Presentation on theme: "E-Business Strategies"— Presentation transcript:
1E-Business Strategies E-Commerce: Impacting the Way We do BusinessOctober 1-2, 2001, Nashville TNBob SmithAssociate Professor/Extension SpecialistDept. of Wood Science and Forest ProductsVirginia Tech
2Outline Why the Internet E-business Strategy ??? Determining Competitive AdvantageImplementing Strategy
4“When history is written, the creation of the Internet may be ranked alongside Johann Gutenberg’s printing press and Marconi’s radio as among the major advancements in human communication.”Roanoke Times, March 1, 1997
5What do these technologies have in common with the Internet? Printing pressTelephoneAutomobileAirplaneTelevisionOver-night deliveryFacsimile machineCellular phonePersonal computer
6Printed Material Mass reproduction Unknown audience Wider geographical areaOne-way communication
7Telephone Immediate communication Interactive two-way communication Customer prospectingWider geographical area
8Planes, Trains & Automobiles Personal communicationWider geographical baseTwo-way communicationPerception of above- average service
9Television Wide, mass audience One-way communication 60 second sound biteFirst visual electronic medium
10Over-night Delivery Provide immediate service Create perception of customer careJIT management systemsFederal Express
11FAX - iT Immediate transfer of written information Above average serviceOne-way promotionCloser to the customer
12Cellular Phone Mobility Instant access to customers Above average service24 hour contact
13Personal Computer Faster service Customer information Data bases Instant communication
14What do they have in Common? Wider distribution of informationUniform informationAssist in marketing function of companyMany were interactiveAllow for impression of above average serviceThey all have become standards in the industry
16DefinitionsElectronic Commerce (EC) is where business transactions take place via telecommunications networks, especially the Internet.Electronic commerce describes the buying and selling of products, services, and information via computer networks including the Internet.The infrastructure for EC is a networked computing environment in business, home, and government.E-Business describes the broadest definition of EC. It includes customer service and intrabusiness tasks. It is frequently used interchangeably with EC.Electronic Commerce, 2000
17What is an Intranet?When internet technology is used to create a private network within a company an intranet is formed.Allows for immediate transfer of technology between locations.Provides information such as product pricing, inventory lists, production schedules, and data bases for remote employees.
18What is an Extranet?An extranet is formed when the company allows outsiders into the intranet pages.Customers can order on line.Reduces paperworkMinimizes errorsProvides better customer servicesShortens delivery timesSupport distributors
19What’s Needed Designated computer Software to communicate with InternetA connection into a network that accesses the InternetOr* Hire a commercial service andhave a connection to the network
20Cost $1500 computer $300 Software Home page design - $100/hr - ? Commercial Internet access - >$100/month
21Current Users Average age is 40 45% female 45% married 1/3 computer field, 1/4 educational & 20% professional>40% have made purchase over $100Source:
22What’s Being Sold Computer software Computer hardware Books Music GiftsTravelClothes>$100 billion sold in 1999
23What’s Being Sold?Source: Forester Research Inc. 1998
24Technology Update (It took this many years to reach 50 million users) Radio - 38 yearsTelevision - 13 yearsInternet - 4 years
26The Benefits of Electronic Commerce Benefits to OrganizationsExpands the marketplace to national and international marketsDecreases the cost of creating, processing, distributing, storing and retrieving paper-based informationAllows reduced inventories and overhead by facilitating “pull” type supply chain managementThe pull type processing allows for customization of products and services which provides competitive advantage to its implementersElectronic Commerce, 2000
27Benefits to Organizations Reduces the time between the outlay of capital and the receipt of products and servicesSupports business processes reengineering (BPR) effortsLowers telecommunications cost - the Internet is much cheaper than value-added networks (VANs)Electronic Commerce, 2000
28Benefits to CustomersEnables customers to shop or do other transactions 24 hours a day, all year round from almost any locationProvides customers with more choicesProvides customers with less expensive products and services by allowing them to shop in many places and conduct quick comparisonsAllows quick delivery of products and services in some cases, especially with digitized productsElectronic Commerce, 2000
