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E-Business Strategies E-Commerce: Impacting the Way We do Business October 1-2, 2001, Nashville TN Bob Smith Associate Professor/Extension Specialist Dept. of Wood Science and Forest Products Virginia Tech Outline Why the Internet E-business Strategy ??? Determining Competitive Advantage

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e business strategies

E-Business Strategies

E-Commerce: Impacting the Way We do Business

October 1-2, 2001, Nashville TN

Bob Smith

Associate Professor/Extension Specialist

Dept. of Wood Science and Forest Products

Virginia Tech

outline
Outline
  • Why the Internet
  • E-business Strategy ???
  • Determining Competitive Advantage
  • Implementing Strategy
slide4

“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

what do these technologies have in common with the internet
Printing press

Telephone

Automobile

Airplane

Television

Over-night delivery

Facsimile machine

Cellular phone

Personal computer

What do these technologies have in common with the Internet?
printed material
Printed Material
  • Mass reproduction
  • Unknown audience
  • Wider geographical area
  • One-way communication
telephone
Telephone
  • Immediate communication
  • Interactive two-way communication
  • Customer prospecting
  • Wider geographical area
planes trains automobiles
Planes, Trains & Automobiles
  • Personal communication
  • Wider geographical base
  • Two-way communication
  • Perception of above- average service
television
Television
  • Wide, mass audience
  • One-way communication
  • 60 second sound bite
  • First visual electronic medium
over night delivery
Over-night Delivery
  • Provide immediate service
  • Create perception of customer care
  • JIT management systems

Federal Express

fax it
FAX - iT
  • Immediate transfer of written information
  • Above average service
  • One-way promotion
  • Closer to the customer
cellular phone
Cellular Phone
  • Mobility
  • Instant access to customers
  • Above average service
  • 24 hour contact
personal computer
Personal Computer
  • Faster service
  • Customer information
  • Data bases
  • Instant communication
what do they have in common
What do they have in Common?
  • Wider distribution of information
  • Uniform information
  • Assist in marketing function of company
  • Many were interactive
  • Allow for impression of above average service
  • They all have become standards in the industry
definitions
Definitions
  • Electronic 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

what 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.

What is an Intranet?
what is an extranet
An extranet is formed when the company allows outsiders into the intranet pages.

Customers can order on line.

Reduces paperwork

Minimizes errors

Provides better customer services

Shortens delivery times

Support distributors

What is an Extranet?
what s needed
What’s Needed
  • Designated computer
  • Software to communicate with Internet
  • A connection into a network that accesses the Internet

Or

* Hire a commercial service and

have a connection to the network

slide20
Cost
  • $1500 computer
  • $300 Software
  • Home page design - $100/hr - ?
  • Commercial Internet access - >$100/month
current users
Current Users
  • Average age is 40
  • 45% female
  • 45% married
  • 1/3 computer field, 1/4 educational & 20% professional
  • >40% have made purchase over $100

Source:

www.gvu.gatech.edu/user_surveys/survey-1999

what s being sold
What’s Being Sold
  • Computer software
  • Computer hardware
  • Books
  • Music
  • Gifts
  • Travel
  • Clothes
  • >$100 billion sold in 1999
what s being sold23
What’s Being Sold?

Source: Forester Research Inc. 1998

technology update it took this many years to reach 50 million users
Technology Update(It took this many years to reach 50 million users)
  • Radio - 38 years
  • Television - 13 years
  • Internet - 4 years
the benefits of electronic commerce
The Benefits ofElectronic Commerce
  • Benefits to Organizations
  • Expands the marketplace to national and international markets
  • Decreases the cost of creating, processing, distributing, storing and retrieving paper-based information
  • Allows reduced inventories and overhead by facilitating “pull” type supply chain management
  • The pull type processing allows for customization of products and services which provides competitive advantage to its implementers

Electronic Commerce, 2000

benefits to organizations
Benefits to Organizations
  • Reduces the time between the outlay of capital and the receipt of products and services
  • Supports business processes reengineering (BPR) efforts
  • Lowers telecommunications cost - the Internet is much cheaper than value-added networks (VANs)

