times
Start with a Pilot Project
Allocate Resources
Manage the Project

35. 14.6 E-Strategy Implementation
Strategy Implementation Issues
Application development
Partners’ strategy
outsourcing
The use of an external vendor to provide all or part of the products and services that could be provided internally

36. EC Strategy Implementation Issues (cont.)
Partners’ strategy
Outsourcing: The use of a third-party vendor to provide all or part of the products and services that could be provided internally
Two drivers
focus
on core business
value
shareholder

37. When to Outsourcing?
Which IS activities are strategic to our company's business?
Will outsourcing save us at least 15 percent?
Does our firm have access to the needed technology and expertise?
If not, outsourcing may be the answer to acquiring these resources.
Does outsourcing increase our firm's flexibility?
Does outsourcing increase our firm's flexibility?
Outsourcing shifts capital budgets to operating expenses, which can give a firm more financial flexibility. Furthermore, outsourcing may free up personnel to work on new systems, while the outsourcer maintains the existing ones. Also, it can increase the firm's flexibility for acquiring new technologies sooner.
Outsourcing is an important question facing today's IS executives. There are four activities that management should not outsource: strategy, the architecture of the system, the decisions about when to introduce IS into the organization, and management of the vendor.
Dr. Chen, Managing IT Reos. Thru Strategic Partnerships; A Portoflio Approach to IT Development
TM -37

38. Going Offshore for IS Development
When the MIS organization uses contractor services, or even builds its own data center in a distant land, it is engaged in offshoring, which is short for outsourcing offshore.
The types of tasks that are outsourced are usually those that can be well-specified; however, nowadays, the functions sent offshore range from routine IT transactions to increasingly higher end, knowledge-based processes.
Countries such as India, the Philippines, etc, offer “offshoring”, an alternative to in-house systems development
It raises the issue of what to send offshore, and what to keep within your enterprise MIS organization.
When the MIS organization uses contractor services, or even builds its own data center in a distant land, it is engaged in offshoring, which is short for outsourcing offshore.
Many Indian enterprises, for example, are well known for their use of the Capability Maturity Model (CMM) Level 5 software development processes, making them extremely reliable, and ultimately desirable as vendors.
Level 1 means that software development processes are immature, bordering on chaotic. Few processes are formally defined, and output is highly inconsistent.
Virtual work also raises the specter of offshoring, or foreign outsourcing of software development and computer services.

39. Decisions on Outsourcing
Strategic Grid for
Decisions on Outsourcing
Strategic Importance Y N Y
Competitive Advantage N

40. Decisions on Outsourcing
Strategic Grid for
Decisions on Outsourcing
Strategic Importance Y N
Insourcing
Leverage
(K-How to partners) Y
Competitive Advantage
Strategic
Alliance
Outsourcing N

41. Summary: Factors driving outsourcing
Cost savings
Qualified IT staff are difficult to find and retain
By bringing in outside expertise, management needs to focus less on IS operations and more on the information itself.
Outsourcers are specialists, should understand how to manage IS staff more effectively.
Outsourcers may have larger IS resources that provide greater capacity on demand.
Outsourcing can help a company overcome inertia to consolidate data centers that could not be consolidated by an internal group, or following a merger or acquisition.

42. E-Strategy Implementation
Business alliances and virtual corporations
virtual corporation (VC)
An organization composed of several business partners sharing costs and resources for the production or utilization of a product or service
co-opetition
Two or more companies cooperate together on some activities for their mutual benefit, even while competing against each other in the marketplace

43. EC Strategy Implementation Issues (cont.)
A Virtual Corporation (VC) is an Organization
Composed of several Business Partners that Uses
Information Technology to Link/Share People,
Assets, Ideas, Costs, and Resources
for the purpose of producing a product or service.
Virtual Companies are Adaptable and Opportunity-
Exploiting Organizations Providing World-Class
Excellence in Their Competencies and
Technologies.

