1. Chapter 5 E-business strategy

2. 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.

3. 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?

4. 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.

5. 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”.

6. Figure 5.1 Different forms of organizational strategy

7. e-Business development Going Forward
Environment Support Levels
Enterprise Development Levels
Taxation &
Finance
ICT adoption
& use
Legal &
Regulatory
Investment in
e-Business
Security &
Trust
Growth in numbers of e-Businesses
Research &
Development
Numbers
employed
E-business
Development
National
Infrastructure
E-Business
Market Size
E-Government
Support
Services
E-Business
Export growth
Electronic
Business
Processes
Number of
e-Commerce
transcations
Skills
National
Strategy
Education

8. Key Technology Trends and Strategies Going Forward
Supplier Integration
Full supply chain integration
Order taking, making and tracking
eBusiness evolution and business benefit
Intranet /
Web-mail
eBusiness functionality implemented
Web page
INFORM INTERACT TRANSACT INTEGRATE

9. What is working? music, books, gifts, Computers, electronic items
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)

10. Items which require “touch and trial”
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,

11. Sell-side e-commerce is a channel strategy
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.

12. Operational efficiency KPIs should drive our strategy
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.

13. 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).

14. Figure 5.2 Relationship between e-business strategy and other strategies

15. 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
1Michael Porter “What is Strategy”, Harvard Business Review, November 1996, pp

16. 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 …

17. E-commerce Business Models (cont.)1
Description
Examples
Comments
Brokerage
Brokers bring buyers and sellers together for a fee.
There are many types of brokerage models in all types of e-commerce.
Advertising
An 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.
Merchant
Sell 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).
1Adapted from Micheal Rappa,

18. E-commerce Business Models (cont.)1
Description
Examples
Comments
Manufacturer Direct
Make and sell products directly to customer
Products can be purchased (PCs), leased (servers), or licensed (software).
Affiliate
Affiliate 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.
Community
Based on user loyalty because of high investment of time and emotion.
Revenue is generated through sale of ancillary products or voluntary contributions
1Adapted from Micheal Rappa,

19. E-commerce Business Models (cont.)1
Description
Examples
Comments
Subscription
Users 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
Infomediary
Provides data on consumers and consumption habits
Usually aimed at helping businesses rather than consumers
Coopetitive
Enable competitors to cooperate on a Web site
Usually aimed at individuals or small businesses that cannot attract customers to their own Web site.
1Adapted from Micheal Rappa,

20. Web Sites Classified By Purpose
Web Site Type
Purpose
Example
Business Model
Portal
A gateway to many other Web sites
Advertising, Affiliate
Search Engine
Finds 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 Support
To provide information on a product before or after the sale
Community, Infomediary

21. Web Sites Classified By Purpose (Cont.)
Web Site Type
Purpose
Example
Business Model
Information Service
To provide news, information, commentary, and so on.
Subscription, Community, Affiliate
Auction
Facilitate sales between third parties
Brokerage
Travel
Sell 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

22. 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.

23. Company Centric Business Model

24. Exchange Model
In the exchange business model, many companies use an exchange to buy and sell from each other through spot-buying transactions.

25. Issues confronting m-commerce
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

26. 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.

27. 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

28. Figure 5. 3 BA communicates their online value proposition (www
Figure 5.3 BA communicates their online value proposition (
Source: Based on Revolution (2005)

29. Figure 5.4 A generic strategy process model

30. Figure 5.5 Dynamic e-business strategy model
Source: Adapted from description in Kalakota and Robinson (2000)

31. Figure 5.6 Elements of strategic situation analysis for the e-business

32. Figure 5.7 Summary applications of a portfolio analysis for The B2B Company

33. Figure 5.8 SWOT analysis for The B2B Company

34. Figure 5.9 Customer demand for e-marketing services for The B2B Company

35. Figure 5.10 Competitive threats acting on the e-business

36. Porter’s five forces

37. 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

38. Figure 5.11 Elements of strategic objective setting for the e-business

39. Figure 5. 12 An evaluation tool relating information to business value
Figure 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)

40. Figure 5.13 Capital One web site (www.capitalone.co.uk)

41. Figure 5.14 Direct and indirect Internet contributions for fast-growth companies in the USA
Source: PricewaterhouseCoopers (2000)

42. Figure Grid of product suitability against market adoption for transactional e-commerce (online purchases)

43. Table 5.5 Vision of online revenue contribution for The B2B Company

44. Figure 5.16 Elements of strategy definition for the e-business

45. Figure Strategic options for a company in relation to the importance of the Internet as a channel

46. Right Channelling Right channelling can be summarized as: Examples:
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.

47. Figure 5.18 Liveperson – an example of a service to assist with ‘right-channelling’
Source:

48. Figure 5.19 Using the Internet to support different growth strategies

49. Figure 5.20 smile (www.smile.co.uk)
Source: Reprinted by permission of The Co-operative Bank

50. Figure 5.21 Dabs.com (www.dabs.com)

51. Figure 5.22 Elements of strategy implementation for the e-business