Chapter 16 ec strategy and implementation
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Chapter 16 EC Strategy and Implementation. Learning Objectives. Describe the importance and essentials of business and EC strategies Describe the strategy planning process fro EC Understand the strategy formulation process Understand how EC applications are discovered and prioritized.

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Chapter 16 ec strategy and implementation

Chapter 16EC Strategy and Implementation

Prentice Hall, 2002


Learning objectives

Learning Objectives

  • Describe the importance and essentials of business and EC strategies

  • Describe the strategy planning process fro EC

  • Understand the strategy formulation process

  • Understand how EC applications are discovered and prioritized

Prentice Hall, 2002


Learning objectives cont

Learning Objectives (cont.)

  • Describe the role of CSFs and justification of EC

  • Describe strategy implementation

  • Understand how to reassess EC strategy

  • Describe the role of metrics in EC

  • Understand EC failures and lessons for success

Prentice Hall, 2002


Ibm s e business strategy

IBM’s E-Business Strategy

  • Following four goals:

    • Lead IBM’s strategy to transform itself into e-business

    • Act as a catalyst to help facilitate that transformation

    • Help business units become more effective in their use of the Internet/intranet

      • Internally

      • With their customers

Prentice Hall, 2002


Ibm s e business s strategy cont

IBM’s E-Business’s Strategy (cont.)

  • Establish a strategy for the corporate Internet site

    • Including definition of how it should look, “feel” and be navigated

    • Create an online environment most conducive to customers doing business with IBM

  • Leverage the wealth of e-business transformational case studies within IBM to highlight the potential of e-business to IBM’s customers

Prentice Hall, 2002


Ibm s e business strategy cont

IBM’s E-Business Strategy (cont.)

  • IBM focused on key initiatives:

    • E-commerce—selling more goods via the Web

    • E-care for customers—providing all kinds of customer support online

    • E-care for business partners—dedicated services providing faster, better information for these important groups

Prentice Hall, 2002


Ibm s e business strategy cont1

IBM’s E-Business Strategy (cont.)

  • E-care for employees—improving the effectiveness of IBMers by making the right information and services available to them

  • E-procurement—working closely with IBM's customers and suppliers to improve the tendering process and to better administer the huge number of transactions involved

  • E-marketing communications—using the internet to better communicate IBM’s marketing stance

Prentice Hall, 2002


Need for a strategy

Need for a Strategy

  • Cases of e-strategy

    • Click-and-mortar companies that use several EC applications

    • Click-and-mortar companies that use only one or two EC applications

    • Click-and-mortar companies that use one EC application that fundamentally changes all their business

    • Pure-play EC companies

Prentice Hall, 2002


Need for a strategy cont

Need for a Strategy (cont.)

  • Why does a company need an e-strategy?

    • Fast changes in business and technology means opportunities and threats can change in a minute

    • Company must consider EC strategy that includes contingency plans to deal with changes

    • May be too costly not to have one

Prentice Hall, 2002


Essentials of a business strategy

Essentials of a Business Strategy

  • Strategy—search for revolutionary actions that will significantly change the current position of a company, shaping its future

    • Finding the position in marketplace that best fits the firm’s skills

    • Company’s choice of new position that must be driven by its ability to find new trade-offs and leverage a new system of complementary activities into sustainable advantage

Prentice Hall, 2002


Essentials of a business strategy cont

Levels of strategy

Corporate (or organizational) strategy

IT strategy

EC strategy

EC functional strategies

These are interrelated

Types of strategy

Strategic planning

Strategic response

Strategic innovation

Essentials of a Business Strategy (cont.)

Prentice Hall, 2002


Figure 16 1 ec strategy alignment

Figure 16-1EC Strategy Alignment

Prentice Hall, 2002


Essentials of a business strategy cont1

Elements of a strategy

Forecasting

Resource allocation

Core competency

Strategy formulation

Environmental analysis

Company analysis

Strategy landscape

Strategy initiation

Strategy formulation

Strategy implementation

Strategy assessment

Four major steps

Basis for chapter organization

Essentials of a Business Strategy (cont.)

