E business architecture final copy

Q.1. E-Business Architecture:
Importance of Application Integration
Ans.
Your company may be forced to take the integration route for a variety of reasons, including better customer
care, new competitive conditions, or the need to offer more integrated services.

Needless to say, an integrated application architecture is key to serving the customer seamlessly, especially
in e-commerce. This strategy is exemplified by Amazon.com, the integrated seller of books, CDs,
videotapes, audiotapes, and other products.

Once an order is placed on the Web site, Amazon.com uses an integrated packing and shipping system via
an online connection to the order management system. This system monitors the in-stock status of each item
ordered, processes the order, and generates warehouse selection tickets and packing slips. Once picking and
packing is done, the package is sent via Airborne or UPS to the customer. The high level of integration in
order fulfillment means that Amazon.com can turn its own inventory much more frequently than traditional
competitors, who average three to four times longer. This helps keep inventory and warehousing costs down,
making them more competitive.

Q.2. Integrating Application Cluster into E-Business Architecture E-Business Model.
Ans.
Effectively managing the transformation to a process-centered organization will be critical to the success of
the twenty-first-century organization. Every aspect of the modern organization is being transformed by
integration of disparate processes. First applied to manufacturing and order fulfillment, the cutting edge of
process integration is now found in sales, employee self-service, and customer service. An integrated
process view infuses support areas, such as finance and human resources, with a strong customer orientation.

Figure show how all the various application clusters are integrated to form the future model of the twenty-
first-century organization. This blueprint is useful because it assists managers in identifying near-term and
long-term managers grasp the big picture, so they can set priorities.

Figure also illustrates the underlying premise of e-business design: Companies run on interdependent
application clusters. If one application cluster of the company does not function well, the entire customer
value delivery system is affected. The world-class enterprise of tomorrow is built on the foundation of
world-class application clusters implemented today.

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Let’s examine the five stages of e-business design.
Stage 1: The Cross-Functional Business Unit. The driving goal of the organization in this stage is to
produce dependable, consistent, quality products and services at the lowest possible cost. In order to
accomplish this goal, companies in stage 1 typically focus on automating existing functions and tasks. Most
companies are striving to reach this level. The majority of the cross-functional examples found in this
chapter (e.g., Whirlpool, CIBC) depict stage 1 companies.

Stage 2: The Strategic Business Unit. Companies moving toward stage 2 concentrate on serving the
customer end to end, for example, in order acquisition and fulfillment. Companies in this stage are
beginning to consolidate their supply chains in some areas, such as combining distribution and
transportation into logistics, and manufacturing and purchasing into operations, with the ultimate units
(SBUs) have increasingly taken the role of application strategy formulation away from corporate
headquarters, and costs. American Express is an example of a stage 2 company. However, in a high-velocity
environment rife with mergers and acquisitions, SBUs can fail to create organizational agility by losing their
focus on the organization’s priorities and capabilities.

Stage 3: The Integrated Enterprise. Companies in stage 3 focus mostly on cost reduction and
internal efficiency. The driving goal is to be highly customer responsive, leveraging the ability to quickly
deliver high-quality products and services at the lowest total delivered cost. Stage 3 companies become
highly responsive by investing in operational flexibility as well as integrating their internal supply chains,
from the acquisition of raw material to the delivery of product to the customer. Companies implement a
strategy of decreasing costs by achieving “preferred partner” status with key suppliers. Chapter 3’s example
of Dell Computer depicts an integrated enterprise.

Stage 4: The Extended Enterprise. As companies move into stage 4, creating market value becomes
important. Extended enterprise describes a multienterprise supply chain with a shared information
infrastructure. The extended enterprise enables supply chain integration, more effective outsourcing, and
self-service solutions for both internal and external users. The extended enterprise allows for sophisticated
online business processes that interweave line-of-business apps with other internal and external information
or sources. The goal is profitable growth, which such companies accomplish by providing customer-tailored
products, services, and value-added information. This differences them from competitors. McKesson, a
health-care distributor, is an example of a stage 4 company.

Stage 5: The Inter-Enterprise Community. This stage focuses on market leadership. Companies
consolidate into true interenterprise communities whose members share common goals and objectives across
and among enterprises, using forward-looking technologies such as the Internet. Stage 5 companies are able

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to streamline their business transactions with their partners to maximize growth and profit. Microsoft
Expedia and E*TRADE are example of stage 5 companies.

Q.3. Customer Relation Ship (CRM).
Ans. Defining Customer Relationship Management
CRM is defined as an integrated sales, marketing, and service strategy that precludes lone showmanship and
depends on coordinated actions. The goals of this business framework are as follows:
♦ Use existing relationships to grow revenue. Composite a comprehensive view of the customer the
maximize his or her relationship with the company through up-selling and cross-selling. Enhance
profitability by identifying attracting, and retaining the best customers.
♦ Use integrated information for excellent service. Use customer information to better serve his or her
needs. It’s about saving time and easing frustration for customers. For instance, they shouldn’t have to
repeat information to various departments over and over again. Customers should surprised by how well
you know them.
♦ Introduce more repeatable sales processes and procedures. With the proliferation of customer
contact channels, many more employees are involved in sales. In order to enjoy continued success,
companies must improve consistency in account management and selling.
♦ Create new value and instill loyalty. It can be your point of difference, your competitive advantages,
to become a company known to prospects and customers for the ability to respond to needs and
accommodate requests, a company well deserving of their patronage, a company to which they will
become loyal.
♦ Implement a more proactive solution strategy. Use a customer-focused business solution that works
across the entire enterprise. Instead of just gathering data and eventually using it, eliminate issues before
they reach the crisis stage. Move from reactive data collection to proactive consumer relations that
resolve problems on the first call.

Q.4. New CRM Architecture Organizational
Ans.
What’s new is the customer-centered nature of applications, which means organizing CRM processes around
the customer, rather than marketing, sales, or any other internal functions. Measurements and feedback from
the customer drive improvements in the CRM process. The customer’s viewpoint becomes an integral part
of the process, allowing it to change with the customer’s needs. In other words, companies base their actions
not on the priorities of functional fiefdoms, but on the overall corporate objective of providing customer
satisfaction.
The core CRM process competencies are cross-selling and up-selling, direct marketing and fulfillment,
customer service and support, store front and field service and retention management.

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Cross-Selling and Up-Selling
Cross-sell and up-sell software typically include the capability to quality prospects, track contacts, and refer
them to salespersons when appropriate. Even-driven marketing is one aspect of cross-selling that companies
are beginning to recognize as a strategic advantage for their marketing departments. By implementing a
cross-sell strategy, complete with the applications necessary to track customer contacts, triggers can be
established to identify prospects for additional sales. For example, in a bank an event would be a large
deposit, which would then trigger a salesperson to call the customer and ask if he or she would be interested
in investment options.