29Benefits to CustomersCustomers can receive relevant and detailed information in seconds, rather than in days or weeksMakes it possible to participate in virtual auctionsAllows customers to interact with other customers in electronic communities and exchange ideas as well as compare experiencesElectronic commerce facilitates competition, which results in substantial discounts.Electronic Commerce, 2000
30Benefits to SocietyEnables more individuals to work at home, and to do less traveling for shopping, resulting in less traffic on the roads, and lower air pollutionAllows some merchandise to be sold at lower prices benefiting the poor onesEnables people in Third World countries and rural areas to enjoy products and services which otherwise are not available to themFacilitates delivery of public services at a reduced cost, increases effectiveness, and/or improves qualityElectronic Commerce, 2000
31Why? Works 24 hours a day Offers 2 way communication Unlimited access Interactive advertisingSupports current business efforts
32Electronic MarketsA market is a network of interactions and relationships where information, products, services, and payments are exchanged. The market handles all the necessary transactions.An electronic market is a place where shoppers and sellers meet electronically.In electronic markets, sellers and buyers negotiate, submit bids, agree on an order, and finish the execution on- or off-line.Electronic Commerce, 2000
33Electronic Commerce is Interdisciplinary MarketingComputer sciencesConsumer behavior and psychologyFinanceEconomicProduction/LogisticManagement information systemsAccounting and auditingManagementBusiness law and ethicsElectronic Commerce, 2000
34Major Business Pressures Market andeconomic pressuresStrong competitionGlobal economyRegional trade agreements (e.g. NAFTA)Extremely low labor cost in some countriesFrequent and significant changes in marketsIncreased power of consumersSocietal andenvironmental pressuresChanging nature of workforceGovernment deregulation of banking and other servicesShrinking government budgets subsidesIncreased importance of ethical and legal issuesIncreased social responsibility of organizationsRapid political changesRapid technological obsolescenceIncrease innovations and new technologiesInformation overloadRapid decline in technology cost vs. performance ratioTechnological pressuresElectronic Commerce, 2000
35Competition in Electronic Commerce Impacts on competitionLower buyers’ search costSpeedy comparisonsDifferentiationLower priceCustomer serviceDigital products lack normal wear and tearElectronic Commerce, 2000
36Competition in Electronic Commerce Perfect competitionEnable many buyers and sellers to enter the market at little or no cost (no barriers to entry)Not allowing any buyers and sellers to individually influence the marketMake certain products homogeneous (no product differentiation)Supply buyers and sellers with perfect information about the products and the market participants and conditionsElectronic Commerce, 2000
37Competition in Electronic Commerce Observations regarding competitivenessThere will be many new entrantsThe bargaining power of buyers is likely to increaseThere will be more substitute products and servicesThe bargaining power of suppliers may decreaseThe number of industry competitors in one location will increaseElectronic Commerce, 2000
39Strategy is the roadmap to success. Strategy answers the question what business are you in?Strategy determines how you compete within the market you are in.Strategy focuses the company in a unified direction.
40The goal is to develop a sustainable competitive advantage The goal is to develop a sustainable competitive advantage. There are generally two forms of competition, Operating effectiveness (production) or Competitive position (marketing)
41Competitive Advantage Can Be Achieved By: Concentrating on particular market segments (niche markets)Offering products which differ from the competition (product differentiation)Using alternative distribution channels and manufacturing processesEmploying selective pricing and fundamentally different cost structures
42Generic Strategies Porter gives us a little more help in strategy formulation by providing three generic strategies which, if successfully implemented, can allow a firm to stake out a defended position in the marketplace. These strategies are:Overall cost leadershipDifferentiationFocus
44Differentiation Key idea: Create something about your product that is perceived industry wide as being unique Bases for Differentiation:QualityDeliveryCredit and TermsServiceTrainingReputation / Brand ImageTech. InformationThe Actual ProductPriceEtc.
