Strategy for B2B

1. Strategy for B2B Anna E. Story INBS 510

2. Strategy Need • IBM E-Biz Strategy • ROI • practical • 7 Initiatives • EC • e-care for customers • e-care partners • e-care for influencers • e-care for employees • e-procurement • e-marketing communications

3. Schwab’s Strategy • online initiative • lower transaction price • first mover advantage • Value Proposition • targeted existing • key benefits • supportive rationale • Financial Model • revenue • value • growth

4. Strategy Essentials • broad based formula for how a business is going to compete, goals, plans and policies • Levels • corporate • IT • EC strategy • EC functional

5. Types of Strategy • strategic planning • strategic response • strategic innovation

6. Figure 16-2The Landscape of EC Strategy

7. Strategy Initiation • mission statements • Industry assessment • company assessment • SWOT analysis • competitive intelligence • review competitors • newsgroups • exame public docs • ask customers • research companies • chat rooms

8. Industry and Competitive Analysis • Monitoring, evaluating, disseminating of information from the external and internal environments • SWOT Analysis • Strengths • Opportunities • Weaknesses • Threats SWOT

9. Figure 16-4 SWOT Diagram INTERNAL FACTORS Strengths (S) Weaknesses (W) EXTERNAL FACTORS SO Strategies Generate strategies here that use strengths to take advantages of opportunities WO Strategies Generate strategies here that take advantage of opportunities by overcoming weaknesses 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)

10. Competitive Intelligence on the Internet Internet can play a major role as a source of competitive information (competitive intelligence) • Review competitors’ Web sites • Analyze related newsgroups • Examine publicly available financial documents • Ask the customers—award prizes to those who best describe your competitors’ strengths and weaknesses

11. Issues in Initiation • First mover or follower? • advantages and disadvantages • p 687 Turban • Why need EC? • Separate online from offline?

12. Advantages Reducing or eliminating internal conflicts Providing more freedom to management in pricing, advertising, etc. Can create new brands quickly Take the e-business to an IPO and make a fortune Disadvantages May be very costly and risky Collaboration with off-line business may be difficult Lose expertise of business functions unless you use close collaboration Should You Have a SeparateOnline Company or Not?

13. Critical Success Factors • How can I use the info I have about individual customers to make it easier for them to do business with me? • How much does it cost me to provide services that customers could get by themselves over the Internet? • What help can I give customers by using the experience of other customers or the expertise of my employees? • Will I be at a significant disadvantage if my competitors provide these capabilities to customers before I do?

14. EC Opportunities • 3 common mistakes in allocating EC investment • Let a thousand flowers bloom—fund many projects indiscriminately • Bet it all—put everything on a single high-stake initiative • Trend-surf—follow the crowd toward the next “big thing” • All of the above can be risky and costly

15. EC Opportunities (cont.) Approaches to finding individual EC initiatives • Problem-driven—attempt to solve a problem such as: • Excess inventory • Delivery delays • Technology-driven—trying to use existing applications • Find problems no one knew existed • Used by first movers

16. EC Opportunities (cont.) Approaches to finding individual EC initiatives (cont.) • All can fail • Market-driven—waiting to see what the competitors will do • Fear or greed-driven • Afraid if they do not practice EC they will be big losers • Think they can make lots of money going into EC

17. Figure 16-5Approaches for Finding EC Opportunities

18. Cost-Benefit and Risk Analysis • Business case for EC approach for garnering funding for projects used to: • Provide justification for investments • Provides bridge between EC plan and the execution • Provides foundation for tactical decision making and technology risk management • Clarifies how the organization will use resources to accomplish the e-strategy

19. Cost-Benefit and Risk Analysis (cont.) • Content of an E-business case • Strategic justification—”where are we going?” • Generational justification—”how will we get there?” • Technical justification—”when will we get there?” • Financial justification—”why will we win?”

20. How to conduct an e-business case Develop goal statement Set measurable goals Develop short- and long-term action plans Gain approval and support Revenue model Properly planned revenue model is a critical success factor Revenues from sales depend on customer acquisition cost and advertisement Must be figured into the analysis Cost-Benefit and Risk Analysis (cont.)

