Slide 5.1 Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007 Chapter 5 E-business strategy

Slide 5.2 Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007 Learning outcomes Follow an appropriate strategy process model for e-business; Apply tools to generate and select e-business strategies; Outline alternative strategic approaches to achieve e-business.

Slide 5.3 Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007 Management issues How does e-business strategy differ from traditional business strategy? How should we integrate e-business strategy with existing business and IS strategy? How should we evaluate our investment priorities and returns from e-business?

Slide 5.4 Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007 Michael Porter on the Internet ‘The key question is not whether to deploy Internet technology – companies have no choice if they want to stay competitive – but how to deploy it.’ Porter, M. (2001) Strategy and the Internet, Harvard Business Review, March 2001, 62–78.

Slide 5.5 Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007 Alternative definitions of strategy What is strategy? –“Defines how we will meet our objectives” –“Sets allocation of resources to meet goals” –“Selects preferred strategic options to compete within a market” –“Provides a long-term plan for the development of the organization”.

Slide 5.6 Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007 Figure 5.1 Different forms of organizational strategy

Slide 5.7 Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007 e-Business development Going Forward Environment Support LevelsEnterprise Development Levels Taxation & Finance Legal & Regulatory Security & Trust Research & Development National Infrastructure Support Services Skills Education ICT adoption & use Investment in e-Business Growth in numbers of e-Businesses Numbers employed National Strategy E-Business Market Size E-Business Export growth E-business Development Number of e-Commerce transcations Electronic Business Processes E-Government

Slide 5.8 Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007 Key Technology Trends and Strategies Going Forward eBusiness evolution and business benefit Intranet / Web- mail Web page Order taking, making and tracking eBusiness functionality implemented Supplier Integration Full supply chain integration INFORM INTERACT TRANSACT INTEGRATE

Slide 5.9 Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007 What is working? Pornography Travel / Tourism Retail - items that don’t need personal touch - objectivity in product quality and performance –music, books, gifts, Computers, electronic items –Auctions Real Estate - houses and investment properties. Customer support services More efficient and effective processes between businesses (B 2 B)

Slide 5.10 Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007 What is not working? Items which require “touch and trial” –Luxury goods –Clothes - beyond Tshirts Groceries - it works for some people but market is restricted Note: Many OFF line factors determine success of Online service. Eg. Transport network, customer profiles,

Slide 5.11 Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007 Sell-side E-commerce strategy (Chapters 8 & 9) or E-marketing/E-CRM Strategy Sell-side e-commerce is a channel strategy Objectives for online contribution percentage should drive our strategy Our e-commerce strategy defines how we should: Hit our channel leads & sales targets –Acquisition, Conversion, Retention, Service, Profitability Communicate benefits of using this channel Prioritise products available through channel Prioritise audiences targeted through channel Select partners for this channel Channel strategy thrives on differentials BUT, need to manage channel integration.

Slide 5.12 Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007 Buy-side E-commerce strategy (Chapters 6 & 7) or E-supply chain management strategy Buy-side e-commerce strategy is about maximizing operational efficiencies while improving customer service quality Operational efficiency KPIs should drive our strategy Our buy-side e-commerce strategy defines how we should: Automate internal processes Link internal resource management systems with external purchasing systems Prioritize suppliers/partners collaborating using this channel Prioritize applications for E-SCM – create a roadmap Involves selection of appropriate strategic partners.

Slide 5.13 Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007 E-business strategy For me, an IS strategy or change management strategy (Chapter 10) which ensures resources are managed effectively to achieve opportunities from Buy-side and Sell- side e-commerce. Also involves deploying IS to manage administrative internal process and employee knowledge Involves management of information systems resources (e-business applications, infrastructure/hardware and people/change/ knowledge management).

Slide 5.14 Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007 Figure 5.2 Relationship between e-business strategy and other strategies

Slide 5.15 Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007 Business and E-commerce Strategy E-commerce has changed business strategy. A strategy is 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. 1 1 Michael Porter “What is Strategy”, Harvard Business Review, November 1996, pp

Slide 5.16 Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007 E-commerce Strategy An e-commerce strategy is a … To build an e-commerce strategy requires two view of an organization’s strategy: what is wants to do (conceptual) and how it will do it (technology strategy). One strategy being used by many companies is customer relationship management which enables them to create to one-to-one marketing experience for their customers. Other e-commerce strategies include virtual showrooms, increased channel choices, wider component choice, and use of mobile technology. Mobile commerce is …

Slide 5.17 Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007 E-commerce Business Models (cont.) 1 1 Adapted from Micheal Rappa, Business Model DescriptionExamplesComments BrokerageBrokers bring buyers and sellers together for a fee. There are many types of brokerage models in all types of e-commerce. AdvertisingAn extension of the traditional media broadcasting model in which ads appear on Web sites. There are many different types of advertising, but all depend on a large volume of viewer traffic. MerchantSell products, both physical and electronic, to consumers Commonly referred to as e- tailers, merchants can use pure e-commerce or a combination (click and mortar).

Slide 5.18 Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd Adapted from Micheal Rappa, E-commerce Business Models (cont.) 1 Business ModelDescriptionExamplesComments Manufacturer Direct Make and sell products directly to customer Products can be purchased (PCs), leased (servers), or licensed (software). AffiliateAffiliate Web sites are paid a fee when purchases come through them. Can also include banner ad exchange between affiliated sites as well as revenue-sharing. CommunityBased on user loyalty because of high investment of time and emotion. Revenue is generated through sale of ancillary products or voluntary contributions

Slide 5.19 Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007 E-commerce Business Models (cont.) 1 1 Adapted from Micheal Rappa, Business Model DescriptionExamplesComments SubscriptionUsers are charged fee to subscribe to service to service or information source Subscription may be for premium services; advertising model may be combined with this model InfomediaryProvides data on consumers and consumption habits Usually aimed at helping businesses rather than consumers CoopetitiveEnable competitors to cooperate on a Web site Usually aimed at individuals or small businesses that cannot attract customers to their own Web site.