Electronic Commerce, 2000

benefits to customers
Benefits to Customers
  • Enables customers to shop or do other transactions 24 hours a day, all year round from almost any location
  • Provides customers with more choices
  • Provides customers with less expensive products and services by allowing them to shop in many places and conduct quick comparisons
  • Allows quick delivery of products and services in some cases, especially with digitized products

Electronic Commerce, 2000

benefits to customers29
Benefits to Customers
  • Customers can receive relevant and detailed information in seconds, rather than in days or weeks
  • Makes it possible to participate in virtual auctions
  • Allows customers to interact with other customers in electronic communities and exchange ideas as well as compare experiences
  • Electronic commerce facilitates competition, which results in substantial discounts.

Electronic Commerce, 2000

benefits to society
Benefits to Society
  • Enables more individuals to work at home, and to do less traveling for shopping, resulting in less traffic on the roads, and lower air pollution
  • Allows some merchandise to be sold at lower prices benefiting the poor ones
  • Enables people in Third World countries and rural areas to enjoy products and services which otherwise are not available to them
  • Facilitates delivery of public services at a reduced cost, increases effectiveness, and/or improves quality

Electronic Commerce, 2000

slide31
Why?
  • Works 24 hours a day
  • Offers 2 way communication
  • Unlimited access
  • Interactive advertising
  • Supports current business efforts
slide32

Electronic Markets

  • A 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

electronic commerce is interdisciplinary
Management information systems

Accounting and auditing

Management

Business law and ethics

Electronic Commerce is Interdisciplinary
  • Marketing
  • Computer sciences
  • Consumer behavior and psychology
  • Finance
  • Economic
  • Production/Logistic

Electronic Commerce, 2000

slide34

Market and

economic pressures

Strong competition

Global economy

Regional trade agreements (e.g. NAFTA)

Extremely low labor cost in some countries

Frequent and significant changes in markets

Increased power of consumers

Major Business Pressures

Societal and

environmental pressures

Changing nature of workforce

Government deregulation of banking and other services

Shrinking government budgets subsides

Increased importance of ethical and legal issues

Increased social responsibility of organizations

Rapid political changes

Rapid technological obsolescence

Increase innovations and new technologies

Information overload

Rapid decline in technology cost vs. performance ratio

Technological pressures

Electronic Commerce, 2000

competition in electronic commerce
Competition in Electronic Commerce
  • Impacts on competition
    • Lower buyers’ search cost
    • Speedy comparisons
    • Differentiation
    • Lower price
    • Customer service
    • Digital products lack normal wear and tear

Electronic Commerce, 2000

competition in electronic commerce36
Competition in Electronic Commerce
  • Perfect competition
    • Enable 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 market
    • Make certain products homogeneous (no product differentiation)
    • Supply buyers and sellers with perfect information about the products and the market participants and conditions

Electronic Commerce, 2000

competition in electronic commerce37
Competition in Electronic Commerce
  • Observations regarding competitiveness
    • There will be many new entrants
    • The bargaining power of buyers is likely to increase
    • There will be more substitute products and services
    • The bargaining power of suppliers may decrease
    • The number of industry competitors in one location will increase

Electronic Commerce, 2000

slide39
Strategy 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.
slide40

The goal is to develop a sustainable competitive advantage. There are generally two forms of competition, Operating effectiveness (production) or Competitive position (marketing)

competitive advantage can be achieved by
Competitive 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 processes
  • Employing selective pricing and fundamentally different cost structures
slide42

Generic StrategiesPorter 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 leadership
  • Differentiation
  • Focus
overall cost leadership efficient scale facilities vigorous cost reductions
Overall Cost LeadershipEfficient scale facilitiesVigorous cost reductions
  • Cost control
  • Overhead control
  • Avoid marginal accounts
  • Minimize R&D
  • Minimize service
  • Minimize advertising
slide44
Quality

Delivery

Credit and Terms

Service

Training

Reputation / Brand Image

Tech. Information

The Actual Product

Price

Etc.