Direct Marketing and Fulfillment
Marketing automation is critical as organizations grow larger. Why? It becomes more difficult to manage
multiple, simultaneous programs and track costs across multiple channels. Campaign management, a direct
marketing process, allows companies to manage, integrate, and leverage marketing programs by automating
such tasks as managing responses, qualifying leads, and arranging logistical aspects of events.

Customer Service and Support
Customer support provides customer care and other services. The applications include support for service
request management, account management, contact and activity management, customer surveys, return
material authorizations, and detailed service agreements. These discrete applications work together to ensure
that customer service representatives can quickly assign, create, and manager service requests, as well as
look up detailed information about customer service contracts, contacts, and activities.

Field Service Operations
Field service software provides service organizations with features for scheduling and dispatching repair
personnel, managing inventory and logistics, and handling contracts and accounting. More and more, the
field service function plays a role in increasing revenues.

Retention Management
Your resources are valuable: Spend them wisely on the customers who count. Effective CRM must be based
on differentiating customers based on account and transaction histories. Today, very few organizations are
able to make these distinctions. The ability to effectively segment customers depends on decision support
technology, which most executives see as a powerful enabler of CRM.

Effective decision support depends on the ability to gather customer information at great levels of detail.
Detailed knowledge about customers allows companies to treat all customers individually and, in many
cases, disengage from or “fire” customers who are high-maintenance, low-margin prospects.

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Q.5. Challenges in Implementing CRM.
Ans.
Organization Challenges in Implementing CRM
Organization resistance to CRM is unfortunate, but almost inevitable. The organizational issues that
companies must tackle to implement CRM include the following:

♦ CRM may reduce an individual business unit’s contribution, even though the whole company benefits.
Current incentive systems work against CRM because they reward only part of the customer’s
relationship with the company. Therefore, a sales manager who is evaluated on individual product sales
has no vested interest in ensuring that the service organization is meeting the needs of the customer.
Most companies today lack financial incentive programs that promote CRM.
♦ CRM requires making a careful transition from an existing “silo-centric” infrastructure to an integrated
customer-centric infrastructure. Over the years, however, large enterprises have built, bought, or
inherited a wide variety of customer management applications. Some of this software is proprietary and
will be difficult to share across departments.
♦ Organizations with global operations must manage customer interactions in different languages, time
zones, currencies, and regulatory environments. In this environment, providing consistent, customized
service is difficult to accomplish using traditional technology.

Q.6. Next-Generation CRM Trends
Ans.
As CRM infrastructure becomes more widely accepted, we anticipate that customer needs and expectations
are going to change subtly across various channels.

The Rise of the Call Center as a Powerful Customer Contact Point
A call center is a group of agents and voice response units (VRUs) that assist customers with support,
inquiry and transaction functions. As the call center evolves into a sales-and-service channel, understanding
the dynamics of this channel will help us prepare for the future. Why? Because the Web is also evolving into
a self-services sales and service channel. While it’s currently a tiny market, we expect the Web to be one of
the fastest-growing portions of the CRM software market, leveraging the rapid growth of the Internet.
However, the trick is identifying where the changes will take place and where growth will happen in the
near future.

Listening to the Customer
The call center and Web channels must be transformed into listening outposts that keep track of what
customers are talking about. However, be careful to listen to the right set of customers. Most organizations

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fail to maximize their sales potential because they make the mistake of asking the wrong customers for
feedback on how to improve their performance.

Customer Loyalty: Luke-warm or Fanatical
In this changing and challenging environment, customers have more choices. Once-apathetic customers are
becoming increasingly engaged, well-informed, and demanding. Customers are beginning to ask companies,
“What have you done for me lately?” This may be the biggest challenge corporations face as they move
forward in the call center and Web channels. Like it or not, the juggernaut of change driven by the Internet
has made people smarter, more aware of the business landscape, and better able to find information about
you and your competitors – what you sell, what you don’t sell, and what people have to say about you. Take
a moment to think about this. How can your call center help you build customer loyalty? When your
customers call you, do they get courteous service? Are they delighted when the call is over? If you did not
respond with a quick yes, you need to think about how loyal that customer will be to your company.

New Integrated Service Experience
You are still undecided which car in the $15,000 to $20,000 range you want to buy. You visit the Web home
page of a car manufacturer and browse the features and options of their latest model. You click a button and
an agent from the manufacturer calls you within a minute. She answers your questions and schedules a test
drive at your home on Saturday morning.

The very same technologies that are raising customer expectations can also be used to meet and exceed them
through integrated solutions that offer superior customer service at every contact point – the Internet, call
centers, storefronts, ATMs, kiosks, and person-to-person selling. No matter how or why customers reach
you, or you reach them, you can offer a uniformly effective (and therefore positive) customer experience.
Ask yourself, is my company creating an integrated service experience?

Higher Service Expectations
Customer dissatisfaction with service is widespread, and expectations of customers interfacing with call
centers are higher than ever. Consider what’s possible in customer service. For example, you call your
insurance company with a question about your homeowner’s policy. The agency’s telephone system
identifies you and greets you by name. The agent knows your policy, answers your question, and asks if you
would like information on a new line of auto insurance that could save you money. You say yes and begin to
rattle off your address, but the agent already has it and says the information will be in the mail you that day.

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New Competition Creates New Headaches
Are new startups creating new value propositions for your customers? Globalization and deregulation are
opening up new markets, increasing the reach of competition. New and nontraditional competitors are
entering established market as industry lines become blurred. Enabled by e-business technologies, these
companies often have lower cost structures and broader geographic reach. At the same time, they are very
creative in addressing customer needs.

Q.7. Building CRM Infrastructure.
Ans.
Building a CRM Infrastructure: A Manager’s Roadmap
1. Define a vision of integrated CRM. Understand what services and products you want to offer your
customers and how you want to track customer interactions. It’s critical to look at the whole relationship
with the customer and not limit yourself to a stovepipe view.
2. Understand the customer. How does he or she use the existing products and services you offer? What is
good or bad about the current process from the customer’s perspective?
3. Develop a business case. Analyze where you currently stand and where you need to go. Do not use
subpar technology as an excuse for inaction. There will always be technical weaknesses.
4. Evaluate current readiness. Determine your company’s position relative to the competition. Assess the
ability of existing sales and service infrastructures to gain and retain existing customers.
5. Establish the CRM strategy and specific objectives. Adopt a strategy consistent with the overall
company strategy. Involve marketing, sales, and service organizations, and understand how each deal
with customers. Ask about current and future product and sales offerings.
6. Evaluate appropriate applications with an uncompromising focus on ease of doing business. Ensure that
the applications meet today’s needs and the strategic direction of the firm. Look at the applications from
an integrated viewpoint.
7. Take the customer’s view, not the product or account view. After selecting an application, ensure that
the process redesign will benefit and retain the customer.
8. Identify and target quick wins. Set aggressive and realistic milestones. Accomplish attainable objectives
early in the process to build support and ensure completion. This allows you to implement incrementally
and successfully. Celebrate your successes along the way.
9. Put the ownership of the end-to-end project in the hands of a single manager. Partner your team
members with experienced business leaders and developers who understand how to deliver and deploy
integrated applications.
10. Implement in stages. Due to the cost complexity of CRM, a staged approach will offer a greater chance
of success and allow for continuous evaluation of strategy. Also, challenge the solution. The usefulness

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and benefits of a CRM strategy constantly change in the real world. Be ready for it. Be proactive about
change.
11. Be sure to create a closed-loop CRM environment. The goal of the CRM strategy is zero leakage of
information. As customers contact the company, regardless of the channel, purpose, or outcome of the
interaction, make sure it is captured.
12. Finally, create concrete measurements goals. Through ongoing measurement and continuous
improvement, you will be able to monitor the project and ensure its success.

