1. Chapter 5
E-business strategy

2. Learning outcomes
Follow an appropriate strategy process model for e-business
Produce and select e-business strategies
Outline alternative strategic approaches to achieve e-business goals.

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. Definitions of Strategy
What is strategy?
A plan of action designed to achieve a particular goal. -wikipedia
‘Defines how we will meet our objectives’
‘Sets allocation of resources to meet goals’
‘Selects preferred strategic option 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. Sell-side e-commerce strategy (Chapters 8 & 9)
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 and sales targets
Acquisition, Conversion, Retention, Service, Profitability
Communicate benefits of using this channel
Prioritize products available through channel
Prioritize audiences targeted through channel
Select partners for this channel
Channel strategy thrives on differentials
BUT, need to manage channel integration

8. 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

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

10. What happens where there is no e-business strategy?
Missed opportunities for additional sales on the sell-side and for more efficient purchasing on the buy-side
Fall-behind competitors in delivering online services – may become difficult to catch-up, for example, Tesco, Dell
Poor customer experience from poorly integrated channels

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

12. Figure 5.4 A generic strategy process model

13. Figure 5.5 Dynamic e-business strategy model
Source: Adapted from Kalakota/Robinson, EBUSINESS 2.0 © 2001, 1999 Pearson Education, Inc. Reproduced by permission of Pearson Education, Inc.

14. Strategic Analysis
Collection and review of information about the external environment and internal resources
Immediate competition
Wider environment
Internal resources

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

16. Stage Models of e-Business Development
Earlier in chapter 1 a stage model was presented, which could be helpful in assessing the business’s position and resources

17. Figure 1.13 A simple stage model for buy-side and sell-side e-commerce17

18. Portfolio Analysis
Portfolio analysis is helpful for assessing current e-business capability and future e-business strategies
The next slide show an example for B2B case

19. Figure 5.7 Summary applications of a portfolio analysis for an example B2B
company

20. SWOT Analysis
Strengths, weaknesses, opportunities, and Threats analysis is a useful tool for analyzing the current situation and for formulating strategies
Next slide shows an example of e-business SWOT analysis

21. Figure 5.8 SWOT analysis

22. Balance Internal and External
A e-Business strategy must be based on the balance between internal capability and external forces
Next slide presents different options based on such a balance

23. Figure 5.9 Matrix for evaluation of external capability against internal capability
Source: Perrott (2005)

24. Competitive Environment Analysis Porter’s five forces
Source: adapted with the permission of The Free Press, a Division of Simon & Schuster, Inc., from COMPETITIVE STRATEGY: Techniques for Analyzing Industries and Competitors by Michael E. Porter. Copyright © 1980, 1998 by The Free Press. All rights reserved

25. Activity – Impact of Internet
For one of the industries below, assess how the Internet has changed the competitive forces, for example, has it increased or decreased power of suppliers and customers?
Industries:
Banking
Supermarkets
Retail
Travel
Oil industry
Rail industry

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

27. How can e-business create value
Following methods were proposed
Adding values—better quality products and services
Reducing cost—making the business process more efficient
Managing risks—improve information flow and availability
Creating new reality—create new way that products and or services

28. 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 to 10 Source: Marchand et al. (2002)

29. E-Business and Competitive Advantage
Read Case Study 5.1 on pages
Discuss questions on p.287

30. SMART Objectives
The 2nd phase of strategy development process will produce objectives.
The objectives should be SMART
Specific
Measurable—both efficient and effective
Actionable
Relevant
Time-Related
Example—ref. p. 289, table 5.6

31. Figure 5.13 Arena Flowers (www.arenaflowers.com)

32. SMART Objectives
Online Revenue Contribution--% of company revenue directly generated through online transactions
B2B should consider indirect revenue
Conversion Modeling for B2C
Using various conversion rates to measure the effectiveness of e-marketing
Ref. p. 291 Box 5.5

33. Figure 5.14 An example of conversion modelling for an online retailer

34. Case Study Read page 292-293 Case study 5.2
Answer the questions on page 293
Activity 5.2, pages 293

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

36. Scorecard for Objective Setting
Scorecard is a comprehensive framework for setting and monitoring business performance.
Metrics includes
Customer issues
Internal efficiency
Financial, and
Innovation
Example—p. 295, table 5.8

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

38. Strategy Definition
Various models were suggested for defining e-business strategies
Ref. pp
The next slide shows a strategy selection model based on portfolio analysis proposed by EConsultancy