Prentice Hall, 2002


Figure 16 2 the landscape of ec strategy

Figure 16-2The Landscape of EC Strategy

Prentice Hall, 2002


Essentials of a business strategy cont2

Essentials of a Business Strategy (cont.)

  • Information technology (IT) strategy—strongly correlated with EC strategy because:

    • IT provides much of the infrastructure for EC

    • EC applications must be integrated with IT applications

    • EC applications may replace or improve existing IT applications

    • EC organization may report to CIO

    • Employees in IS department work on EC applications

Prentice Hall, 2002


Strategy initiation

Strategy Initiation

  • First step is to review the organization’s business and IT vision and mission

  • Then, a vision and mission for EC can be generated

  • Although these statements are usually very vague, they provide a springboard for generating more specific goals and objectives

  • Begin with industry and competitive analysis

Prentice Hall, 2002


Industry analysis

Industry Analysis

  • Analyze position of the company in its industry and the competition

  • Required for assessing the changes that EC project may introduce and its chances for success

Prentice Hall, 2002


Industry assessment

What industry is the EC initiative related to?

Who are the customers?

What are the current practices of selling and buying?

Who are the major competitors? (How intense is the competition?)

What e-strategies are used, by whom?

How is value added throughout the value chain?

What are the major opportunities and threats?

Are there any metrics or best practices in place?

What are the existing and potential partnerships for EC?

Industry Assessment

Prentice Hall, 2002


Figure 16 3 company analysis

Figure 16-3Company Analysis

Source: Hackbarth and Kettinger (2000), p. 85. Reprinted with permission of William J. Kettinger.

Prentice Hall, 2002


Industry and competitive analysis

Industry and Competitive Analysis

  • Monitoring, evaluating, disseminating of information from the external and internal environments

  • SWOT Analysis

    • Strengths

    • Opportunities

    • Weaknesses

    • Threats

SWOT

Prentice Hall, 2002


Chapter 16 ec strategy and implementation

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)

Prentice Hall, 2002


Competitive intelligence on the internet

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

Prentice Hall, 2002


Competitive intelligence on the internet cont

Competitive Intelligenceon the Internet(cont.)

  • Information delivery services

    • Find out what it published on the Internet

      • Newsgroups

      • Information about your competitors and their products

    • Known as push technologies

  • Corporate research companies provide information about your competitors:

    • Risk analysis

    • Stock market analysts’ reports

  • Examine chat rooms

Prentice Hall, 2002


Competitive intelligence on the internet cont1

Competitive Intelligenceon the Internet(cont.)

  • Evolving experiences, need to be treated with care

  • Overreliance on such information can be dangerous

  • Using publicly available search engines is free, but may produce lots of irrelevant information

  • Use specialty-build agents to search the overwhelming amount of information available

Prentice Hall, 2002


Customized competitive intelligence

Customized Competitive Intelligence

  • Current company information is available in their press releases and information published on their Web sites

    • Push technology services used to keep companies up-to-date by finding information for them

  • Searches should not replace in-depth background research

  • Business intelligence companies offer packaged competitive analysis

Prentice Hall, 2002


Issues in strategy initiation

Advantages

Chance to capture large markets

Establishing a brand name

Exclusive strategic alliances

Disadvantages

Cost of developing EC initiative is usually very high

Chance of failure is high

System may be obsolete as compared to second wave arrivals

No support services are available at the beginning

Issues in Strategy Initiation

To be a first mover or a follower?

Prentice Hall, 2002


What do you need an ec for

Enhancing the sell channel by advertisement and sales

Enhancing the buy (procurement channel)

Enhancing the customer service channel

Going global

Facilitating value-chain integration

Providing for new products and services

Going into specialty markets

Going to mass customization

What Do You Need an EC For?

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Should you have a separate online company or not

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?

Prentice Hall, 2002


Strategy formulation

Strategy Formulation

  • Strategy formulation

    • Development of long-range plans

  • Organization’s mission

    • Purpose or reason for the organization’s existence

  • 3 main reasons for establishing Web site

    • MARKETING, CUSTOMER SUPPORT, and SALES

  • Products with good fit for EC

    • Shipped easily or transmitted electronically

    • Targets knowledgeable buyers

    • Price falls within certain optimum ranges

Prentice Hall, 2002


Ec critical success factors

EC Critical Success Factors

  • Special products or services traded

  • Top management support

  • Project team representing various functional areas

  • Appropriate technical infrastructure

  • Must have customer acceptance

  • User-friendly Web interface

  • Integration with the corporate legacy systems

Prentice Hall, 2002


Ec critical success factors cont

EC Critical Success Factors (cont.)