Q.8. Selling-Chain Management.
Ans.
Defining Selling-Chain Management.
Selling-chain management is defined as the application of technology to the activities in the whole life cycle
of an order – from inquiry to order.
Companies will move away from automating discrete tasks, such as lead management, configuration, and
pricing, and move toward an integrated infostructure that view order acquisition holistically, as an end-to-
end process involving every department, from marketing to logistics.

Q.9. Need for Selling-Chain Management.
Ans.
Several fundamental market issues are driving the interest in selling-chain applications: the rise of self-
service, the excessive cost of presales support, the increasing cost of order errors, changing sales channels,
increasing product complexity, and the rise of mergers and acquisitions.

The rise of the self-service Order
The sales process is getting increasingly complex as customers demand higher levels of service, faster
turnaround times, and more customization. The early 1990s brought the concept of mass customization to
the marketplace, which has evolved to serve a “market of one”. Consumers want what they want, when they
want it, and they want is packaged uniquely to meet their individual needs. In this new market, companies
need to reexamine their sales procedures for ease of use. For years, Citibank captured a significant share of
the college student market for credit cards simply by making it easy for students to obtain credit, while
competitors made it difficult.

The Excessive Cost of Presales Technical Support
The effective translation of prospect needs into product specifications results in the increased use of
technical sales specialists during the presale phase of a sales process. Generally, technical sales specialists

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have a superior grasp of the capabilities of the entire product line and a better understanding of how these
capabilities may meet a prospective customer’s needs.

While effective, using technical support drives up the cost of selling and shifts the burden of expertise from
the salesperson to the technical sales specialist. The result: excessive time consumed preparing complex
sales quotes and proposals. As the pace of business accelerates and consumers expect shorter response
times, it’s imperative that companies deliver accurate and thorough sales proposals in record time.

The Increasing Cost of Order Errors
The increased sophistication of custom products, services, and systems has resulted in an overall increase in
the cost and frequency of order errors, which occur throughout the sales-and-delivery cycle. At the point of
sale, an error can be made by simply proposing a product configuration that does not actually meet a
customer’s technical requirements or by offering a product that can’t be manufactured.

Errors occur in order entry because incompatible options are not rejected or ancillary equipment has not
been included in the order. In manufacturing, an invalid configuration can shut down the production line. If
a miscalculated, multi-vendor product configuration is actually shipped to a customer, the cost of correcting
the mistake in the field can be excessive, if not irrecoverable.

The Increasing Channel Proliferation Problem
Selling is not as simple as it used to be, due to the rapid proliferation of channels.
The channel applications that serve the order acquisition side are manifold:
♦ Field sales and in-store/branch sales: assisted in-person selling
♦ Telesales: assisted call-center selling
♦ Self-service: unassisted selling via the Web
♦ Third-party resellers or channel selling

The relative success of direct-to-the-end-user and build-to-order models are beginning to put pressure on
companies to improve the information flow through various sales channels in order to improve time to
market, reduce costs, and compete more effectively.

The Increasing Complexity of Products
The increasing complexity of products and the rise in customers’ demands for time-efficient ordering
processes have put pressure on companies to increase the productivity and responsiveness of their sales
force. Furthermore, the pace of introducing new products has accelerated dramatically, causing shorter
product life cycles, which makes the salesperson’s job of staying current even more difficult.

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Sales efficiency and productivity remain major issues in many industries that are experiencing tight labor
markets for seasoned sales professionals. The sales force must become adept at dealing with an ever-
growing, even-changing set of products (and/or services) as companies seek to broaden their product
portfolios to sustain or accelerate growth rates.

The Rise of Deregulation, Mergers, and Acquisitions
While some organizations may face new sales and marketing challenges due to new channels and product
line expansions, others face dramatic changes within their industries, such as the impact of deregulation on
both the telecommunications and utility industries. Until now, companies in these industries haven’t had to
worry about having efficient and effective sales and marketing departments because they’ve enjoyed a
monopoly. Now that they must compete, many of these companies are rapidly adopting selling-chain
applications, not only to improve service, but to survive.

Q.10. Need Driving Technological.
Ans.
Technology Forces Driving the Need for Selling-Chain Management
Business drivers highlight the importance of watching customer preferences and trends in selling-chain
management. Just as important are the technology issues and trend that steer a company in a direction that
will either position it for the future or for failure.
Managers should not make application investment decisions without a clear understanding of technology
limitations. Many of the sales automation applications have mixed reputations in corporations due to
vendors who made promises that didn’t come to fruition. The reasons for these failures are varied:
♦ Integration was not a factor considered in the selection and implementation of applications.
♦ Many of the then-current software solutions were unwidely or difficult to implement.
♦ The breadth of product functionally did not meet business requirements.
♦ Sales and marketing staff refused to use the products because they didn’t increase sales effectiveness.
The driving business forces and limitations of existing applications, coupled with the emergence of
necessary enabling technologies, have companies scrambling to invest in sales automation solutions so they
aren’t left behind by more technically advanced competitors. In order to understand where we’re going,
however, we need to understand the application continuum.

The first generation of selling-chain solutions burst onto the marketplace in the form of sales force
automation (SFA) software, which is used to manage the entire sales process by capturing data at every step,
from lead generation to contract closing.

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The first generation of SFA software included stand-alone, task-oriented tools, such as personal organizers
(appointment calendars and address/telephone directories). The focus of these products was to coordinate
and manage the diverse activities of a direct sales force throughout the entire sales cycle.

The reason for the lack of success is that SFA tools suffer from the following problems:
♦ Limited, task-oriented functionally. These systems have archaic interfaces that are inflexible, have
limited capabilities, and often require different sessions to access various core programs.
♦ Functional Isolation. These products have limited back-office integration to perform such activities as
inventory availability checks, fulfillment functions, real-time pricing, and account management, all of
which emanate from sales-initiated customer contact.
♦ Organizational resistance. No enterprise wants to buy an off-the-shelf sales automation solution.
Almost every company views its sales processes as a unique, key part of its competitive differentiation.
Although most companies realize the inefficiency of building and maintaining a custom application, they
won’t accept a cookie-cutter approach either.
♦ Limited view of the customer. Salespeople don’t sit at desks, so it’s difficult to tie them directly to the
enterprise applications and provide a 360-degree view of the customer. Also, sales activities are
organized by product or account for operational efficiency. Thus, incomplete understanding of the total
customer situation propagates throughout the entire customer interaction and destroys sales
opportunities.
Many sales applications are built for some limited subset of a product and functionality, which results in
narrow process capabilities. For example, a banking sales application may serve only credit card, mutual
fund, or insurance products.
The ability to take a customer view – an integral part of CRM – is thus severely restricted. This results in
lower productivity from the sales force, more customer call-backs when needs can’t be met in one phone
call, and an increased possibility of error when data has to be entered more than once.