45Differentiation can provide insulation against competitors because of brand loyalty by customers and a resulting lower sensitivity to price
46Focus Key Idea: Focus on a particular buyer group, segment of the product line, or geographic market
47This strategy is built around serving a particular target market very well. The premise is that a firm is able to serve its narrow strategic target more effectively or efficiently than competitors who are competing more broadly By effectively implementing this strategy a firm can achieve differentiation by better meeting the market needs or lower costs through specialization, or both
48Focus your message Pick your theme to say something special/unique about your firm, and stick to it. Unique productSpeedy DeliverySuper Service?Stay Committed!
51For Successful Strategic Competition, Select Arenas That Are: Sheltered from changes in the business environmentAdvantaged to provide protection from intense global competitionElectronic Commerce, 2000
53Industry and competitive analysis Strategic PlanningIndustry and competitive analysisImplement-ationplanStrategy formulationStrategy reassessmentElectronic Commerce, 2000
54Company and Competitive Analysis Monitoring, evaluating, disseminating of information from the external and internal environmentsSWOT AnalysisWeaknessesStrengthsThreatsOpportunitiesElectronic Commerce, 2000
55SWOTStrengths – those factors of the company that provide for its success. A good reputation, quality products or low cost producer.Weaknesses – those factors that are a disadvantage for the company. A high cost producer, a high employee turnover, or much competition.Opportunities – those factors that are outside the company’s control, but are areas in which they could capitalize. A changing demographic profile, competition closing plants or e-business allowing for wider distribution of products.Threats – those items outside the control of the company and that may hinder it. Items such as new laws, a recession or increased competition.
56Company Analysis Strengths (S) Weaknesses (W) Production Marketing INTERNAL FACTORSStrengths (S)Weaknesses (W)ProductionMarketingElectronic Commerce, 2000
58Company and Competitive Analysis INTERNAL FACTORSStrengths (S)Weaknesses (W)EXTERNAL FACTORSWO Strategies Generate strategies here that take advantage of opportunities by overcoming weaknessesSO Strategies Generate strategies here that use strengths to take advantages of opportunitiesOpportunities (O)ST Strategies Generate strategies here that use strengths to avoid threatsWT Strategies Generate strategies here that minimize weaknesses and avoid threatsThreats (T)Electronic Commerce, 2000
59Strategic Questions The Company What is your uniqueness? Where are you vulnerable?Why are you losing existing customers?Where is the greatest value created in the company?What are the most common objections you hear from customers?Electronic Commerce, 2000
60Strategic Questions The competition The market Who are the top 3 competitors?What are their strengths?Where are they vulnerable?Where can you attack?How do you compare on price, service, quality, etc?The marketWhat are 3 important trends?How is the industry changing?How many market segments do you serve?Where is the greatest growth potential?Which of your customers are doing well and why?Electronic Commerce, 2000
61Competitive Strategies Offensive strategy— usually takes place in an established competitor’s marketFrontal Assault— attacker must have superior resources and willingness to persevereFlanking Maneuver— attack a part of the market where the competitor is weakBypass Attack— cut the market out from under an established defender by offering a new type of product that makes the competitor’s product unnecessaryEncirclement— greater product variety and/or serves more marketsGuerrilla Warfare— use of small, intermittent assaults on different market segments held by the competitorElectronic Commerce, 2000
62Competitive Strategies Defensive strategies— takes place in the firm’s own current market position as a defense against possible attack by a rivalLower the probability of attackDivert attacks to less threatening avenuesLessen the intensity of an attackMake competitive advantage more sustainableElectronic Commerce, 2000
63Cooperative Strategies Competitive StrategiesCooperative StrategiesCollusion— 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 beneficialJoint Venture— a way to temporarily combine the different strengths of partners to achieve an outcome of value to bothValue-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 advantageElectronic Commerce, 2000
64Strategic Summary Focus your efforts! Define your competitive advantage!Have a clear strategy!Do it!
