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Chapter 12: Planning for Electronic Commerce. Planning Electronic Commerce Initiatives. Objectives of electronic commerce: Increasing sales in existing markets Opening new markets Serving existing customers better Identifying new vendors Coordinating more efficiently with existing vendors

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planning electronic commerce initiatives
Planning Electronic Commerce Initiatives
  • Objectives of electronic commerce:
    • Increasing sales in existing markets
    • Opening new markets
    • Serving existing customers better
    • Identifying new vendors
    • Coordinating more efficiently with existing vendors
    • Recruiting employees more effectively
linking objectives to business strategies
Linking Objectives to Business Strategies

Downstream strategies

Used to improve the value that the business provides to its customers

Upstream strategies

Focus on reducing costs or generating value

Work with suppliers or inbound shipping and freight service providers

Electronic commerce opportunities can inspire businesses to undertake activities such as:

Building brands

Enhancing existing marketing programs

Selling products and services

Selling advertising

Developing a better understanding of customer needs

measuring benefits
Measuring Benefits
  • Tangible benefits of electronic commerce initiatives include:
    • Increased sales
    • Reduced costs
  • Intangible benefits of electronic commerce initiatives include:
    • Increased customer satisfaction
managing costs
Managing Costs

Total cost of ownership

Includes costs of hardware, software, design work outsourced, and salaries

Change management

Process of helping employees cope with changes

Opportunity costs

Lost benefits from an action not taken

International Data Corporation and Gartner, Inc. estimate that the cost for a large company to build and implement an entry-level electronic commerce site is about $1 million

79 percent of cost is labor related

10 percent is the cost of software

11 percent is the cost of hardware

Experts agree that the annual cost to maintain and improve a site will be between 50 and 200 percent of the initial cost

comparing benefits to costs
Comparing Benefits to Costs
  • Capital projects (capital investments)
    • Major investments in equipment, personnel, and other assets
  • Key part of creating a business plan for electronic commerce initiatives includes:
    • Identifying potential benefits
    • Identifying costs required to generate benefits
    • Evaluating whether benefits exceed costs
return on investment roi
Return on Investment (ROI)
  • Return on investment techniques provide a quantitative expression of a comfortable benefit-to-cost margin
  • Built-in biases that can lead managers to make poor decisions:
    • ROI requires that all costs and benefits be stated in dollars
    • Focus is on benefits that can be predicted
    • Tends to emphasize short-run benefits over long-run benefits
strategies for developing electronic commerce web sites
Strategies for Developing Electronic Commerce Web Sites
  • Typical early Web site
    • Static brochure not updated frequently
    • Seldom had any capabilities for helping the company’s customers
  • Today’s Web site includes:
    • Transaction-processing tools
    • Automated homes for business processes of all kinds
internal development vs outsourcing
Internal Development vs. Outsourcing
  • Outsourcing
    • Hiring another company to provide outside support for all or part of a project
  • Internal team
    • Should include people with enough knowledge about the Internet and its technologies
    • Should be creative thinkers
  • Measuring achievements of internal team is very important

Early Outsourcing

Outsource the initial site design and development to launch a project quickly

Outsourcing team trains the company’s information systems professionals in the new technology

It is best to have the company’s own information systems people working closely with the outsourcing team

Late Outsourcing

Information systems professionals

Do initial design & development work

Implement the system

Operate the system until it becomes a stable part of the business operation

Once a company has gained a competitive advantage, maintenance can be outsourced

Partial Outsourcing

Company identifies specific portions of the project that can be completely designed, developed, implemented, and operated by another firm

Many smaller Web sites outsource their e-mail handling and response functions

selecting a hosting service
Selecting a Hosting Service
  • Factors to evaluate when selecting a hosting service include:
    • Functionality
    • Reliability
    • Bandwidth and server scalability
    • Security
    • Backup and disaster recovery
    • Cost
new methods for implementing partial outsourcing
New Methods for Implementing Partial Outsourcing


Company that offers start-up companies a physical location with:

Offices, accounting, and legal assistance

Computers and Internet connections

Receive ownership interest in the company

Fast venturing

Existing company that wants to launch an electronic commerce initiative joins external equity partners and operational partners

Equity partners

Banks or venture capitalists

Operational partners

Firms that have experience in moving projects along and scaling up prototypes

managing electronic commerce implementations
Managing Electronic Commerce Implementations
  • Project management
    • Formal techniques for planning and controlling activities undertaken to achieve a specific goal
  • Project plan
    • Includes criteria for cost, schedule, and performance
  • Project management software products
    • Microsoft Project
    • Primavera Project Planner
project portfolio management
Project Portfolio Management
  • Each project is monitored as if it were an investment in a financial portfolio
  • Chief Information Officer
    • Records projects in a list
    • Updates the list with current information about each project’s status
    • Assigns a ranking for each project based on importance and level of risk
staffing for electronic commerce
Staffing for Electronic Commerce

General areas of staffing include:

Business managers

Project managers

Account managers

Applications specialists

Web programmers

Web graphics designers

Customer service

Systems administration

Business manager

Should be a member of the internal team that sets objectives for a project

Project manager

Person with specific training or skills in tracking costs and accomplishment of specific objectives

Account manager

Keeps track of multiple Web sites in use by a project

staffing for electronic commerce continued
Staffing for Electronic Commerce (continued)

Applications specialists

Maintain accounting, human resources, and logistics software

Web programmers

Design and write underlying code for dynamic database-driven Web pages

Web graphics designer

Person trained in art, layout, and composition

Understands how Web pages are constructed

Customer service personnel

Help design and implement customer relationship management activities

Call center

Company that handles incoming customer telephone calls and e-mails for other companies

Systems administrator

Responsible for the system’s reliable and secure operation

postimplementation audit
Postimplementation Audit

Formal review of a project after it is up and running

Gives managers a chance to examine:


Performance specifications

Cost estimates

Scheduled delivery dates

Allows internal team, business manager, and project manager to:

Raise questions about the project’s objectives

Provide feedback on strategies

Final report should analyze:

Project’s overall performance

How well the project was administered

Specific performance of the project team(s)


Plans for electronic commerce implementations include:

Setting objectives

Determining benefit and cost objectives which should be stated in measurable terms

Project evaluation technique

Return on investment

Determining an outsourcing strategy

Form an internal team that includes knowledgeable individuals from within the company

Project management

Formal way to plan and control specific tasks and resources used in a project

Project portfolio management techniques

Used to track and make trade-offs among multiple ongoing projects

Critical staffing areas:

Business management

Application specialists

Systems administration