Limited Sales Effectiveness:
The Need for More Integrated Applications
Salespeople are demanding the integration of sales applications into their enterprises’ back-office systems.
The implications for any company are far-reaching because all departments will be affected. For example,
with full integration, a completed sales transaction will book the sale automatically, update the demand
forecasting model, affect the production and delivery schedules, update the customer relationship file, and
provide input to the calculation of sales performance metrics.

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Q.11. Managing Order Acquisition Process.
As shown in Figure the process of order acquisition entails performing needs assessment; facilitating option
selection; performing configuration; and generating a quote and proposal, complete with drawings,
schematics, and performance metrics.
The technical sales specialist then transfers his or her understanding of the solution into production terms,
such as price and delivery schedules, or passes the technical information to someone else who figures out the
pricing and manufacturing schedule. The information is then either given back to the salesperson or to a
proposal specialist, who creates a complex document recapping the customer’s needs and proposing the
manufacturer’s best product configuration, price, delivery date, and other relevant terms. This manual
process leaves a great deal of information (e.g., engineering, pricing, and manufacturing issues) up to
individual interpretation. The likelihood of human error in the process is high and the cycle time is long.

Ask yourself, What does my sales process look like? The first step toward creating applications that provide
strategic differentiation is to map the customer’s entire experience with the sales order process. We
recommend that companies perform this exercise for each important customer segment. The begin, assemble
groups from all areas of your company, in particular those who use marketing data and those who have face-
to-face or phone contact with customers. Charge the groups with identifying, for each major market
segment, all the steps through which customers pass from the time they become aware of your product to the
time the order is entered into the system.

Specific industries may increasingly need selling-chain automation for different reasons, but corporations
worldwide are turning to these solutions as they look to gain and use more intimate knowledge about their
customers in the order acquisition process. It’s simply easier for any company to sell when the sales team is
equipped with comprehensive information about customers and can demonstrate their ability to respond
quickly to customers’ possible needs or concerns.

Sometimes reengineering the entire order acquisition process may be very difficult. In such cases, it makes
sense to optimize the elements that are causing the most grief.

Q.12. Elements of Selling-Chain Infrastructure Custom Food:
Ans.
Product Catalogs and Marketing Encyclopedia
For assisted selling, a valuable tool is a marketing encyclopedia, an intelligent electronic catalog that
connects sales representatives and customers to a company’s most current product and service information.
It provides a single point of entry for harnessing and distributing all product information. Product managers
can update information in the database and immediately broadcast the changes throughout the enterprise.

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Some critical requirements of any marketing encyclopedia are the ability to easily create and maintain a
repository of product information; the ability to create multiple search mechanisms to assist in location
information; and the ability to alert sales representatives and customers to bundled products and services,
promotions, and complementary products.

Sales Configuration Systems
In many companies, the process of selling configurable or customized products is cumbersome at best. From
the time a sales quotation is prepared, through product manufacturing and shipment, requirements must be
captured and configuration questions must be accurately answered. Salespeople (either direct or channel
partners) are forced to “check with the home office” because they lack the tools and information they need
to provide accurate and complete configuration quotes in the field.

Modern configurators are designed to go beyond checking configuration to embracing the needs of the
customer, enabling a sales force to generate requirements-based, accurate configurations and quotes at the
point of sale, whether it’s in front of the customer or over the Web.

Pricing Maintenance, Distribution, and Configuration
Selling complex products requires effective pricing strategy support. Pricing varies by the sales strategy,
such as tiered customer hierarchies, multiple distribution channels, varying product lines, “effectivity” dates,
and authorization ranges. Because of these and many more issues, a new sales configuration type has
emerged: pricing configuration. Pricing configuration and update management assists companies as they
develop, manage, and deploy complex pricing and discounting structures to selling channels.

Proposal and Quote Generation
The goal of proposal and quote generation systems is to enable companies to provide an intuitive,
professional layout to customers who require complex quotes.

Such applications include the following features:
♦ Opportunity Creation/Tracking. This enables salespeople to organize, locate, and restore versions of
existing quotes and configurations by customer, session, or date.
♦ Interactive needs assessment. This enables salespeople and customers to articulate their buying criteria
and solution requirements.
♦ Automatic quote generation. This generates quotes directly from the sales configuration, with the
ability to add spare parts, apply custom discounting, select currency type, apply special charges or
discounts based on geography, and affix special shipping and packaging charges.

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♦ Proposal Wizard. This automatically generates tailored proposals from configurations, needs
assessments, and quotes, reducing the time and effort required to generate custom proposals.

Sales Incentives and Commission Processing
Commission systems have three core modules: incentive design, inventive processing, and incentive
analysis. From an incentive design standpoint, systems need to enable a company to:
♦ Create sophisticated commission and bonus rules that reward salespersons based on different sales credit
points, including booking, shipping, and payment.
♦ Create individualized and account compensation programs using an unlimited number of commissions,
bonuses, and quotas.
♦ Create and use customized performance measures, including profit margin, net discount, and customer
satisfaction.

Q.13. Structural Transformation.
Ans. If e-commerce innovation is the cause of a revolution in the rules of business, what is the effect? In
short, structural transformation. The results are a growing pace of application innovation, new distribution
channels, and competitive dynamics that are baffling even the smartest managers.

As technology permeates everything we do, business transformation is becoming harder to manage because
the issues of change play out on a much grander scale. Increasingly, value is found not in tangible assets
such as products, but in intangibles: branding, customer relationship, supplier integration, and the
aggregation of key information assets. This observation leads to the second rule of e-business.

The ability to streamline the structure and to influence and control the flow of information is dramatically
more powerful and cost-effective than moving and manufacturing physical products.

The rule is the core driver of structural transformation. Ironically, it seems that few companies have
developed the necessary information-centric business designs the deal with the issues of business change
and innovation. Changing the flow of information requires companies to change not just the product mix,
but perhaps more important, the business ecosystem in which they compete.

Unless an enterprise develops an explicit strategy to accommodate the accelerated flow of information, the
enterprise will find itself scrambling, working harder and faster just to stay afloat. There is always hope that
some magical silver bullet will appear and pierce the walls blocking the smooth flow of information, but that
isn’t likely.