  • Security and control of the EC system

  • Competition and market situation

  • Conduct pilot project and capture corporate knowledge

  • Use promotion and internal communication

  • Cost of the EC project must be reasonable

  • Need sufficient level of trust between buyers and sellers

Prentice Hall, 2002


Ec opportunities

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

Prentice Hall, 2002


Ec opportunities cont

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

Prentice Hall, 2002


Ec opportunities cont1

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

Prentice Hall, 2002


Figure 16 5 approaches for finding ec opportunities

Figure 16-5Approaches for Finding EC Opportunities

Prentice Hall, 2002


Uncovering specific ec opportunities and applications

Uncovering Specific ECOpportunities and Applications

  • Understand:

    • How digital markets operate

    • How Internet customers behave

    • How competition is created and what infrastructure

      is needed

    • What the dynamics of EC are

  • Map opportunities that match current competencies and markets

    • Many opportunities to create new products and services

Prentice Hall, 2002


Uncovering specific ec opportunities and applications cont

Uncovering Specific ECOpportunities and Applications (cont.)

  • Opportunities for EC businesses

    • Matchmaking—matching buyers’ needs from seller without a prior knowledge of either one

    • Aggregation of services—combines several existing services to create a new service

    • Bid/ask engine—creates a demand/supply floating pricing system

    • Notification service—tells you when the service becomes available, or when it becomes cheaper

Prentice Hall, 2002


Uncovering specific ec opportunities and applications cont1

Uncovering Specific ECOpportunities and Applications (cont.)

  • Smart needs adviser—if you want …, then you should…

  • Negotiation—price, quantity, or features are negotiated

  • Up-sell—suggests an additional product or service

  • Consultative adviser—provide tips on using the product

Prentice Hall, 2002


Methods for finding it applications

Brainstorming by a group of employees

Soliciting the help of experts, such as consultants

Review what the competitors are doing

Ask the vendors to provide you with suggestions

Read the literature to find out what’s going on

Use analogies from similar industries or business processes

Use a conventional IS requirement analysis approach

Methods for Finding IT Applications

Prentice Hall, 2002


Determining an appropriate ec application portfolio

Determining an AppropriateEC Application Portfolio

Generic approaches

  • Find the most appropriate portfolio in order to share limited resources

    • Combine long-term speculative investments in new potentially high-growth business

    • With short-term investments in existing, profit-making businesses

  • Boston Consulting Group’s matrix

    • Cash cowsQuestionable projects

    • StartsDogs

Prentice Hall, 2002


Ec application portfolio

EC Application Portfolio

  • Tjan’s portfolio strategy—Internet portfolio map

    • Strategy based on company fit (assessed by five levels from high to low)

    • Project’s viability—assessed by 4 criteria

      • Market value potential

      • Time to positive cash flow

      • Personal requirements

      • Funding requirements

  • An EC-specific method

Prentice Hall, 2002


Which business model to use

Which Business Model to Use?

  • Case: Schubb Corp.—property and casualty insurance company

  • Typical choice of EC model at Schubb Corp.

    • Create a new business model with EC as a major driver—discarded because they had a successful business model with products matching distribution systems

    • Spawn a secondary business model around EC; go directly to consumers—did not want to interrupt their relationships with agents and brokers

Prentice Hall, 2002


Case schubb corp cont

Case: Schubb Corp. (cont.)

  • Use EC as a tool within the existing business model (the selected model)

    • Helped Schubb further differentiate products and services by providing superb customer service over the Internet

    • Opened several Web sites—one for each specialty group (e.g., for wine collectors)

    • Enables superb communication with agents and business partners

    • Allows business expansion into 20 countries

Prentice Hall, 2002


Cost benefit and risk analysis

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

Prentice Hall, 2002


Cost benefit and risk analysis cont

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?”

