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 ... VisiondevelopCustomers,market,competitionguideStrategycreateTacticKnowledge ---> Intelligence ---> WisdomAttention 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,ServicesN
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 goalsStrategy 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 propositionStrategy is focused on questions about:organizational fitprofitabilityvalueValue 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 Environmente-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 Environmentstrategic 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
9 Systems Development Life Cycle (SDLC) Systems InvestigationProduct:Feasibility StudyUnderstand theBusinessProblem orOpportunitySystems AnalysisProduct:Functional RequirementsDevelop anInformationSystemSolutionSystems DesignProduct:System SpecificationsThe 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.Implementthe InformationSystemSolutionSystems ImplementationProduct:Operational SystemSystems MaintenanceProduct:Improved System
10 Strategic planning process Strategy initiation: The initial phase of strategic planning in which the organization examines itself and its environmentValue 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 competitionstructure/cultureEssentials for a Successful EnterpriseValue propositions1. Business modelBusiness landscapeInternal/ExternalConsistentfulfill2. Core competenciesStrategic intentfuture positioningFinanceManagementProcessH/RTechnology…Analysis(Porter, SWOT)StrategyPositioningCorporate strategyBusiness strategyFunctional strategyPositioning on product/marketDifferentiation/choice of competitive advantageCompetitive postureIndustry 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 enterpriseDifferentiation (BPR, Benchmarking, Best Practices): KSF - K_Survival_F - Strategic convergence - KSF-- competitive advantage, sustainability, imitabilityCompetitive 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. ExecutionIT Role?N
12 Strategic planning process (cont.) Outcomes from strategy initiation phaseCompany analysis (including value proposition)Core competenciesForecastsCompetitor (industry) analysisCompany analysis (including value proposition)-- include the vision, purpose, value proposition, capabilities, constraints, strengths, and weaknesses of the companyCore competencies-- it refers to the unique combination of the resources and experiences of a particular firmForecastsCompetitor (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 weaknessesSpecific activities and outcomes from strategy formulation phase:Business opportunitiesCost-benefit analysisRisk 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 formulationSpecific activities and outcomes from strategy implementation phase:Business planningResource allocationProject 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 reformulationSpecific 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 weaknessesWeaknessesOpportunitiesThreatsStrengths
17 Strategic planning tools (cont.) 2. Competitor analysis grid: A strategic planning tool that highlights points of differentiation between competitors and the target firm3. 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 areas5. (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 MixProductPlaceCPricePromotionQ: ask students how to sell (promote) a new product. Then try to direct the answers cover this 4P’sSummary 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 IssuesForm 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 criteriaCustomersNeeds and otherSegmentingDimensionsPlaceProductPricePromotionCS.W.O.T.Segmentation &TargetingCompanyObjectives&ResourcesSegmentation &PositioningSummary Overview (P;Exhibit 3-1)In contrast to micro-marketing, macro-marketing’s emphasis is on how the whole marketing system works.Key IssuesEvery 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.CompetitorsCurrent&ProspectiveExternal Market EnvironmentTechnologies 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 planExecutive SummaryBusiness DescriptionOperations PlanFinancial PlanMarketing PlanCompetitor Analysis
23 Business Planning in E-Commerce Business Plan FundamentalsPurposes for business planTo acquire fundingTo acquire nonfinancial resourcesTo obtain a realistic approach to the businessbusiness caseA 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 StrategyBusiness DecisionsObjectives and DirectionChangeITImpactandpotentialWhere is thebusinessgoing andwhySupportsbusinessDirection forbusinessIS StrategyWhat isrequiredBusiness BasedDemand OrientatedApplication FocusedInfrastructureAnd servicesNeeds andprioritiesIT StrategyHow itcan bedeliveredActivity BasedSupply OrientatedTechnology Focused
26 14.4 E-Strategy Initiation Issues in E-Strategy InitiationBe a First Mover or a Follower?Born-on-the-Net or Move-to-the-Net?Determining ScopeHave a Separate Online Company?Have a Separate Online Brand?