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Why do successful firms fail? The marketplace is cruel to companies that don’t adapt to change. History
shows that organizations best positions to seize the future rarely do so. As Alvin Toffler pointed out in
Future Shock, either we do not respond at all or we do not respond quickly enough or effectively enough to
the change occurring around us. He called our paralysis in the face of demanding change “future shock”.
Too often, senior managers fail to anticipate change, become overconfident, lack the ability to implement
change, or fail to manage change successfully.

Q.14. E-business Communities.
Ans. To create the future, a company must be capable of engineering the entire end-to-end value stream,
which is not a radically new concept. Experienced managers know to redefine business designs and
processes when implementing new forms of value. What’s different in this new environment is the
widespread use of synergistic clusters, business ecosystems, coalitions, cooperative networks, or outsourcing
t create end-to-end value streams. E-Business communities (EBCs), as these networks of relationships are
known, link businesses, customers, and suppliers to create a unique business organism. This trend to the
seventh rule of e-business:

The business design of the future increasingly uses reconfigurable e-business community models to best
meet customers’ need

For instance, Amazon.com, Microsoft CarPoint, E*TRADE, and other e-commerce startups are essentially
complex EBCs built for the sole purpose of organizing and energizing cross-enterprise relationships to
create end-to-end value for the customer. Competition is no longer between companies, but between EBCs.

EBC strategies see companies as part of an extended business family that pools the resources and benefits of
each company’s expertise. An EBC can play a powerful role in attacking market leaders, and new entrants
are using them to gain access to resources, customers, technology, and products. However, EBCs are not just
restricted to e-commerce startups. They are everywhere. Large established companies are also moving to the
EBC model, but at a slower pace. Why? EBCs are difficult to integrate, and coordination among partners
can prove troublesome. Large companies are therefore taking a more incremental approach to EBCs by first
concentrating on creating flexible supplier communities vis-a-vis supply chain management.

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Q.15. Integrate.
Ans. Providing end-to-end process integration is not as easy it looks. End-to-end process integration
demands major application overhaul to develop an integrated back-end infrastructure that allows the process
to flow seamlessly. Most firms don’t have integrated infrastructures. And the inefficiencies, inaccuracies,
and inflexibilities of information technology systems within corporations need no introduction.

The lack of an integrated application architecture is not a new difficulty. It’s just that with the advent of e-
commerce, these problems are starting to matter more. The reason is simple: When customers had little
choice and all competitors were equally bad, there was little incentive for a company to do better.

With the threat of losing customers, integrated infrastructure problems rockets to the top of the business
agenda. Clearly with e-commerce, the definition of enterprise architecture must change. It’s gradually
dawning on managers that they are not going to get very far in e-commerce if they apply piccemeal solutions
to process problems that range from customers to suppliers.

Forward-thinking companies are beginning to understand the enormity of the task that lies ahead, and that a
number of barriers must be eliminated before they are ready to use e-commerce to a competitive advantage.
The typical barriers that organizations face are process inefficiencies, and lack of accurate information.
Removing these roadblocks won’t be easy. The functional model of the past can’t deliver for today’s world.
As new technological integration problems continue to create patholes in the smooth road of business,
managers eventually run out of asphalt and ideas. Enter e-business.

Q.16. Reversing the Value Chain.
Ans. Successful companies no longer just add value, they invent it. To invent value, managers must reverse
the traditional value-chain thinking (inside-out-models) by which business define themselves in terms of the
products they produce. In the traditional model, managers concentrate on being effective and competitive by
putting well-understood products on the market. In the new world, however, the business design is outside
in.

In an outside-in approach, the strategy revolves around the customer. Why is this crucial? From time to time,
conditions suddenly change direction, causing industries to completely rethink the way they do business.
Often, a business-condition change is due to new entrant that does not play the game by the understood
rules. The challenger reconfigures the offering and suddenly starts running away with the business.

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Q.17. ERP Decision = Enterprise Architecture Planning.
Ans. No doubt, ERP applications are defining the overall corporate architecture. An ERP application
affects the whole corporation; therefore, the decision to build versus buy is very strategic. A misguided ERP
selection will hinder a company’s ability to achieve strategic e-business objectives. The ERP selection
dilemma is, Do we build it ourselves or do we buy it from others?

Traditionally, organizations had two alternatives when choosing an ERP architecture: a highly complex,
custom-designed application to meet the organization’s specific requirements, typically developed in a
legacy environment; or an off-the-shelf application designed to be amenable to changing environment and to
be implemented more rapidly at a lower cost. While custom-designed apps provide the desired degree of
functionally, their size and complexity require lengthy design, development, and implementation efforts.
Maintaining, updating, and upgrading these apps require substantial internal resources, and often the
assistance of outside consultants as well. In addition, these apps have limited flexibility to support diverse
and changing operations or to respond effectively to evolving business demands and technologies.

To address the limitations of custom programming apps, a new breed of software solutions – off-the-shelf
apps – has emerged. These off-the-shelf apps aim to provide broad functionality, better integration with
existing systems, greater flexibility to change and upgrade, and a lower total cost of ownership. Never run
into these packages? Odds are you will soon, because most businesses are adopting them en masse. SAP,
Baan, PeopleSoft, J.D. Edwards, Oracle, Lawson, QAD, and SSA offer by far the most popular ERP
packages available today.

The build vs. buy decision is being tilted toward purchasing commercial off-the-shelf (COTS) software from
third-party vendors for several reasons:

♦ Only organizations with deep pockets can viably maintain the high total cost of ownership and
complexity associated with developing and maintaining custom-designed apps.
♦ Installed applications are becoming technically outdated and the ongoing re-design of business processes
makes existing software functionally obsolete-even a business impediment.
♦ Off-the-shelf solutions integrate the best business practices from a variety of industries. The ability to
import and adopt these best business practices translates into bottom-line improvements.
♦ Companies realize that software development may not be a core competency. It’s estimated that more
than 70 percent of internal software projects fail. To minimize risk, companies increasingly outsource
development activities.

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Q.18. ERP Costs, usage in the World.
Ans. ERP Usage in the Real Word.
No doubt the success of the SAP R/3 ERP solution has been quite phenomenal. However, there is
widespread misunderstanding that ERP equals production scheduling. This is not the case. The fundamental
ideas behind ERP apps have a broad range of applicability.

As consumers, most of us are oblivious to the processes that go into the products we buy and use every day.
We are also oblivious to the raw materials used to make them. But the acquisition of raw materials, the
accounts payable and receivable processes, and the manufacturing and distribution processes provide the
basic building blocks for virtually every commercial product.

Let us consider three companies that have built their business around ERP: Microsoft in the software
industry, Owens-Corning in the building supplies industry, and Colgate-Palmolive in the consumer products
industry.

Microsoft
In general, ERP software is used for divisionwide or enterprisewide business-critical purposed and involves
significant capital commitments by customers. Microsoft spent ten months and $25 million installing SAP
R/3 to replace a tangle of 33 financial-tracking systems in 26 subsidiaries. As a result, Microsoft puts its
annual savings at $18 million, and Bill Gates calls CAP “an incredible success story.”