Prentice Hall, 2002


Cost benefit and risk analysis cont1

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.)

Prentice Hall, 2002


Cost benefit and risk analysis cont2

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

Prentice Hall, 2002


Value analysis and proposition

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)

Prentice Hall, 2002


Value analysis and proposition cont

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?

Prentice Hall, 2002


Value analysis and proposition cont1

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?

Prentice Hall, 2002


Return on investment roi

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

Prentice Hall, 2002


Return on investment and risk analysis

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.

Prentice Hall, 2002


Return on investment and risk analysis cont

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

Prentice Hall, 2002


Figure 16 7 real option analysis

Figure 16-7Real Option Analysis

Source: Rayport and Jaworski (2001); Exhibit 8-8; pg. 304.

Prentice Hall, 2002


Risk analysis

Risk analysis program should

Identify all potential risks

Assess potential damage

Evaluate possibility of protection (insurance)

Evaluate cost of protection vs. benefits

E-business risks

Strategic risks (e.g., competitive environment, wrong strategic direction)

Financial risks (e.g., currency management and changes, unclear tax situations)

Operational risks (e.g., technological changes and use of poor technology, security)

Risk Analysis

Prentice Hall, 2002


Ec scenarios

EC Scenarios

  • Scenario planning is a methodology used in planning situations that involve much uncertainty, like that of EC (“what-if”)

    • Several different scenarios are created

    • A team compiles several future events as possible influences on the outcome

    • Securities are assessed and future projections are made

    • Scenarios are compared

Prentice Hall, 2002


Ec scenarios cont

EC Scenarios (cont.)

  • Four scenarios described by Hutchinson:

    • Open, global commerce scenario—removal of intermediaries flattens the value chain

    • Members-only subnet scenario—applies mostly to B2B EC

    • Electronic middlemen scenario—business and consumer market suppliers can make products/services available through independent third-party distribution channels

Prentice Hall, 2002


Ec scenarios cont1

EC Scenarios (cont.)

  • 4 scenarios described by Hutchinson (cont.)

    • Consumer marketing channels scenario—traditional methods collapse into a unified consumer-centric EC medium on the Internet

      • Broadcasting

      • Advertising

      • Consumer telephony

Prentice Hall, 2002


Strategic planning framework

Strategic Planning Framework

  • EC appears in three levels:

    • Level 1: Basic presence—company uses the Internet to feature company information and provide brochures

    • Level 2: Prospecting—features added

      • Search engine

      • Extensive product information

      • Links to services

      • Ability to interact with the company

      • Basic customer service

Prentice Hall, 2002


Strategic planning framework cont

Strategic Planning Framework (cont.)

  • Level 3: Business integration—more features added

    • EC transaction capabilities

    • Customization and personalization services

    • Tools fostering creation of a community

  • Level 4: Business transformation—supplier and customer integration added

    • Multichannel integration

    • Advanced customization and configuration

    • Superb customer service

Prentice Hall, 2002


Strategic planning framework cont1

Strategic Planning Framework (cont.)

  • Generic competitive strategy vs. cooperarative strategy

    • Competitive strategy assumes fighting against all competitors for the purpose of survival and winning

    • Cooperarative strategy plans for working together with specific competitors to gain advantage against other competitors

Prentice Hall, 2002


Generic 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

Defensive strategies— takes place in the firm’s own current market position as a defense against possible attack by a rival

Raise structural barriers

Lower the inducement for attack

Generic Competitive Strategies

Prentice Hall, 2002


Generic cooperative strategies

Generic 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

Prentice Hall, 2002


Generic cooperative strategies cont

Generic Cooperative Strategies (cont.)

  • 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

Prentice Hall, 2002


Sviokla s strategy

What is the company’s digital business strategy?

What is the right value proposition for a new business model?

EC ventures don’t fit neatly into established business categories

Traditional strategies probably won’t fly either

What is the right organizational structure?

Existing company structures designed to sustain existing marketplace model

Companies usually need to realign their structures to:

Break functional “silos”

Meet different business needs

Sviokla’s Strategy

Prentice Hall, 2002


Sviokla s strategy cont

What is the best capital structure?