27 When to Perform Activities First MoversAdvantagesDisadvantagesBuild brand recognitionControl scarce resourcesEstablish networksEarly Economies-of-ScaleNewer technologyHigher development costsReverse engineering by competitors
28 Winners vs. LosersWhat 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”utilityalignValueInnovationFirmWinners 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.Innovationpricecost
29 14.5 E-Strategy Formulation Selecting EC OpportunitiesIncorrect approaches to EC strategy selection:Indiscriminately funding many projects and hoping for a few winnersBetting it all in a single, high-stakes initiative“Trend-surfing”Productive approaches to EC strategy selectionProblem-driven strategyTechnology-driven strategyMarket-driven strategyE-business maturity model
30 E-Strategy Formulation Determining an Appropriate EC Application Portfolio MixThe BCG modelAn Internet portfolio map for selecting applications
31 E-Strategy Formulation Exhibit Internet Portfolio MapHighSellprojectAdoptprojectViability of ProjectRejectprojectRedesignprojectSource: 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 rejectedIf both are high—the project is adoptedIf fit is high but viability is low—the project is redesignedIf the fit is low but the viability is high—the project is soldLowCompany FitHigh
32 E-Strategy Formulation Risk Analysis and Managemente-commerce (EC) riskThe likelihood that a negative outcome will occur in the course of developing and operating an electronic commerce strategySecurity issues
33 E-Strategy Formulation Issues in Strategy FormulationHow to handle channel conflictHow to handle conflict between the off-line and online businessesPricing strategyPrice comparison is easierBuyers sometimes set the priceOnline and off-line goods are priced differentlyDifferentiated pricing can be a pricing strategyversioningSelling the same good, but with different selection and delivery characteristics
34 14.6 E-Strategy Implementation Create a Web Teamproject championThe person who ensures the EC project gets the time, attention, and resources required and defends the project from detractors at all timesStart with a Pilot ProjectAllocate ResourcesManage the Project
35 14.6 E-Strategy Implementation Strategy Implementation IssuesApplication developmentPartners’ strategyoutsourcingThe 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’ strategyOutsourcing: The use of a third-party vendor to provide all or part of the products and services that could be provided internallyTwo driversfocuson core businessvalueshareholder
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 DevelopmentTM -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 developmentIt 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 forDecisions on OutsourcingStrategic ImportanceYNYCompetitive AdvantageN
40 Decisions on Outsourcing Strategic Grid forDecisions on OutsourcingStrategic ImportanceYNInsourcingLeverage(K-How to partners)YCompetitive AdvantageStrategicAllianceOutsourcingN
41 Summary: Factors driving outsourcing Cost savingsQualified IT staff are difficult to find and retainBy 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 corporationsvirtual corporation (VC)An organization composed of several business partners sharing costs and resources for the production or utilization of a product or serviceco-opetitionTwo 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 OrganizationComposed of several Business Partners that UsesInformation Technology to Link/Share People,Assets, Ideas, Costs, and Resourcesfor the purpose of producing a product or service.Virtual Companies are Adaptable and Opportunity-Exploiting Organizations Providing World-ClassExcellence in Their Competencies andTechnologies.
44 VIRTUAL ORGANIZATION MANUFACTURING COMPANY DESIGN COMPANY CORE COMPANY SALES & MARKETINGCOMPANYLOGISTICSCOMPANYFINANCE 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, telcommutecreates (conditions)IT > Changes>manages (as a tool)(p.352)NTM -44
45 Characteristics of Virtual Corporations ExcellenceBorderlessAdaptabilitySixCharacteristicsof VirtualCompaniesUtilization: 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, telcommutecreates (conditions)IT > Changes>manages (as a tool)(p.352)OpportunismTrust-BasedTechnologyUtilizationN
46 E-Strategy Implementation Redesigning business processesbusiness 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 AssessmentMeasure the extent to which the EC strategy and ensuing projects are delivering what they were supposed to deliverDetermine if the EC strategy and projects are still viable in the current environmentReassess the initial strategy in order to learn from mistakes and improve future planningIdentify failing projects as soon as possible and determine why they failed
49 E-Strategy and Project Assessment Measuring Results and Using MetricsmetricA specific, measurable standard against which actual performance is comparedcorporate (business) performance management (CPM, BPM)Advanced performance measuring and analysis approach that embraces planning and strategy
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 translationAdministrative issuesGeographic issues and localizationEconomic issues
55 Global E-Commerce Breaking Down the Barriers to Global EC Be strategic Know your audienceLocalizeThink globally, act consistentlyValue the human touchClarify, document, explainOffer services that reduce barriers
56 E-Commerce in Small and Medium-Sized Enterprises Advantages and Benefits of EC to Small and Medium-Sized EnterprisesInexpensive sources of informationInexpensive ways of advertising and conducting market researchCompetitor analysis is easierInexpensive ways to build storefrontsLess locked into legacy technologiesImage and public recognition can be generated quicklyAn 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 EnterprisesLack of financial resources to fully exploit the WebLack of technical staff or insufficient expertise in legal issues, advertising, etc.Less risk tolerance than a large company.Products not suitable for online salesReduced personal contact with customersInability to afford the advantages of digital exchanges
58 E-Commerce in Small and Medium-Sized Enterprises Critical Success Factors for SMESProduct is criticalPayment methods must be flexibleElectronic payments must be secureCapital investment should be kept to a minimumInventory control is crucialLogistics services must be quick and reliable
59 E-Commerce in Small and Medium-Sized Enterprises Critical Success Factors for SMESOwner supportHigh visibility on the InternetJoin an online communityA Web site should provide all the services needed by consumersSupporting SMESGovernment agenciesVendor 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 strategyBuy-in and open discussions are keys to successRobert Plant, eCommerce: Formulation of Strategy, pp.67, 1999, Prentice Hall
61 Ownership Issues E-centric Structure + = Success Content Content alone is not sufficient for successSuccesses come from a balanced business modelthat involves each business area content providercontributing to the overall business model.Content is Knowledge,Knowledge is PowerContent isKnowledge,Knowledge isPower.N
62 Managerial IssuesWhat 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?