Chapter 9 EC Strategy and Implementation Plan

1. Chapter 9EC Strategy and Implementation Plan

2. Learning Objectives • Describe what a business strategy and implementation plan are • Understand the process of formulating EC strategies • Explain the issues involved in EC implementation planning • Experience the role of intelligent agents in the strategic perspective • Characterize how the strategic planning evolves throughout the business cycle • Describe the key management issues in the strategic planning

3. IBM’s E-Business’s Strategy • Following four goals: • To lead IBM’s strategy to transform itself into e-business and to act as a catalyst to help facilitate that transformation. • To help out business units become more effective in their use of the Internet/intranet, both internally and with their customers. • To establish a strategy for the corporate Internet site. This would include a definition of how it should look, ‘feel’ and be navigated. In short, to create an online environment most conducive to customers doing business with IBM. • To leverage the wealth of e-business transformational case studies there are within IBM to highlight the potential of e-business to IBM’s customers.

4. IBM’s E-Business’s 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 on-line • e-care for business partners— dedicated services providing faster, better information for these important groups • 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

5. Implement-ation plan Strategy formulation Strategy reassessment Strategic Planning for EC Industry and competitive analysis

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

7. Industry and Competitive Analysis (cont.) INTERNAL FACTORS Strengths (S) Weaknesses (W) EXTERNAL FACTORS WO Strategies Generate strategies here that take advantage of opportunities by overcome 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)

8. 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

9. EC Critical Success Factors • Special products or services traded • Top management support • Project team reflecting various functional areas • Technical infrastructure • Customer acceptance • User friendly Web interface • Integration with the corporate legacy systems • Security and control of the EC system • Competition and market situation • Pilot project and corporate knowledge • Promotion and internal communication • Cost of the EC project • Level of trust between buyers and sellers

10. EC Critical Success Factors (cont.) • 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

11. EC Critical Success Factors (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? • Representative Question for Creating New Values • Can I offer additional information of transaction service 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?

12. “What criteria determine who will be our most profitable customers?” “How can we acquire this customer in the most efficient and effective way? Customers Acquisition Customers Selection Customers Retention “How can we increase the loyalty and the profitability of this customer?” “How can we keep this customer for as long as possible?” Customers Extension EC Critical Success Factors (cont.) Relationship Marketing Gartner’s Model of Customer Interaction

13. EC Critical Success Factors (cont.) • 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 • Some intangible benefits • effective marketing channel • increased sales • improved customer service

14. EC Critical Success Factors (cont.) • Return on Investment and Risk Analysis • Classified generic IT values and risks falls into the following five categories • 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. • Risks • Competitive strategy risk— external, due to joint venture, alliances, or demographic changes among others • Organizational risk and uncertainty— internal to company

15. Open, Global Commerce Scenario IT Events : Internet standards,new media, proprietary solutions marginalized, intranets, highly distributed, fat-client architectures prevail Business Events : Global trade, logistics on the Internet, pay bills electronically, digital cash widely used, smart cards, and fewer wholesaler/salespeople Members-Only Subnets Scenario IT Events : Standards vary between industries, objective measures of Internet security, EDI standards widely adopted Business Events : High-performance information networks, cumbersome global EC Electronic Middlemen Scenario IT Events : Transaction processing and interface, distributor drive EC, EC activity expands rapidly, and transaction security deeply embedded Business Events : One-stop shopping popular, professional services popular with smaller enterprises New Consumer Marketing Channels Scenario IT Events : Activity oriented to consumers, price of wireless drops, and growth of networked multimedia Business Events : Online transactions seen as less convenient, security not widely trusted, basic international norms accepted, and wireless links increase sales productivity Electronic Commerce Scenarios © Prentice Hall, 2000

16. Competitive Strategy • 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

17. Competitive Strategy (cont.) • 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

18. 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

19. EC Strategy in Action • 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? • 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?

20. EC Strategy in Action (cont.) • The steps to Successful EC Programs • Conduct necessary education training • Review current distribution and supply chain models • Understand what your customers and partners expect from the Web • Reevaluate the nature of your products and services • Give a new role to your human resources department • Extend your current systems to the outside • Track new competitors and market shares • Develop a Web-centric marketing strategy • Participate in the creation and development of virtual marketplaces • Install electronic commerce management style

21. Competitive Intelligence on the Internet • Review competitor’s Web sites • Analyze related newsgroups • Examining publicly available financial documents • You can give prizes • Use an information delivery service • Use research companies • Solicit opinions in a chat room

22. Competitive Intelligence on the Internet (cont.) • Using Push Technology for Competitive Intelligence • Allow users to request updates of topics and have the latest records automatically delivered to users’ e-mail address • Provide corporate snoopers with lots of information, save search time and monitoring time • Several ways push models can provide competitive intelligence information: • broadcast model • selective pull model • distributed push pull model • interactive push model