Colgate-Palmolive: The ERP Benefits Are Tangible
ERP implementation has become the foundation of Colgate-Palmolive’s business. The corporation is the
world leader in oral-care products (mouthwashes, toothpaste, and toothbrushes) and a major supplier of
personal-care products (baby care, deodorants, shampoos, and soaps). Palmolive is a leading dishwashing
soap brand worldwide, and Colgate is a top producer of bleach and liquid surface cleaners (Ajax) outside the
United States. The company’s Hill’s Health Science Diet is a leading premium pet food brand worldwide.
Foreign sales account for about 70 percent of Colgate’s total revenues.

Q.19. ERP Implementation.
Ans. A combination of better products, time-to-market urgency, and thin in-house technical skills ensures
that mainstream firms will embrace packaged ERP software. It’s important to note that each ERP application
suite has its own architecture, customization features, installation procedures, and level of complexity.
Therefore, you can never approach the installation of all ERP packages in the same manner.
Take, for instance, SAP. Companies implementing SAP use a variety of implementation strategies:

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♦ A step-by-step approach, in which one SAP module at a time is installed, tested, and integrated with
other systems.
♦ A “big bang” technique, sweeping away all old systems at once and replacing them with SAP.
♦ A “modified big bang” approach, in which various modules are implemented at one time, piloting them
in one area of the company and then extending the program throughout the firm. Most companies use
this method.

Let’s look at the implementation methodology phases.
♦ In the project preparation phase, the project kickoff is organized and all the arrangements for the project
team are made. This phase also includes the estimation of project resources, costs, and duration of each
activity.
♦ During the blueprint phase, the consultants document the requirements of the enterprise and its business
process design, including interviewing potential users.
♦ In the pilot phase, the software is configured to match the structure of the company with the desired
business processes. The technical team members plan the interfaces and data integration infrastructure of
the new system.
♦ In the final phase, all the work from the previous phases is consolidated, with the goal of preparing the
system for final acceptance. This phase covers the final system test, user training, and final migration of
the data to the new system. Moreover, all the conversion and interface programs are verified, as is the
scalability of the system. Finally, the user acceptance tests are run.
♦ The assessment phase reviews the system to ensure that all business requirements were met. This
includes checking the business processes and technical architecture are well as checking with the end
users, assuring that their expectations were met. Finally, the business benefits of the new system are
measured, allowing the company to determine the ultimate return on investment.

Q.20. Future in Application.
Ans. The Future of ERP Applications.
Compared with even a decade ago, the ERP solutions that have become routine in corporate life today are
pretty amazing. But have no doubt, they’re nothing compared with tomorrow’s. As a wise person once said,
“The road to excellence is always under construction.” Likewise, the ERP solution is also “under
construction”. The long-term goal is achieving more flexibility in operations.
Four crucial elements are required to achieve flexibility.
1. Components, not modules. Historically, ERP systems have been built from interdependent modules. In
the future, freestanding components will work independently, capable of integrating seamlessly with
each other, with legacy systems, and third-party solutions. Why? Companies are outsourcing business
functions such as logistics, human resources, and accounting in order to concentrate on areas that

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improve competitive advantage. They need apps that can be pulled apart, recombined, and distributed to
match new outsourcing-based business models.
2. Incremental migration, rather than massive reengineering. ERP systems have traditionally taken too
long to implement. This must give way to a ready-to-go product that allows companies to migrate in
easy steps, moving steadily from one deliverable to another, rather than waiting long periods for
completion of a total project.
3. Dynamic, rather than static, configuration of ERP systems. Big ERP systems that are configured
once and for all are no longer acceptable. ERP components must be dynamically reconfigured to suit
changing business needs. No one vendor can presume to predict accurately and precisely how its
customers will work and how their processes will flow. Technically, users will be able to influence the
system functionality and configuration simply by changing an underlying business logic template.
Critical to such reconfigurability is the ability to create dynamic suites of applications out of best-of-
breed components.
4. Management of multiple strategic souring and partnership relationships. Rather than merely
viewing the flow of processes, future ERP systems will model and monitor processes affecting the
activity of the business, wherever those processes are occurring, up and down the supply chain. This is
especially important in a business-to-business e-commerce environment.

Q.21. Supply Chain Management
(SCM):
DEFINITION
Ans. Defining Supply Chain Management
In the simple sense, the supply chain is a “process umbrella” under which products are created and delivered
to customers. From a structural standpoint, a supply chain refers to the complex network of relationships that
organizations maintain with trading partners to source, manufacture, and deliver products.
As you can see from figure, a company’s supply chain encompasses the facilities where raw materials,
intermediate products, and finished goods are acquired, transformed, stored, and sold. These facilities are
connected by transportation links, along which materials and products flow. Ideally, the supply chain
consists of multiple companies that function as efficiently and effectively as a single company, with full
information visibility and accountability.
In a nutshell, SCM is the coordination of material, information, and financial flows between and among all
the participating enterprises.
♦ Material flows involve physical product flows from suppliers to customers through the chain, as well as
the reverse flow via product returns, servicing, recycling, and disposal.
♦ Information flows involve demand forecasts, order transmissions, and delivery status reports.

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♦ Financial flows involve credit card information, credit terms, payment schedules, and consignment and
title ownership arrangements.

Q.22. SCM Inter-Enterprise Fusion.
Ans. E-Supply Chain Fusion: e-Supply Chain 301
How do you create integrated supply chain structures? How do you migrate from existing nonintegrated
supply chain models to more effective integrated models? Before we address the process of fusion, note that
many firms struggle to implement the integrated supply chain vision because existing supply chains are
artifacts of the past. These legacy supply chains are clogged with unnecessary steps and redundant
stockpiles. For instance, a typical box of breakfast cereal spends an incredible 104 days getting from factory
to supermarket, struggling its way through an unbelievable maze of wholesalers, distributors, brokers, and
consolidators, each of which has a warehouse. Unclogging these inefficient supply chains means changing
the way links interact, and it could greatly affect leadership positions of some or all of the companies
involved.
Diagnosing Root Causes of Supply Chain Problems
Before creating an e-supply chain architecture, such as that shown in figure, you have to diagnose what the
problems are that prevent collaborative work. An old axiom says, “If you don’t understand the problem, it’s
hard to fix it!” Fixing a business problem requires untangling underlying, symptomatic, structural trouble,
such as:
♦ A lack of knowledge about the end-to-end demand planning function. This often results in an unstable
demand figure that changes frequently in he production schedule and can lead to expedited transfers and
shipments.
♦ Inconsistent or out-of-date, due to a lack of integration with ERP. This can result in reactive fire-fighting
decisions based on inadequate information or poor decision-support tools.
♦ A lack of process integration across partners. Retailers are demanding more sophisticated interenterprise
purchasing, inventory management, and merchandizing tools that enable them to distribute and manage
goods efficiently.
Inventory management has become more complicated as retailers, distributors, and customers seek to reduce
costs and improve margins while replenishing inventory on a just-in-time basis. But until efficient SCM is in
place, inventory management plans are hard to execute well.
♦ Effective deployment of SCM requires structural change, because existing supply chains are sadly
outdated in an era in which inventories and costs must be ruthlessly eliminated.

