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Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Chapter 14 E-Commerce Strategy and Global EC.

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Presentation on theme: "Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Chapter 14 E-Commerce Strategy and Global EC."— Presentation transcript:

1 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Chapter 14 E-Commerce Strategy and Global EC

2 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Learning Objectives 1.Describe the strategic planning process. 2.Describe the purpose and content of a business plan. 3.Understand how e-commerce impacts the strategic planning process. 4.Understand how to formulate, justify, and prioritize EC applications. 5.Describe strategy implementation and assessment, including the use of metrics. 6.Evaluate the issues involved in global EC. 7.Analyze the impact of EC on small and medium-sized businesses.

3 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Planning is everything... Products, Services Customers, market, competition Vision guide Strategy create develop Tactic N

4 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce 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 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce 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

6 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce 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 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce 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 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Strategy Initiation (section 14.4) Strategy Initiation (section 14.4) Strategy Assessment (section 14.7) Strategy Assessment (section 14.7) Strategy Implementation (section 14.6) Strategy Implementation (section 14.6) Strategy Formulation (section 14.5) Strategy Formulation (section 14.5) Exhibit 14.1 The Strategic planning Process Organizational Strategy

9 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Systems Development Life Cycle (SDLC) Systems Implementation Product: Operational System Systems Implementation Product: Operational System Systems Investigation Product: Feasibility Study Systems Investigation Product: Feasibility Study Systems Analysis Product: Functional Requirements Systems Analysis Product: Functional Requirements Systems Design Product: System Specifications Systems Design Product: System Specifications Systems Maintenance Product: Improved System Systems Maintenance Product: Improved System Understand the Business Problem or Opportunity Develop an Information System Solution Implement the Information System Solution

10 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce 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 companys products or services provide to customers; the consumer need that is being fulfilled

11 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Value propositions 1. Business model 2. Core competencies competition structure/ culture Strategic intent Finance ManagementProcessH/RTechnology … Strategy Positioning on product/market Differentiation/choice of competitive advantage Competitive posture Industry characteristics Market growth Demand characteristics Barrier of entry etc. fulfill IT Role? N Consistent Essentials for a Successful Enterprise Analysis (Porter, SWOT) Corporate strategy Business strategy Functional strategy Business landscape Internal/ External future positioning Positioning 3. Execution

12 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Strategic planning process (cont.) Outcomes from strategy initiation phase –Company analysis (including value proposition) –Core competencies –Forecasts –Competitor (industry) analysis

13 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce 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 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce 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 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Strategic planning process (cont.) Strategy assessment: The continuous evaluation of progress toward the organizations 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 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Strategic planning tools 1. SWOT analysis: A methodology that surveys external opportunities and threats and relates them to internal strengths and weaknesses

17 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce 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 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce 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 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce A Marketing Strategy – showing the 4 Ps of a Marketing Mix Place ProductPricePromotion C

20 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Overview of Marketing Strategy Planning Process PlaceProduct PricePromotion C External Market Environment Technologies Political and Legal Cultural and Social Economic Narrowing down to focused strategy with quantitative and qualitative screening criteria Customers Needs and other Segmenting Dimensions Company Objectives & Resources Competitors Current & Prospective Segmentation & Positioning Segmentation & Targeting S. W. O. T.

21 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce 14.2 Business Planning in E- Commerce business plan A written document that identifies the companys goals and outlines how the company intends to achieve those goals

22 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Business Planning in E-Commerce Outline of a business plan –Executive Summary –Business Description –Operations Plan –Financial Plan –Marketing Plan –Competitor Analysis

23 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce 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 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce 14.3 E-Commerce Strategy: Concepts and Overview

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

26 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce 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 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce 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 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce 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 Firm price utility cost Innovation Value Innovation Value Innovation align

29 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce 14.5 E-Strategy Formulation Selecting EC Opportunities –Incorrect approaches to EC strategy selection: 1.Indiscriminately funding many projects and hoping for a few winners 2.Betting it all in a single, high-stakes initiative 3.Trend-surfing –Productive approaches to EC strategy selection 1.Problem-driven strategy 2.Technology-driven strategy 3.Market-driven strategy 4.E-business maturity model

30 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce E-Strategy Formulation Determining an Appropriate EC Application Portfolio Mix –The BCG model –An Internet portfolio map for selecting applications

31 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Sell project Sell project Reject project Reject project Adopt project Adopt project Redesign project Redesign project Company Fit Viability of Project Exhibit 14.6 Internet Portfolio Map Low High E-Strategy Formulation

32 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce 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 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce 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 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce 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 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce 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 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce 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 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce 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? Dr. Chen, Managing IT Reos. Thru Strategic Partnerships; A Portoflio Approach to IT Development TM -37

38 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce 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.