DifferentiationKey idea: Create something about your product that is perceived industry wide as being uniqueBases for Differentiation:
slide45
Differentiation can provide insulation against competitors because of brand loyalty by customers and a resulting lower sensitivity to price
focus key idea focus on a particular buyer group segment of the product line or geographic market
FocusKey Idea: Focus on a particular buyer group, segment of the product line, or geographic market
slide47

This 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 broadlyBy effectively implementing this strategy a firm can achieve differentiation by better meeting the market needs or lower costs through specialization, or both

focus your message pick your theme to say something special unique about your firm and stick to it
Focus your messagePick your theme to say something special/unique about your firm, and stick to it.
  • Unique product
  • Speedy Delivery
  • Super Service
  • ?
  • ?
  • Stay Committed!
for successful strategic competition select arenas that are
For Successful Strategic Competition, Select Arenas That Are:
  • Sheltered from changes in the business environment
  • Advantaged to provide protection from intense global competition

Electronic Commerce, 2000

strategic planning

Implement-ation

plan

Strategy formulation

Strategy reassessment

Strategic Planning

Industry and competitive analysis

Electronic Commerce, 2000

company and competitive analysis
Company and Competitive Analysis
  • Monitoring, evaluating, disseminating of information from the external and internal environments
  • SWOT Analysis

Weaknesses

Strengths

Threats

Opportunities

Electronic Commerce, 2000

slide55
SWOT
  • Strengths – 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.
slide56

Company Analysis

INTERNAL FACTORS

Strengths (S)

Weaknesses (W)

Production

Marketing

Electronic Commerce, 2000

slide57

Competitive Analysis

EXTERNAL FACTORS

Production

Marketing

Opportunities (O)

Threats (T)

Electronic Commerce, 2000

slide58

Company and Competitive Analysis

INTERNAL FACTORS

Strengths (S)

Weaknesses (W)

EXTERNAL FACTORS

WO Strategies Generate strategies here that take advantage of opportunities by overcoming weaknesses

SO Strategies Generate strategies here that use strengths to take advantages of opportunities

Opportunities (O)

ST Strategies Generate strategies here that use strengths to avoid threats

WT Strategies Generate strategies here that minimize weaknesses and avoid threats

Threats (T)

Electronic Commerce, 2000

strategic questions
Strategic 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

strategic questions60
The competition

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 market

What 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?

Strategic Questions

Electronic Commerce, 2000

competitive strategies
Competitive Strategies
  • Offensive strategy— usually takes place in an established competitor’s market
    • Frontal Assault— attacker must have superior resources and willingness to persevere
    • Flanking Maneuver— attack a part of the market where the competitor is weak
    • Bypass Attack— cut the market out from under an established defender by offering a new type of product that makes the competitor’s product unnecessary
    • Encirclement— greater product variety and/or serves more markets
    • Guerrilla Warfare— use of small, intermittent assaults on different market segments held by the competitor

Electronic Commerce, 2000

competitive strategies62
Competitive Strategies
  • Defensive strategies— takes place in the firm’s own current market position as a defense against possible attack by a rival
    • Lower the probability of attack
    • Divert attacks to less threatening avenues
    • Lessen the intensity of an attack
    • Make competitive advantage more sustainable

Electronic Commerce, 2000

cooperative strategies

Competitive Strategies

Cooperative Strategies
  • Collusion— 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 beneficial
  • Joint Venture— a way to temporarily combine the different strengths of partners to achieve an outcome of value to both
  • Value-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 advantage

Electronic Commerce, 2000

strategic summary
Strategic Summary
  • Focus your efforts!
  • Define your competitive advantage!
  • Have a clear strategy!
  • Do it!
questions
Objectives