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Q.23. Basics of Internet – Enabled SCM.
Ans. Basics of Internet-Enabled
SCM: e-Supply Chain 101
SCM is where the action will be in the next decade. But as the SCM industry grows, so does confusion over
which software apps do what functions best. With a host of products for every task from forecasting and
purchasing to warehousing and shipping, and with countless variations in the terms used for various supply
chain functions, managers struggling to improve their SCM infrastructure find themselves wandering in the
dark. In order to turn on the lights, we must first understand the basics of SCM. Thankfully, the basics are
the same whether companies make PCs or conduct financial transactions.

SCM Requires Interenterprise Integration
Interenterprise integration is the core of SCM. As Figure illustrates, SCM is evolving from the current
enterprise-centric models (e.g., Nabisco) to more collaborative, partnership-oriented models (e.g., the
Proctor & Gamble and Wal-Mart continuous replenishment model in the consumer packaged goods
industry). And leading-edge companies such as Intel and Dell in the high-tech industry have gone even
further to create an increasingly streamlined supply chain model with mass-customization and customer-
direct capabilities.
No company wants excess inventory. The rallying cry behind interenterprise integration is “drive down
inventory, production, and distribution costs.” The basic economic reality, however, is that retail stores and
distributors maximize profits by inventory turns – frequent delivery of goods to replace sales (order cycles
of less than 18 hours), whereas manufacturers maximize profits by longer production lead times (production
cycles of many days or weeks). To manage the mismatch between the two, companies create stores of
inventory in the supply chain.

Q.24. e-Supply Chain Issues
Ans.
1. What is the Right e-Supply Chain Structure for My Company?
To meet customer’s demands, an expensive option is to keep a large finished goods inventory. But what
happens when the market demands something else? The now-obsolete product becomes wasted money.
Companies have to use supply chain planning to anticipate conditions and act, not react. In other words,
SCM is a prerequisite to doing business.
Consider the computer supply chain. The consumer has a specific need for one of a thousand possible
configurations of processors, hard drives, peripherals, and so forth. One manufacturer, such as Compaq,
reacts by tieing up millions of dollars building an inventory of premade models (which the customer may
not want), whereas another manufacturer, such as Dell with its responsive supply chain, can quickly
assemble every customer’s order. Which manufacturer pleases customers and saves money?

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Clearly, SCM is not a technology issue; it’s a business strategy issue. In a classic articles titled “What is the
Right Supply Chain for Your Product,” Marshall Fisher wrote: “Before devising a supply chain, consider the
nature of the demand for your products,” because “functional products require an efficient process;
innovative products, a responsive process.”

2. Does the Chain Enable Effective Differentiation Capabilities?
Consider, for instance, build-to-order (BTO) business models, which are used to support delivery of the
mass-customization value proposition. The basic goal of build-to-order is to trigger the entire buy-make-ship
cycle only when a clear demand signal is sent by a specific customer. BTO provides vendors and suppliers
multiple avenues of differentiation by adjusting variables: the velocity of moving goods throughout the
supply chain, exposure to inventory carrying and depreciation costs, higher volatility in demand, and
transitions through product cycles.

3. Does My Supply Chain Facilitate Effective Order Fulfillment Capabilities?
Order fulfillment is the highest single cost of doing business and therefore offers a great opportunity to
reduce cost and improve service. For instance, better consensus planning reduces errors that are often caused
by multiple groups developing forecasts independently. The different functional groups involved in the
supply chain have different priorities, and sometimes conflicting objectives. The classic example is the sales
department that pads its forecast to ensure availability of a product, to the detriment of those trying to
control inventory. Unless these conflicts are resolved, the supply chain can be whipsawed between extremes,
resulting in increased cost and poor customer service.

4. Does My Company Have the Right Infrastructure Capabilities?
Creating a real-time SCM infrastructure is a daunting and ongoing issue, and quite often a point of failure
for several reasons, chief among them being that the planning, selection, and implementation of SCM
solutions are becoming more complex as the pace of technological change accelerators and the number of
partners increases. SCM investments must be made surgically, while bearing in mind the existing ERP and
legacy infrastructure. Large companies have already made the necessary investments in ERP systems to
integrate functions such as purchasing, inventory management, production scheduling, and finance within
the enterprise. The next step is to leverage ERP investments to integrate the functions and information of
multiple enterprises in real time.

Q.25. The Future: e-Supply Chains
in 200X
Ans. As we move into the new millennium, a key issue on most managers’ minds is what the supply chain
will look like in the year 200X.

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Integrated Make-to-Stock. Traditional supply chains, also called make-to-stock models, are particularly
useful in mass-production environment. How does this work? Production quantities and dates are provided
by the forecast, with no concern for individual customer requirements. Instead, customer receive shipments
from the finished goods inventory. This means that the irregular demand flow that would result from various
customer orders can be smoothed, produced, and warehoused downstream.
Examples of make-to-stock users include Coca-Cola, Proctor & Gamble, and General Mills’ cereal
production. Typically, the resource utilization with make-to-stock models was modest due to inefficient
parts purchasing, product overdesign, poor plant utilization, lengthy inventory pipelines, and a lack of
streamlined logistics. Companies are now attempting to mitigate the problems associated with make-to-stock
by using information to better coordinate the end-to-end chain.

Q.26. E-Procurement Knowledge-Tone Applicant.
Ans.
Before going any further, it’s important to clarify the difference between purchasing and procurement. These
terms are often used interchangeably, but they differ in scope. Purchasing refers to the actual buying of
materials and those activities associated with the buying process. Electronic purchasing addresses only part
of the problem and represents only the tip of the iceberg.
Procurement, on the other hand, has a broader meaning and includes purchasing, transportation,
warehousing, and inbound receiving. Procurement is a closed-loop process that begins with the requisition
and ends with payment. Integrated procurement remains one of the truly significant business strategies to be
developed in this century. But it’s been hampered by technological limitations.
The initial goal of integrating the procurement supply chain was to take apart some traditional, hierarchically
structured purchasing organizations. Many had layer upon layer of approval procedures that slowed the
process down. What’s emerging is an emphasis on order-to-delivery processes rather than tasks. The focus is
moving quickly toward integrated procurement chain management.
At the same time, procurement is migrating from traditional paper-based processes to e-procurement. The
benefits of a e-procurement fall into two major categories: efficiency and effectiveness. Efficiency includes
lower procurement costs, faster cycle times, reduced maverick or unauthorized buying, more highly
organized information, and tighter integration of the procurement function with key back-office systems.
Effectiveness includes increased control over the supply chain, proactive management of key procurement
data, and higher-quality purchasing decisions within organizations.

