COMP7880: E-Business Strategies Internal organization of e-business activities Dickson K.W. Chiu PhD, SMIEEE, SMACM, Life MHKCS Jelassi & Enders: Chapter 9
Our Roadmap Mobile e-commerce strategy 12 E-business strategy Strategic analysis Strategy formulation Strategy implementation 3 Externalanalysis 9 5 Strategyoptions Internal organisation Opportunities/ threats 6 10 7 13 Interaction with suppliers Implementation Sustaining competitive advantage Exploring new market spaces Strengths/ weaknesses 4 Internalanalysis 11 8 Creating and capturing value Interaction with users/customers
PC industry (1990s) became increasingly fragmented IBM-Integrated value chain (1985) Micro processors, integrated circuits, memory chips Application software Operating systems Marketing, sales and distribution PCs Retail Compaq Microsoft Office Dell Windows Megastores IBM Unbundled value chain (1999) Intel Online Apple Netscape Motorola UNIX Post order Adobe OS/2 AMD Cyrix Mac OS Direct sales Linux Source: Adapted from D. Heuskel (1999), p. 53.
Variety of options for making a product or service. Market transactions entail the purchase from an external provider on an individual one-by-one contractual basis. entail the purchase from an external provider on a contractual basis, spanning over an extended period of time. Long-term contracts entail the close co-operation of two separate firms that join up in the production of a certain product or service. Alliances entail the setting up of a distinct firm that operates separately from, yet under the auspices of, the parent company. Parent/subsidiary entails a process that is managed completely internally, without any outsourcing to external providers. Internal production
Reasons favoring ‘make’ or ‘buy’ decisions Reasons favouring ‘make’ decisions Reasons favouring ‘buy’ decisions • High economies of scale • High capital requirements • Specialized know-how • Higher efficiency of the open • markets • Strong linkage between activities • Confidentiality of information • High transaction costs Think: how does IT impacts?
Clicks-and-mortar spectrum spans from integration to separation of activities Clicks-and-mortar spectrum Independent business/ spin-off (e.g. BOL.de) Strategic alliance (e.g. Amazon.com and Borders) Joint venture (e.g. KB Toys and Brain- Play.com) In-house division (e.g,Tesco.com) • Integration • established brand • shared information • purchasing leverage • cross-promotion • distribution efficiencies • shared customer services • Separation • greater focus • more flexibility • access to venture • capital for funding Source: Adapted from R. Gulati and J. Garino (2000).
Separation vs integration Integrated organization Separate organization • Greater focus • More flexibility and faster decisions • Entrepreneurial culture • Access to venture capital • Established and trusted brand • Shared information • Cross-promotion • Purchasing leverage • Distribution efficiencies • Shared customer service Source: R. Gulati and J. Garino (2000), pp. 107-114 Think: how does IT impacts?
Traditional corporation can be unbundled into 3 distinct businesses Customer relationship management Identify, attract, and build relationships with customers Infrastructure management Build and manage facilities for high-volume, repetitive operational tasks Product innovation Conceive attractive new products and services and commercialise them Source: Adapted from J. Hagel and M. Singer (1999).
Different imperatives regarding economics, culture, and competition Businesses Product innovation Customer relationship management Infrastructure management High cost of customer acquisition makes it imperative to gain large shares of wallet; economies of scope are the key Early market entry allows for a premium price and a large market share; speed is the key High fixed costs make large volumes essential to achieving low unit costs; economies of scale are the key I m p e r a t i v e s Economics Employee centered; coddling the creative ‘stars’ Highly service oriented; ‘customer comes first’ Cost focused; stress on standardization, predictability, efficiency Culture Battle for talent; low barriers to entry; many small players thrive Battle for scale; rapid consolidation; a few big players dominate Competition Battle for scope; rapid consolidation; a few big players dominate Source: Adapted from J. Hagel and M. Singer (1999).
Channel conflict matrix analyses how to resolve different channel conflicts Relative importance of threatened channel High Low Address channel conflict Accept the decline of threatened channel 1 2 High M a i l o r d e r Conflict Traditional retailer Internet Risk of conflict between different channels Reassure members of threatened channel Ignore 3 4 O t h e r s Low Source: Adapted from C. Bucklin, P. Thomas-Graham and E. Webster, ‘Channel conflict: when is it dangerous?’, McKinsey Quarterly, 1997, No. 3, pp. 36–43.
For your project & exercise Repeat the methodology in this chapter for your project case study