66Questions Savings Objectives Competitive advantage PresentationObjectivesBenefits to customersCurrent business
67Questions What are you producing and selling? How are you unique? Why should the customer buy from you?How are you going to reach the customer?What’s success?
68Objectives Introduce new product or service Advertising existing businessSupplement existing business programReach broader customer baseProvide better serviceInformation exchangeReduce transaction costs
69Current Customers Benefits Easier access to information Shipping schedulesDiscountsInvoicingInventories
71$ Savings Support time Order entry Promotion response E-mail Shipping and invoicing informationCustomer lists$
72Home Page KISS Keep it simple, stupid 1. Decide what information you want to share2. Grab their attention quickly3. Present information in simple, logical fashion4. Do not put lots of graphics on first page5. Should be pleasant to the eye6. Each page should have company name, logo, e mail address and toll-free phone number
74Why Do You Need Promotion? Just because you build it, doesn’t mean they will come.You are competing against not only your market area, but the entire world.Your current and future customers need to be able to find you.
75HOW? List homepage address on all current advertising. Put on all publicitynewslettersletterheadbusiness cardsbilling statementsfax cover sheetsRegister with search engines.Link to other sites and your association sites.Advertise on the web.
76Link to? Your trade associations Suppliers Customers Complementary products
77Advertising on the Web To build awareness Develop prospects Meet customer needsGenerate ordersBuild customer relationsTest market
78Good Internet Advertising Includes: Clear message and identification on 1st page.Facilitates easy access to further information.The advertisement downloads quickly.Provides the right information.Product description, payment options, and contact information.
80The Advantage for Small Businesses Inexpensive source of informationInexpensive way of advertisingInexpensive way of conducting market researchInexpensive way to build (or rent) a storefrontLower transaction costElectronic Commerce, 2000
81The Advantage for Small Businesses Niche market, specialty products (cigars, wines, sauces) are the bestImage and public recognition can be accumulated fastInexpensive way of providing catalogsInexpensive way to reach worldwide customersElectronic Commerce, 2000
82The Risks and Disadvantages for Small Businesses Disadvantage when a commodity is the product (for example, CDs)No more personal contact which is a strong point of a small businessNo advantage being in a local communityElectronic Commerce, 2000
83The Risks and Disadvantages for Small Businesses Lack of expertise in legal issues, advertisementLack of resources to fully exploit the WebLess risk tolerance than a large companyElectronic Commerce, 2000
84Success Factors for Small Businesses Niche productsSmall volumeCapital investment must be smallInventory should be minimal or non-existentElectronic payments schema existPayment methods must be flexibleElectronic Commerce, 2000
85Success Factors for Small Businesses Logistical services must be quick and reliableThe Web site should be submitted to directory-based search engine services like Yahoo in a correct wayJoin an online service or mall and do banner exchangeDesign a Web site that is functional and provides all needed services to consumersElectronic Commerce, 2000
86SummarySuccessful firms will integrate the E-business into their company’s strategy.Used properly, E-business will be one more method of increasing income and profits.It is just a matter of time before it will be as common as the fax, cell-phone and digital camera.
87ReferencesElectronic Commerce: A Managerial Perspective By Efraim Turban, Jae Lee, David King, and H. Michael Chung. Prentice Hall, Upper Saddle Rivern New Jersey. (slides are marketed).E-Business Revolution By Daniel Amor. Prentice Hall,Upper Saddle Rivern New Jersey.Strategic Internet Marketing Tom Vassos. MacMillan Computer Publishing, Indianapolis, IN.E-Business Readiness By James Craig and Dawn Jutla. Anderson-Wesley. Upper Saddle Rivern New Jersey.