39. Figure 5.17 Matrix for evaluating e-business strategy alternatives
Source: Econsultancy (2008a)

40. D. 1 Channel Priority “Getting the right mix of bricks and clicks”
The next slide shows various options

41. Figure 5.18 Strategic options for a company in relation to the importance of the
Internet as a channel

42. D. 1 Channel Priority Right-Channeling Right-channeling example
Integrate different channels to reach the right person at the right time using the right channel with a relevant offer, product or message
Right-channeling example
Ref. pp , table 5.9

43. D.2 Market and Product Development
A key strategic considering is which market to target and using what products
The next slide shows a matrix with different options to grow market and product development

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

45. D.3 Positioning and Differentiation
Once the market is identified, we need to define the best position of our e-commerce services relative to competitors.
Research suggests that customer brand perception is determined by this formula Value = (product quality * service quality)/ (price * fulfillment time)
Strategies can be developed around this formula

46. D.3 Positioning and Differentiation
Commonly used Criteria that customers use to benchmark e-tailor performance is presented in table 5.10 on p. 304

47. Activity Read Activity 5.3 on pages 305-306
Discuss the questions 1 and 2 on page 305

48. D.4 Business, Service and Revenue Model
Review business model (ch2)
This decision is closely related or similar to D3. However, here it emphasizes new models, e.g., Amazon
“Only the paranoid will survive” (Andy Grove)
Also need to notice that many companies are successful by sticking to a single business model not far from their original vision

49. D.5 Marketplace Restructuring
Companies should also look at the new opportunities created by Internet in this regard
Disintermediation
Re-intermediation
Counter-mediation
Mini Case Study 5.4 3M on pp
What did 3M do in taking advantages of market restructuring?

50. D.6 SCM Capabilities
This might be considered together with decision 5 but could be examined on its own
How to interact more closely with suppliers?
What to be covered in this e-relationship?
Participate in marketplace to reduce cost?

51. D.7 Internal KM Capabilities
What is knowledge?
Patterns, rules, and contexts that provide a framework for creating, evaluating, and using information.
Can be tacit (undocumented) or explicit (documented) knowledge
What is knowledge management?
Set of processes to create, store, transfer, and apply knowledge

52. D.8 Organizational Resources and Capabilities
What changes does the organization need to make?
Available options
In-house division (integration)
Joint venture (mixed)
Strategic partnership (mixed)
Spin-off (separation)

53. D.8 Organizational Resources and Capabilities
Questions & Discussion
What are the pros and cons for in-house option?
When the separation option would be a good choice?

54. D.8 Organizational Resources and Capabilities
Other changes to be examined
Strategy process and performance improvement
E-commerce infrastructure
Senior management support
Market integration
Online market focus
An e-commerce capability maturity model
Ref. p. 311, Table 5.11

55. Strategy Implementation
Figure Elements of strategy implementation for the e-business

56. Failed e-Business Strategies
Some reasons were articulated
Overestimate the speed that the marketplace adopts the dot.com innovation
Timing errors
Lack of creativity
Free services
Over ambition

57. Failed e-Business Strategies
Usually there are more fundamental problems than surfaced
Major problems occurred at the strategy development and implementation process
Situation Analysis—insufficient research on demand and completive forces
Object setting—no objectives or unrealistic
Strategy definition—poor business models
Implementation—problems with customer services and product quality, etc.

58. Implementation Success Factors for SMEs
Content—effective presentation
Convenience—usability
Control—manageable and under control
Interaction
Community
Price sensitivity
Brand image
Commitment
Partnership
Process Improvement
Integration

59. Case Study
Read the case study on pages
Answer the questions on page 318

60. IS Strategy and e-Business Strategy
These two are closely related.
Business-alignment approach—top down. Start with business strategy and make IS strategy so that it aligns with business strategy
Business-impact approach—bottom up. Examine new IS opportunities to see if they can bring positive impact to business strategy

61. The Productivity Paradox
Research indicates that there is a week or poor correlation between IS investment and business performance
It’s agreed that IT investment has a strong positive relationship with sales, assets and equity but not with net income.
Investment on IT staff and user training does show positive relationship on income
It’s strongly recommended that more attention should be paid to business process change when implementing e-business strategy

62. Next Class
Read the Econsultancy interview on pages of chapter 11
Answer the following questions
What is Arena Flowers’ business model?
How competitive is Arena Flowers on the market and Why?
Is this a business of bricks & mortar, bricks & clicks, or pure play? Are they planning to change that soon and why?
Do they do cross-selling? How successful and why?
Is their site developed and maintained in-house or outsourced?

63. Next Class
Econsultancy interview (Continues)
Is their site developed and maintained in-house or outsourced?
What’s the pros and cons of their approach?
What else can we learn from this interview?