21. Cost-Benefit and Risk Analysis (cont.) • It is difficult to justify EC investment due to many intangible variables • Methods used for analysis • Value analysis and proposition • Rate of return of investment (ROI) and/or discounted cash flow • Real options valuation and analysis • Management by maxim • Information economics

22. Cost-Benefit and Risk Analysis • Business case for EC approach for garnering funding for projects used to: • Provide justification for investments • Provides bridge between EC plan and the execution • Provides foundation for tactical decision making and technology risk management • Clarifies how the organization will use resources to accomplish the e-strategy

23. Cost-Benefit and Risk Analysis (cont.) • Content of an E-business case • Strategic justification—”where are we going?” • Generational justification—”how will we get there?” • Technical justification—”when will we get there?” • Financial justification—”why will we win?”

24. How to conduct an e-business case Develop goal statement Set measurable goals Develop short- and long-term action plans Gain approval and support Revenue model Properly planned revenue model is a critical success factor Revenues from sales depend on customer acquisition cost and advertisement Must be figured into the analysis Cost-Benefit and Risk Analysis (cont.)

25. Cost-Benefit and Risk Analysis (cont.) • It is difficult to justify EC investment due to many intangible variables • Methods used for analysis • Value analysis and proposition • Rate of return of investment (ROI) and/or discounted cash flow • Real options valuation and analysis • Management by maxim • Information economics

26. Value Analysis and Proposition • A Value Analysis Approach • Value chain—a series of activities a company performs to achieve its goal(s) • Value added • Contributes to profit and enhances the asset value as well as the competitive position of the company in the market • To create additional value using EC channels, a company should consider the competitive market and rivalry in order to best leverage its EC assets (Customers’ value proposition)

27. Value Analysis and Proposition (cont.) • Value Analysis Questions • Representative Questions for Clarifying Value Chain Statements • Can I realize significant margins by consolidating parts of the value chain to my customers? • Can I create significant value for customers by reducing the number of entities they have to deal with in the value chain?

28. Value Analysis and Proposition (cont.) • Value Analysis Questions (cont.) • Representative question for creating new values • Can I offer additional information of transaction services to my existing customer base? • Can I use my ability to attract customers to generate new sources of revenue, such as advertising or sales of complementary products?

29. Return on Investment (ROI) • Return on Investment and Risk Analysis • A ratio of resources required and benefits generated by an EC project • Includes both quantifiable items (cost of resources, computed monetary savings) and • Non-quantifiable items (intangibles) • Some intangible benefits • Effective marketing channel • Increased sales • Improved customer service

30. Return on Investment and Risk Analysis • IT values • Financial values—measurable to some degree • Strategic values—competitive advantage in the market and benefits generated by business procedures • Stakeholder values—reflections of organizational redesign, organizational learning, empowerment, information technology architecture of a company, etc.

31. Return on Investment and Risk Analysis (cont.) • IT risks risks • Competitive strategy risk—external, due to joint venture, alliances or demographic changes among others • Organizational risk and uncertainty—internal to company

32. Issues in Strategy Formulation (cont.) • How to handle channel conflicts • Let established old-economy-type dealers handle e-business fulfillment • Sell some products only online • Help your intermediaries (e.g., build portals) • Sell online and off-line • Do not sell online

33. Issues in Strategy Formulation (cont.) • How to handle conflict between off-line and online businesses in a click-and-mortar situation • Clear support of top management • Use of innovative processes that support collaboration • Clear strategy of “what and how” • http://digitalenterprise.org/channels/channel.html Channel Conflict

34. 12 Truths About How the Internet Really Works • Internet not as disruptive to business as we thought • If it doesn’t make cents, it doesn’t make sense • Time favors incumbents • Making a market is harder than it looks • There is no such thing as “”Internet time” • “Branding” is not a strategy

35. 12 Truths About How the Internet Really Works (cont.) • Entrepreneurship cannot be systematized • Investors are not your customers • Internet still changes everything • Internet changes your job • Distinction between Internet companies and non-Internet companies is fading fast • Real wealth creation is yet to come

36. Table 16-3Critical Success Factors for EC