Benefits to customers

Current business

Savings

Competitive advantage

Presentation

Questions
questions67
Questions
  • 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?
objectives
Objectives
  • Introduce new product or service
  • Advertising existing business
  • Supplement existing business program
  • Reach broader customer base
  • Provide better service
  • Information exchange
  • Reduce transaction costs
current customers
Current Customers
  • Benefits
    • Easier access to information
    • Shipping schedules
    • Discounts
    • Invoicing
    • Inventories
marketing mix
Marketing Mix
  • Promotional Tool
    • Ads, publicity, sales tool
  • Pricing
  • Product Information
  • Distribution
savings
Savings
  • Support time
  • Order entry
  • Promotion response
  • E-mail
  • Shipping and invoicing information
  • Customer lists

$

home page
Home Page
  • KISS
    • Keep it simple, stupid

1. Decide what information you want to share

2. Grab their attention quickly

3. Present information in simple, logical fashion

4. Do not put lots of graphics on first page

5. Should be pleasant to the eye

6. Each page should have company name, logo, e- mail address and toll-free phone number

why do you need promotion
Why 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.
slide75
List homepage address on all current advertising.

Put on all publicity

newsletters

letterhead

business cards

billing statements

fax cover sheets

Register with search engines.

Link to other sites and your association sites.

Advertise on the web.

HOW?
link to
Link to?
  • Your trade associations
  • Suppliers
  • Customers
  • Complementary products
advertising on the web
Advertising on the Web
  • To build awareness
  • Develop prospects
  • Meet customer needs
  • Generate orders
  • Build customer relations
  • Test market
good internet advertising includes
Good 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.
common search engines
Common Search Engines
  • Submit it - www.submit-it.com
  • Yahoo - www.yahoo.com
  • Webcrawler - www.webcrawler.com
  • Infoseek - www.infoseek.go.com
  • Lycos - www.lycos.com
  • Google - http://www.google.com/
the advantage for small businesses
The Advantage for Small Businesses
  • Inexpensive source of information
  • Inexpensive way of advertising
  • Inexpensive way of conducting market research
  • Inexpensive way to build (or rent) a storefront
  • Lower transaction cost

Electronic Commerce, 2000

the advantage for small businesses81
The Advantage for Small Businesses
  • Niche market, specialty products (cigars, wines, sauces) are the best
  • Image and public recognition can be accumulated fast
  • Inexpensive way of providing catalogs
  • Inexpensive way to reach worldwide customers

Electronic Commerce, 2000

the risks and disadvantages for small businesses
The 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 business
  • No advantage being in a local community

Electronic Commerce, 2000

the risks and disadvantages for small businesses83
The Risks and Disadvantages for Small Businesses
  • Lack of expertise in legal issues, advertisement
  • Lack of resources to fully exploit the Web
  • Less risk tolerance than a large company

Electronic Commerce, 2000

success factors for small businesses
Success Factors for Small Businesses
  • Niche products
  • Small volume
  • Capital investment must be small
  • Inventory should be minimal or non-existent
  • Electronic payments schema exist
  • Payment methods must be flexible

Electronic Commerce, 2000

success factors for small businesses85
Success Factors for Small Businesses
  • Logistical services must be quick and reliable
  • The Web site should be submitted to directory-based search engine services like Yahoo in a correct way
  • Join an online service or mall and do banner exchange
  • Design a Web site that is functional and provides all needed services to consumers

Electronic Commerce, 2000

summary
Summary
  • Successful 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.
references
References
  • Electronic Commerce: A Managerial Perspective. 2000. By Efraim Turban, Jae Lee, David King, and H. Michael Chung. Prentice Hall, Upper Saddle Rivern New Jersey. (slides are marketed).
  • E-Business Revolution. 2000. By Daniel Amor. Prentice Hall,Upper Saddle Rivern New Jersey.
  • Strategic Internet Marketing. 1996. Tom Vassos. MacMillan Computer Publishing, Indianapolis, IN.
  • E-Business Readiness. 2001. By James Craig and Dawn Jutla. Anderson-Wesley. Upper Saddle Rivern New Jersey.
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