44. VIRTUAL ORGANIZATION MANUFACTURING COMPANY DESIGN COMPANY CORE COMPANY
SALES & MARKETING
COMPANY
LOGISTICS
COMPANY
FINANCE COMPANY
“Virtual corporations” - organizations comprising many small, independent agents (or firms) serving as nodes on an information network, thereby allowing small, entrepreneurial units to achieve dramatic increases in scope and scale.
A Virtual Company is an Organization composed of several Business Partners that Uses Information Technology to Link/Share People, Assets, Ideas, Costs, and Resources for the purpose of producing a product or service.
Virtual Companies are Adaptable and Opportunity- Exploiting Organizations Providing World-Class Excellence in Their Competencies and Technologies.
(Excellence, Adaptability, Borderless, Opportunism, Technology, Trust-Based)
Such arrangements challenge both our legal and social definitions of an organization.
Just as IT has radically altered how we view the relationships between firms, it also challenges our notion of relationships within them -- telework, telcommute
creates (conditions)
IT > Changes
>
manages (as a tool)
(p.352) N
TM -44

45. Characteristics of Virtual Corporations
Excellence
Borderless
Adaptability
Six
Characteristics
of Virtual
Companies
Utilization: Resources of the individual business partners are frequently underutilized. A VC can utilize them more profitably.
“Virtual corporations” - organizations comprising many small, independent agents (or firms) serving as nodes on an information network, thereby allowing small, entrepreneurial units to achieve dramatic increases in scope and scale.
A Virtual Company is an Organization composed of several Business Partners that Uses Information Technology to Link/Share People, Assets, Ideas, Costs, and Resources for the purpose of producing a product or service.
Virtual Companies are Adaptable and Opportunity- Exploiting Organizations Providing World-Class Excellence in Their Competencies and Technologies.
(Excellence, Adaptability, Borderless, Opportunism, Technology, Trust-Based)
Such arrangements challenge both our legal and social definitions of an organization.
Just as IT has radically altered how we view the relationships between firms, it also challenges our notion of relationships within them -- telework, telcommute
creates (conditions)
IT > Changes
>
manages (as a tool)
(p.352)
Opportunism
Trust-Based
Technology
Utilization N

46. E-Strategy Implementation
Redesigning business processes
business process reengineering (BPR)
A methodology for conducting a comprehensive redesign of an enterprise’s processes

47. E-Strategy Implementation
business process management (BPM)
Method for business restructuring that combines workflow systems and redesign methods; covers three process categories—people-to-people, systems-to-systems, and systems-to-people interactions

48. 14.7 E-Strategy and Project Assessment
The Objectives of Assessment
Measure the extent to which the EC strategy and ensuing projects are delivering what they were supposed to deliver
Determine if the EC strategy and projects are still viable in the current environment
Reassess the initial strategy in order to learn from mistakes and improve future planning
Identify failing projects as soon as possible and determine why they failed

49. E-Strategy and Project Assessment
Measuring Results and Using Metrics
metric
A specific, measurable standard against which actual performance is compared
corporate (business) performance management (CPM, BPM)
Advanced performance measuring and analysis approach that embraces planning and strategy

50. E-Strategy and Project Assessment

51. E-Strategy and Project Assessment
Web analytics
The analysis of clickstream data to understand visitor behavior on a Web site