39 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Strategic Grid for Decisions on Outsourcing Strategic Importance Y Y N N Competitive Advantage

40 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Strategic Importance Y Y N N Competitive Advantage Insourcing Strategic Alliance Outsourcing Leverage (K-How to partners) Strategic Grid for Decisions on Outsourcing

41 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Summary: Factors driving outsourcing 1.Cost savings 2.Qualified IT staff are difficult to find and retain 3.By bringing in outside expertise, management needs to focus less on IS operations and more on the information itself. 4.Outsourcers are specialists, should understand how to manage IS staff more effectively. 5.Outsourcers may have larger IS resources that provide greater capacity on demand. 6.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 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce 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 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce 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. 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 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce SALES & MARKETING COMPANY FINANCE COMPANY LOGISTICS COMPANY DESIGN COMPANY MANUFACTURING COMPANY VIRTUAL ORGANIZATION CORE COMPANY TM -44 N

45 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Characteristics of Virtual Corporations Borderless Opportunism Adaptability Trust-Based Excellence Technology Six Characteristics of Virtual Companies N Utilization

46 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce E-Strategy Implementation –Redesigning business processes business process reengineering (BPR) A methodology for conducting a comprehensive redesign of an enterprises processes

47 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce 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 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce 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 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce 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 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce E-Strategy and Project Assessment

51 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce E-Strategy and Project Assessment Web analytics The analysis of clickstream data to understand visitor behavior on a Web site

52 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Exhibit 14.8 Blueprint of the Performance Dashboard (P.664) Step One: Articulate Business Strategy Step One: Articulate Business Strategy Step Three: Devise Metrics Step Three: Devise Metrics Step Four: Link Metrics to leading And lagging indicators Step Four: Link Metrics to leading And lagging indicators Step Five: Calculate Current and Target Performance Step Five: Calculate Current and Target Performance Market opportunity Opportunity Competitive environment Market opportunity Opportunity Competitive environment Business Model Unique value proportion? Capabilities vs. competition Business Model Unique value proportion? Capabilities vs. competition Implementing and Branding How to develop brand? How to go to market? Implementing and Branding How to develop brand? How to go to market? Customer How to acquire customers? How will customers change? How to improve the customer experience? Customer How to acquire customers? How will customers change? How to improve the customer experience? Financial Financial consequences in terms of revenue, profit, cost, and balance sheet? Financial Financial consequences in terms of revenue, profit, cost, and balance sheet? Market Opportunity Market size and growth Average age and income Competitor concentration Market Opportunity Market size and growth Average age and income Competitor concentration Business Model Customer perceived benefit Exclusive partnerships $ invested in technology vs. competition Business Model Customer perceived benefit Exclusive partnerships $ invested in technology vs. competition Implementation Customer brand awareness System uptime percentage Number of IT staff % inaccurate orders Implementation Customer brand awareness System uptime percentage Number of IT staff % inaccurate orders Customer Market share Purchase/year Success rate Service requests/customers Customer Market share Purchase/year Success rate Service requests/customers Financial Revenue Profit Earning per share Debt to equity ratio Financial Revenue Profit Earning per share Debt to equity ratio 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 leading and lagging indicator. 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 leading and lagging 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. 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. Step Two: Translate Strategy Into Desired Outcome Step Two: Translate Strategy Into Desired Outcome Define goals and value proposition Develop resource system required to deliver the strategy

53 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce 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 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Global E-Commerce Barriers to Global EC –Cultural issues –Culture and language translation –Administrative issues –Geographic issues and localization –Economic issues

55 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce 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 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce 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 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce 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 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce 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 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce 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 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce 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 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Ownership Issues E-centric Structure + = Success 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 is Knowledge, Power. Content N

62 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Managerial Issues 1.What is the strategic value of EC to the organization? 2.Who determines EC strategy? 3.What are the benefits and risks of EC? 4.Why do we need a plan? 5.What metrics should we use?

63 Dr. Chen, Electronic Commerce Pearson/Prentice Hall & Dr. Chen, Electronic Commerce Managerial Issues 6.What staffing is required? 7.How can we go global? 8.Should the dot-com activities be spun off as a separate company? 9.Can we learn to love smallness? 10.Is e-business always beneficial?


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