Ecommerce Chap 09
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IBM's e-business strategy followed four goals: transforming itself into an e-business, helping business units use the internet/intranet effectively, establishing a strategy for its corporate website, and leveraging case studies. IBM focused on e-commerce, customer support, partner support, employee support, and e-procurement. Strategic planning for EC involves industry/competitive analysis, strategy formulation, implementation planning, and periodic reassessment. Key factors in strategic planning include critical success factors, opportunities/applications, organization/staffing, and security/control.
Ecommerce Chap 09
- 1. Chapter 9 EC Strategy and Implementation Plan © Prentice Hall, 2000 1
- 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 © Prentice Hall, 2000 2
- 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. © Prentice Hall, 2000 3
- 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 © Prentice Hall, 2000 4
- 5. Strategic Planning for EC Industry and Implement- Strategy Strategy competitive ation formulation reassessment analysis plan © Prentice Hall, 2000 5
- 6. Industry and Competitive Analysis Monitoring, evaluating, disseminating of information from the external and internal environments SWOT Analysis Strengths Weaknesses Opportunities Threats © Prentice Hall, 2000 6
- 7. Industry and Competitive Analysis (cont.) INTERNAL EXTERNAL FACTORS Strengths (S) Weaknesses (W) FACTORS SO Strategies WO Strategies Generate strategies Generate strategies here that use here that take Opportunities (O) strengths to take advantage of advantages of opportunities by opportunities overcome weaknesses ST Strategies WT Strategies Generate strategies Generate strategies Threats (T) here that use here that minimize strengths to avoid weaknesses and avoid threats threats © Prentice Hall, 2000 7
- 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 © Prentice Hall, 2000 8
- 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 © Prentice Hall, 2000 9
- 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 © Prentice Hall, 2000 10
- 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? © Prentice Hall, 2000 11
- 12. EC Critical Success Factors (cont.) “What criteria “How can we acquire determine who will be Customers this customer in the our most profitable Acquisition most efficient and customers?” effective way? Customers Relationship Customers Selection Marketing Retention “How can we increase “How can we keep this the loyalty and the Customers customer for as long as profitability of this Extension possible?” customer?” Gartner’s Model of Customer Interaction © Prentice Hall, 2000 12
- 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 © Prentice Hall, 2000 13
- 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 © Prentice Hall, 2000 14
- 15. Electronic Commerce Scenarios Open, Global Commerce Scenario Members-Only Subnets Scenario IT Events : Internet standards,new IT Events : Standards vary between media, proprietary solutions marginalized, industries, objective measures of Internet intranets, highly distributed, fat-client security, EDI standards widely adopted architectures prevail Business Events : High-performance Business Events : Global trade, logistics on information networks, cumbersome global the Internet, pay bills electronically, digital EC cash widely used, smart cards, and fewer wholesaler/salespeople Electronic Middlemen Scenario New Consumer Marketing Channels IT Events : Transaction processing and Scenario interface, distributor drive EC, EC activity IT Events : Activity oriented to consumers, expands rapidly, and transaction security price of wireless drops, and growth of deeply embedded networked multimedia Business Events : One-stop shopping Business Events : Online transactions seen popular, professional services popular with as less convenient, security not widely smaller enterprises trusted, basic international norms accepted, © Prentice Hall, 2000 and wireless links increase sales productivity © Prentice Hall, 2000 15
- 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 © Prentice Hall, 2000 16
- 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 © Prentice Hall, 2000 17
- 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 © Prentice Hall, 2000 18
- 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? © Prentice Hall, 2000 19
- 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 © Prentice Hall, 2000 20
- 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 © Prentice Hall, 2000 21
- 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 © Prentice Hall, 2000 22
- 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 © Prentice Hall, 2000 23
- 24. Uncovering Specific EC Opportunities 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 © Prentice Hall, 2000 24
- 25. Uncovering Specific EC Opportunities 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 © Prentice Hall, 2000 25
- 26. Uncovering Specific EC Opportunities 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 © Prentice Hall, 2000 26
- 27. Organization and Staffing Define the roles and responsibilities of: Senior management Gatekeepers Web champion Web team Webmaster Building Business Web Page Security System Process Design and Control Infrastructure Reengineering Marketing Finance Accounting Information Technology EC Project Team © Prentice Hall, 2000 27
- 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 © Prentice Hall, 2000 28
- 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 © Prentice Hall, 2000 29
- 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 © Prentice Hall, 2000 30
- 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 © Prentice Hall, 2000 31
- 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 © Prentice Hall, 2000 32
- 33. Web Content Design (cont.) Web content design considerations The services wanted Training requirements How much your company can Installation and server contribute to the site, from maintenance manpower to electronic Programming content On corporate site hosting Vs. The time to design your site off-site The time to create and Secure Server for financial program your site transactions Extra fees for software Your bandwidth needs development Your server capacity needs Fees for off-the-shelf Location of your server at the applications tools Web company or ISP The size of the site company location The amount of traffic the site generates Vs. flat rate © Prentice Hall, 2000 33
- 34. Web Content Design (cont.) Web Application Features Audio Video Electronic shopping mall FTP Unique URL Forms Electronic Chat rooms commerce/financial VRML transactions Statistics Customer tracking Shopping cart software E-mail response and Online catalogs forwarding Direct order procedures Java applications Animation Dynamic databases Security Static databases Multimedia Telephony © Prentice Hall, 2000 34
- 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 © Prentice Hall, 2000 35
- 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 © Prentice Hall, 2000 36
- 37. Questions to Address in Order to Assess EC Project Effort and Outcome What were the goals? Did unanticipated problems occur? What products and services did If so, how were those handled? your company want to offer? What were the expectations? Did you intend to reduce What costs did you hope to reduce? distribution costs? Did other costs increase unexpectedly? What were the sales objectives? Were your expectations Were those goals realistic? reasonable? Did you intend to reduce travel Are Web and Internet expenses for corporate staff? communications reducing Did you intend to improve traditional communication costs? customer relations? How can those errors be If you did not, what went corrected? wrong? © Prentice Hall, 2000 37
- 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? © Prentice Hall, 2000 38
- 39. Management Issues Considering the strategic value of EC Conducting strategic planning Considering the risks Integration Pilot project © Prentice Hall, 2000 39