52. Define goals and value proposition
Exhibit Blueprint of the Performance Dashboard (P.664)
Step One:
Articulate Business
Strategy
Step Two:
Translate Strategy
Into Desired Outcome
Step Three:
Devise Metrics
Step Four:
Link Metrics to leading
And lagging indicators
Step Five:
Calculate Current and
Target Performance
Market opportunity
Opportunity
Competitive
environment
Market Opportunity
Market size and growth
Average age and income
Competitor concentration
Business Model
Unique value proportion?
Capabilities vs. competition
Business Model
Customer perceived benefit
Exclusive partnerships
$ invested in technology vs.
competition
For each metric,
determine the
metrics that it affects
and that affect it.
Map the linked set of
Metrics, indicating
leading and lagging
indicators.
Ensure that there is
a balance between
indicator.
For each metric,
calculate the level
of performance.
Determine target
level required to
meet outcomes
described in Step
Two.
Ensure that target
are consistent with
each other.
Implementing
and Branding
How to develop brand?
How to go to market?
Implementation
Customer brand awareness
System uptime percentage
Number of IT staff
% inaccurate orders
Define goals and value proposition
Develop resource system required to deliver the strategy
Source: Rayport, J., and B. J. Jaworski. Introduction to E-Commerce. Boston: McGraw-Hill, Copyright © McGraw-Hill companies, Inc.
Customer
How to acquire customers?
How will customers change?
How to improve the
customer experience?
Customer
Market share
Purchase/year
Success rate
Service requests/customers
Financial
Financial consequences in
terms of revenue, profit,
cost, and balance sheet?
Financial
Revenue
Profit
Earning per share
Debt to equity ratio

53. 14.8 Global E-Commerce Benefits and Extent of Operations
The major advantage of EC is the ability to do business at any time, from anywhere, and at a reasonable cost

54. Global E-Commerce Barriers to Global EC Cultural issues
Culture and language translation
Administrative issues
Geographic issues and localization
Economic issues

55. Global E-Commerce Breaking Down the Barriers to Global EC Be strategic
Know your audience
Localize
Think globally, act consistently
Value the human touch
Clarify, document, explain
Offer services that reduce barriers

56. E-Commerce in Small and Medium-Sized Enterprises
Advantages and Benefits of EC to Small and Medium-Sized Enterprises
Inexpensive sources of information
Inexpensive ways of advertising and conducting market research
Competitor analysis is easier
Inexpensive ways to build storefronts
Less locked into legacy technologies
Image and public recognition can be generated quickly
An opportunity to reach worldwide customers

57. 14.9 E-Commerce in Small and Medium-Sized Enterprises
Disadvantages and Risks of EC to Small and Medium-Sized Enterprises
Lack of financial resources to fully exploit the Web
Lack of technical staff or insufficient expertise in legal issues, advertising, etc.
Less risk tolerance than a large company.
Products not suitable for online sales
Reduced personal contact with customers
Inability to afford the advantages of digital exchanges

58. E-Commerce in Small and Medium-Sized Enterprises
Critical Success Factors for SMES
Product is critical
Payment methods must be flexible
Electronic payments must be secure
Capital investment should be kept to a minimum
Inventory control is crucial
Logistics services must be quick and reliable

59. E-Commerce in Small and Medium-Sized Enterprises
Critical Success Factors for SMES
Owner support
High visibility on the Internet
Join an online community
A Web site should provide all the services needed by consumers
Supporting SMES
Government agencies
Vendor service centers

60. The Key to successful business on the Internet ...
The key to successful business on the Internet is not the formulation of a conceptual strategy but the execution of that strategy -
the content owners must buy into the strategy and have the confidence of senior executives,
often the decisions the content owners make may have serious consequences to the organization and its strategy
Buy-in and open discussions are keys to success
Robert Plant, eCommerce: Formulation of Strategy, pp.67, 1999, Prentice Hall

61. Ownership Issues E-centric Structure + = Success Content
Content alone is not sufficient for success
Successes come from a balanced business model
that involves each business area content provider
contributing to the overall business model.
Content is Knowledge,
Knowledge is Power
Content is
Knowledge,
Knowledge is
Power. N

62. Managerial Issues
What is the strategic value of EC to the organization?
Who determines EC strategy?
What are the benefits and risks of EC?
Why do we need a plan?
What metrics should we use?

63. Managerial Issues What staffing is required? How can we go global?
Should the dot-com activities be spun off as a separate company?
Can we learn to love smallness?
Is e-business always beneficial?