Slide 5.20 Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007 Web Sites Classified By Purpose Web Site TypePurposeExampleBusiness Model PortalA gateway to many other Web sites Advertising, Affiliate Search EngineFinds Web sites that contain a word or phrase Advertising, Affiliate, Infomediary Browse or search and buy Sell goods and services Merchant, Infomediary, Manufacturer Direct, Coopetitive Sales SupportTo provide information on a product before or after the sale Community, Infomediary

Slide 5.21 Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007 Web Sites Classified By Purpose (Cont.) Web Site TypePurposeExampleBusiness Model Information Service To provide news, information, commentary, and so on. Subscription, Community, Affiliate AuctionFacilitate sales between third parties Brokerage TravelSell travel tickets and tours Merchant, Brokerage, Coopetitive Special Interest or Services Provide information, product sales and support, and contacts between visitors Community, Merchant, Affiliate, Infomediary, Advertising

Slide 5.22 Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007 B2B Business Models Strategic sourcing is often carried out through a one-to-one business model, but company-centric and exchange models are also used. In the one-to-one business model … In the company-centric business model … The single company dominates the market and controls the information systems that supports the transactions. Electronic data interchange (EDI) or an extranet is often used to link trading partners. E-procurement is often the name for B2B e-commerce in the many-to-one business model.

Slide 5.23 Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007 Company Centric Business Model

Slide 5.24 Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007 Exchange Model In the exchange business model, many companies use an exchange to buy and sell from each other through spot-buying transactions.

Slide 5.25 Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007 Mobile Commerce Mobile commerce (m-commerce) relies on the use of wireless devices, such as personal digital assistants, cell phones, and smart phones, to place orders and conduct business Issues confronting m-commerce –User-friendliness of the wireless device –Network speed –Security

Slide 5.26 Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007 What happens where there is no e-business strategy? Missed opportunities for additional sales on the sell-side and more efficient purchasing on the buy-side Fall-behind competitors in delivering online services – may become difficult to catch-up, e.g. Tesco, Dell Poor customer experience from poorly integrated channels.

Slide 5.27 Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007 Electronic Payment Systems Digital certificate: an attachment to an message or data embedded in a Web page that verifies the identity of a sender or a Web site Certificate authority (CA): a trusted third party that issues digital certificates Secure Sockets Layer (SSL): a communications protocol used to secure sensitive data Electronic cash: an amount of money that is computerized, stored, and used as cash for e-commerce transactions

Slide 5.28 Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007 Figure 5.3 BA communicates their online value proposition ( Source: Based on Revolution (2005)

Slide 5.29 Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007 Figure 5.4 A generic strategy process model

Slide 5.30 Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007 Figure 5.5 Dynamic e-business strategy model Source: Adapted from description in Kalakota and Robinson (2000)

Slide 5.31 Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007 Figure 5.6 Elements of strategic situation analysis for the e-business

Slide 5.32 Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007 Figure 5.7 Summary applications of a portfolio analysis for The B2B Company

Slide 5.33 Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007 Figure 5.8 SWOT analysis for The B2B Company

Slide 5.34 Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007 Figure 5.9 Customer demand for e-marketing services for The B2B Company

Slide 5.35 Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007 Figure 5.10 Competitive threats acting on the e-business

Slide 5.36 Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007 Porter’s five forces

Slide 5.37 Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007 Activity – impact of Internet For one of the industries below, assess how the Internet has changed the competitive forces, e.g. has it increased or decreased power of suppliers and customers Industries: –Banking –Supermarkets –Oil industry –Rail industry

Slide 5.38 Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007 Figure 5.11 Elements of strategic objective setting for the e-business

Slide 5.39 Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007 Figure 5.12 An evaluation tool relating information to business value. An organization’s use of information on each axis can be assessed from 1 (low use of information) to 10 (high use of information) Source: Marchand et al. eds (1999)

Slide 5.40 Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007 Figure 5.13 Capital One web site (

Slide 5.41 Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007 Figure 5.14 Direct and indirect Internet contributions for fast-growth companies in the USA Source: PricewaterhouseCoopers (2000)

Slide 5.42 Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007 Figure 5.15 Grid of product suitability against market adoption for transactional e-commerce (online purchases)

Slide 5.43 Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007 Table 5.5 Vision of online revenue contribution for The B2B Company

Slide 5.44 Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007 Figure 5.16 Elements of strategy definition for the e-business

Slide 5.45 Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007 Figure 5.17 Strategic options for a company in relation to the importance of the Internet as a channel

Slide 5.46 Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007 Right Channelling Right channelling can be summarized as: –Reaching the right customer –Using the right channel –With the right message or offering –At the right time Examples: –B2B serve SMEs through e-channels and larger clients through personal service –Encourage consumers to buy and serve through lower cost electronic channels –Encourage offline fulfillment/conversion as appropriate –Different levels of service/promotion for different customers.

Slide 5.47 Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007 Figure 5.18 Liveperson – an example of a service to assist with ‘right-channelling’ Source:

Slide 5.48 Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007 Figure 5.19 Using the Internet to support different growth strategies

Slide 5.49 Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007 Figure 5.20 smile ( Source: Reprinted by permission of The Co-operative Bank

Slide 5.50 Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007 Figure 5.21 Dabs.com (

Slide 5.51 Dave Chaffey, E-Business and E-Commerce Management, 3 rd Edition © Marketing Insights Ltd 2007 Figure 5.22 Elements of strategy implementation for the e-business