23. Implementation EC Plan • Starts with organizing a project team • Undertake a few pilot projects (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

24. Uncovering Specific ECOpportunities and Application • Understand: • How digital markets operate • How Internet customers behave • How competition is created and what infrastructure is needed • What are the dynamics of EC • Map opportunities that match current competencies and markets • Many opportunities to create new products and services

25. Uncovering Specific ECOpportunities and Application (cont.) • Opportunities • Matchmaking— matching buyers’ needs from seller without a priori 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 • Smart needs adviser— if you want …, then you should… • Negotiation— price, quantity, or features are negotiated • Upsell— suggests an additional product or service • Consultative adviser— provide tips on using the product

26. Uncovering Specific ECOpportunities and Application (cont.) • 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

27. Building System Infrastructure Business Process Reengineering Web Page Design Security and Control Marketing Finance Accounting Information Technology Organization and Staffing • Define the roles and responsibilities of: • Senior management • Web champion • Webmaster • Gatekeepers • Web team EC Project Team

28. 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

29. Web Hosting • Hosting Internally Vs. Hosting Using ISP • System Cost • bandwidth • capabilities and specifications • firewall system • wireless delivery • buy, rent, or lease • maintenance, upgrade, and service of the equipment

30. Web Hosting (cont.) • Purchase a suite of software that claims to integrate storefront functions into a single box • iCat Corp.’s Electronic Commerce Suite and Commerce Publisher • Open Market’s Transact and LiveCommerce • Microsoft Corp.’s Site Server Commerce Edition • IBM Corp.’s Net. Commerce Pro • Saqqara Systems’ StepSearch Professional • AT&T

31. Web Hosting (cont.) • Making a Web catalog into a multimedia extravaganza • Not easy and expensive • Lower end systems : begin at $25,000 • High end systems : $250,000 to $2 million

32. Web Content Design • Content takes many shapes • Will change dramatically • More robust, comprehensive, and usable medium • Challenges in developing a successful online storefront • Choosing the right software solution for your site • 3 options • build your own software • purchase a commercial software product • rent from a Web host

33. Web Content Design (cont.) • Web content design considerations • The services wanted • How much your company can contribute to the site, from manpower to electronic content • The time to design your site • The time to create and program your site • Extra fees for software development • Fees for off-the-shelf applications tools • The size of the site • The amount of traffic the site generates Vs. flat rate • Training requirements • Installation and server maintenance • Programming • On corporate site hosting Vs. off-site • Secure Server for financial transactions • Your bandwidth needs • Your server capacity needs • Location of your server at the Web company or ISP company location

34. Web Content Design (cont.) • Audio • Video • FTP • Forms • Chat rooms • VRML • Statistics • Customer tracking • E-mail response and forwarding • Java applications • Animation • Security • Web Application Features • Electronic shopping mall • Unique URL • Electronic commerce/financial transactions • Shopping cart software • Online catalogs • Direct order procedures • Dynamic databases • Static databases • Multimedia • Telephony

35. Security and Control in EC • 80% of all computer crimes reported involve the use of the Internet to break into computer systems • Effective guidelines would be needed to: • Address the Internet features that must be monitored for developing policy on access and use • Disclosure of information through the Internet

36. Strategy Reassessment • Webs grow in unexpected ways — • e.g. Genentec and Lockheed Martin • Reasons for a not having a worthwhile project • The goals were unrealistic • The web server was inadequate to handle traffic • The actual cost savings were not as much as expected • Important • Develop a checklist • Project Team compiles statistics that can be tracked • CIOs and other executives are trying to extract the business value from their investment in information technologies

37. Questions to Address in Order to Assess EC Project Effort and Outcome What were the goals? Did unanticipated problems occur? If so, how were those handled? What products and services did your company want to offer? What were the expectations? What costs did you hope to reduce? Did other costs increase unexpectedly? Did you intend to reduce distribution costs? What were the sales objectives? Were those goals realistic? Were your expectations reasonable? Did you intend to reduce travel expenses for corporate staff? Are Web and Internet communications reducing traditional communication costs? Did you intend to improve customer relations? If you did not, what went wrong? How can those errors be corrected?

38. Revisit Each Phase of EC Project • Is each needed service performing as expected? • Is each needed service still relevant? • What, if any, additional services are needed? • What do customers want that you are not providing? • What impact will they have on the infrastructure, from bandwidth to software? • What will the additional services cost? • What specific changes have taken place among your competitors that might affect what you are trying to accomplish? • Have your vendors provided adequate service? • Has training of employees been adequate, or is more required? • What new internal needs have arisen that need to be addressed?

39. Management Issues • Considering the strategic value of EC • Conducting strategic planning • Considering the risks • Integration • Pilot project