Capital markets tend to reward innovative capital structures

They are buying the future, not the past

Very risky due to overvaluation

What is the correct technology platform?

Companies succeed online only with IT designed for a digital economy

EC technology must integrate seamlessly with:

Customer call center

Billing

Shipping systems

Sviokla’s Strategy (cont.)

Prentice Hall, 2002


Mougayar s approach

Mougayar’s Approach

  • What questions should a strategic plan answer?

    • How is Electronic Commerce going to change our business?

    • How do we uncover new types of business opportunities?

    • How can we take advantage of new electronic linkages with customers and trading partners?

Prentice Hall, 2002


Mougayar s approach cont

Mougayar’s Approach (cont.)

  • Will intermediaries be eliminated in the process? Or do we become intermediaries ourselves?

  • How do we bring more buyers together electronically (and keep them there)?

  • How do we change the nature of our products and services?

  • Why is the Internet affecting other companies more than ours?

  • How do we manage and measure the evolution of our strategy?

Prentice Hall, 2002


Ware s approach

Ware’s Approach

  • Ware et al.’s seven-step model e-strategy asks the following basic questions:

    • Where are you along the continuum of possible EC applications?

    • Where do you want to go?

    • How are you going to get there?

Prentice Hall, 2002


Ware s approach cont

Ware’s Approach (cont.)

  • Seven-step model e-strategy

    • Step 1: create a map of scenarios for aligning business strategy and Internet initiatives in the future

    • Step 2: communicate a vision from top management to drive Internet initiatives

    • Step 3: identify and transform key value constellations (specifically core practices and processes)

Prentice Hall, 2002


Ware s approach cont1

Ware’s Approach (cont.)

  • Seven-step model e-strategy (cont.)

    • Step 4: develop portfolio of EC initiatives the company wants to pursue

    • Step 5: develop year-by-year objectives and plans for chosen initiatives

    • Step 6: implement the change

    • Step 7: monitor the overall plan, learn lessons, adjust, improve

Prentice Hall, 2002


Strategic e breakout methodology

Initiation stage

Envisions potential strategic change

Confirms top management support

Determines project schedule

Diagnosis stage

Gathers information about strengths, weaknesses, opportunities, and threats

Asses company and industry processes

Benchmarks e-business technologies

Strategic E-Breakout Methodology

  • Kettinger and Hackbarth Methodology

Prentice Hall, 2002


Kettinger and hackbarth methodology

E-breakout stage

Formulates an

e-business strategy with objective of breaking out of the box

Using e-business technology to transform processes and people

To better compete in dynamic global marketplace

Transition stage

Recognizes reality that e-breakout may not be immediately obtainable because of a company’s unwillingness to change

Serves as a gap strategy that allows incremental steps to the e-breakout strategy

Kettinger and Hackbarth Methodology

Prentice Hall, 2002


Issues in strategy formulation

Issues in Strategy Formulation

  • EC strategies in small businesses

    Senior managers tend to:

    • Know the whole spectrum of business

    • Possess knowledge and authority to lead EC venture

Prentice Hall, 2002


Issues in strategy formulation cont

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

Prentice Hall, 2002


Issues in strategy formulation cont1

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”

Prentice Hall, 2002


Issues in strategy formulation cont2

Issues in Strategy Formulation (cont.)

  • Pricing strategy

    • Setting prices lower than off-line business may lead to internal conflict

    • Setting prices at the same level may hurt competitiveness

Prentice Hall, 2002


Issues in strategy formulation cont3

Where to compete:

Current position

Backward or forward in the supply chain

Move horizontally to new businesses

Play different roles

Infomediary

Community creator

Content provider

Portal builder

Aggregator

Issues in Strategy Formulation (cont.)

Prentice Hall, 2002


Issues in strategy formulation cont4

Should you get financing from big venture capital firms?

VC financing causes loss of control over business

Benefit: access to various VC experts and get the cash you need

Should you join an exchange?

Several benefits

Many costs and limitations

Decide early—exchange may provide sell-side or buy-side infrastructure

Which exchange to join?

Issues in Strategy Formulation (cont.)

Prentice Hall, 2002


Implementation ec plan

Implementation EC Plan

  • Starts with organizing a project team

  • Undertake a pilot project (help discover problems early)

  • Implementing EC

    • Redesigning existing business processes

    • Back-end processes must be automated as much as possible

    • Company must set up workflow applications by integrating EC into existing accounting and financial back-ends

Prentice Hall, 2002


Evaluating outsourcing

Evaluating Outsourcing

  • Factors to consider:

    • Ease of configuration and setup

    • Database and scripting support

    • Payment mechanism

    • Sample storefronts

    • Workflow management

    • Documented database support

    • Integration into existing accounting and financial back ends

    • Which services to outsource

Prentice Hall, 2002


Issues in strategy implementation

Issues in Strategy Implementation

  • Partners’ strategy

    • Many potential partners, may need several

    • Companies that make B2B e-marketplaces consider:

      • Logistics

      • Technology

      • E-payment partners

  • How to coordinate B2B and B2C

    • Selling direct is creating a B2C business

    • Coordination between the two can be done in different ways

Prentice Hall, 2002


Strategy and project assessment

Strategy and Project Assessment

  • Need for assessment

    • Find out if EC project delivers what it was supposed to deliver

    • Adjust plans if necessary

    • Determine if EC project is still viable

    • Reassess initial strategy in order to learn from mistakes and improve future planning

    • Identify failing projects as soon as possible and determine reasons for failure

Prentice Hall, 2002


Strategy and project assessment cont

Strategy and Project Assessment (cont.)

  • Measuring results; watch for:

    • Goals may be unrealistic

      • Web server was inadequate to handle demand

      • Expected cost savings were now realized

    • Exploding application requests from various functional areas in the company may follow

      • Review requirements and design documents

      • Develop thorough checklist

      • Pose a set of questions to assess impact of EC project

Prentice Hall, 2002


Strategy and project assessment cont1

Strategy and Project Assessment (cont.)

  • Finalization and adjustments

    • Actual ROI can be computed and compared to the projected one

    • If sales expectations were not met, review marketing efforts

    • Web assessment based on collected information

      • Corrective steps might be required

      • Product offerings to pricing strategy

      • Web promotion to review software vendors

Prentice Hall, 2002


Ec metrics

EC Metrics

  • Metrics include benchmarks in different areas related to EC implementation and strategy

    • Define and refine business models

    • Communicate strategy

    • Track performance

    • Increase accountability

    • Align objectives of individuals, departments, and organizations

Prentice Hall, 2002


Ec metrics cont

EC Metrics (cont.)

  • Balanced scorecard—managers focus on short-term financial results and

    • Finance—including both short- and long-term measures

    • Customers—how the customers view companies

    • Internal business process—finding areas in which to excel

    • Learning and growth—sustainability to change and expand

Prentice Hall, 2002


Ec metrics cont1

EC Metrics (cont.)

  • Scorecard approach to EC—seven sets of metrics

    • Financial

    • Competitive leadership

    • Marketing

    • Technology

    • Service

    • Internet site

    • Brand

Prentice Hall, 2002


Ec metrics cont2

EC Metrics (cont.)

  • Performance dashcard

    • Divided into 5 desired outcomes and 5 corresponding metrics

    • Metrics are mapped with leading and lagging indicators of performance, leading to calculated targets

    • Strategies are then evaluated and reformulated

Prentice Hall, 2002


Ec failures and lessons learned

EC Failures and Lessons Learned

  • E-Tailing failures

    • Lack of funding

    • Incorrect revenue model

  • Exchange failures

    • Revenue growth too slow

    • Need to move to new business model

  • EC initiative failures

  • Other failures

Prentice Hall, 2002


Table 16 3 critical success factors for ec

Table 16-3Critical Success Factors for EC

Prentice Hall, 2002


12 truths about how the internet really works

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

Prentice Hall, 2002


12 truths about how the internet really works cont

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

Prentice Hall, 2002


Managerial issues

Managerial Issues

  • Considering the strategic value of EC

  • Considering the benefits and risks

  • Integration is critical

  • Metrics are beneficial

  • Pilot projects are useful

  • Implementing policies and strategies must be written

Prentice Hall, 2002


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