Q.27. E-COMMERCE
Every where you look, electronic commerce, or e-commerce, is the buzzword of the day. Ten years ago,
mail-order catalogs all the rage. Now we have this new medium in the Internet for transacting business. And
that wood “business” may be the most critical aspect of what e-commerce is all about.

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Most people think of e-commerce as shopping online. That is typically called consumer-to-business (C-to-B)
e-commerce. That is your traditional retail or storefront type of business. On the Web today that would
include such sites as Martha Stewart (http://www.marthastewart.com), Amazon (http://www.amazon.com),
and many others. For companies like Dell Computers (http://www.dell.com), their Web sites are beginning
to equal their more traditional retail channels in sales volume. There is no doubt that sites like these are
gaining critical market space and will continue to grow.
E-Commerce also includes the business-to-business (B-to-B) market space, which accounts for a significant
amount of activity on the Internet. Just think of all the supply chain purchasing that takes place to
manufacture and support many of the products and services we use every day! Examples of B-to-B e-
Commerce include wholesales companies selling to end retailers – for example, a PC manufacturer selling to
distributors and large retailers. As B-to-B commerce grows, businesses will come to rely on this type of e-
commerce as an every day business solution. That favorite restaurant down the corner will probably
purchase from different suppliers using this technology, as will your local grocery store, bookshop, and
other traditional business. The day will come when the Internet will be a standard place for business to
communicate with other businesses, and that day is just around the corner.

Q.28. ELECTRONIC COMMERCE PHASES
In this book, we are going to focus on the core concepts of purchasing, which are typically related to retail
shopping but are also relevant to business-to business purchasing. Before we start though, it is important to
understand the complete e-commerce food chain to understand where the Internet storefront begins and ends
and where more traditional back office technology comes into place.

Q.29. Marketing
There is nothing new about marketing and the need to target consumers. The general goal is to target
potential buyers and entice them to give your site a whirl.
What is new is the ability to use the medium of the Internet to target consumers in different ways. While we
might not think of banner advertising, targeted e-mails, sweepstakes, etc., as “e-commerce,” they can be a
critical part of the process in the e-commerce cycle.
Another hot topic on the Net today is the building of community, and creating sticky applications. The goal
is to provide an environment that will entice the site visitor to come back repeatedly. Examples include
discussions forums, polls, surveys, chat, etc.
In this book we will not cover the technology behind using the Internet as a marketing and community
building tool, but we will focus on how to use technology to market to the consumer who has found your
Web site.

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Q.30. Customer Visitors
Of course, what is e-commerce without the customer! In this case our customer is the cyber-surfer who was
decided to type in your URL or click on a link to visit your Web site. The biggest distinction we need to
make here is the difference between the business-to-business, the purchaser is another business entity who
with need to have various purchasing options, including credit card, purchase order, and/or credit account
(net payment). The seller may need to provide a purchase order number to the buyer. There may be
additional requirements for large dollar purchases and mission critical purchases, including authenticated
receipt of order, electronic transfer of funds, etc. Many of these issues have been addressed traditionally
through Electronic Data Interchange (EDI), which provides agreed upon data interchange standards for
businesses.
In the traditional consumer-to-business model the shopper is typically an individual who is going to pay with
a credit card and have the item shipped to her home. In this book, we are going to look at the technology
behind the core shopping process with a specific focus on consumer-to-business purchasing. But, many or
these processes are equally apropos for business-to-business transactions.

Q.31. Web Site Visit
Once the individual visits the Web site, the fun begins. Once a business site is downloaded, a number of
things can happen to begin building that e-commerce experience for a customer, immediately we can begin
tracking and profiling this consumer. And, based on that information, we can begin to target products that
the consumer may be most interested in. This step begins the e-commerce shopping process.

Q.32. Product Browsing
If the visitor likes what he sees upon entry to the Web site, he will hopefully begin to browse through the
site product pages. Typically a visitor will browse through departments and then products within those
departments. As a potential customer goes through this shopping experience, he may be enticed with
products on sale, promotions, related or upgraded products, etc.

Q.33. Shopping Basket
The next step is for the shopper to add products into her “shopping basket.” The shopping basket is simply a
list of products the shopper has selected, the quantities, prices, attributes (color, size, etc.), and anything else
related to the potential order Shopping baskets often offer options to clear the basket, remove items, and
update quantities. In Part II we’ll be explore the basics of the shopping process, including product browsing,
the shopping basket, etc.

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Q.34. Checkout
Once the shopper has all of his items ready for purchase, he will begin the checkout process. On the
consumer-to-business side of things. The consumer will typically enter in his shipping and billing address
information. The shopper might also add in additional information for a gift greeting, gift wrapping and
other information for ancillary services.

Q.35. Tax and Shipping
Once the business site knows where the product is going to be shipped and billed, it can execute two
important business-rule calculations for taxes and shipping. Taxes can be as easy as simply charging for a
state tax if the person lives next to a nexus for the business. Or, in rare cases you may need to provide local
tax rate support usually only where you have local representation such as storefronts in multiple states, etc.
It so, then you may need to consider support for local country or city taxes based on the shopper’s zip code.
Likewise, shipping can be as simple as charging a flat fee or as complicated as calculating charges specific
to each product purchased and correlated to distance the product has to shipped.
Both of these issues can be even more challenging when it comes to handling international ordering. If the
business has never supported international orders before, this may represent many challenges and new
requirements. But, make no mistake about it, when your site launches, people from other countries will find
it one way or another.

Q.36. Payment
Once we have a subtotal for the product purchase, and tax and shipping are calculated, we are ready for the
shopper to present payment. As mentioned above, the options will be quite different of business-to-business
and consumer-to-business transactions. In consumer-to-business e-commerce, the typical purchase is via a
credit card. Or, depending on situation COD or invoice options may be available. In business-to-business e-
commerce, all options may need to be available, including purchase orders. Also, for large ticket purchases
where inventory, advanced availability, and other issues may come up, a quote or follow-up with final
pricing, ship time, etc., may be required as well.
With credit cards, there are options to either clear/transact the credit cards offline or transact them online.
Online processing is over the Internet via services such as CyberCash and HP-Veriphone. When using
online processing, the credit card data is securely transmitted over the net, and a response is sent back
indicating whether the card cleared or not.

Q.37. Receipt
Once the order has been placed, we might want to return a receipt to the purchases. For business-to-business
e-commerce, the receipt might be a listing to attach to a purchase order. For the consumer, that might be a

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reprint of the order on the screen or a listing e-mailed to the purchaser. In both cases, this process can be
easily automated (as will be demonstrated in this book).

Q.38. Process Order
At this stage, the cutting of leaves the patience and we hit the back end of the e-commerce equation. If we
did not automatically process the credit card, then the first call to order is to process the financial
transaction. In general, standard business rules take over in this phase, just as if the order came in via the
phone or mail. The Internet does afford the option to keep the consumer informed of the order status. We
may want to show that the order has been processed, all items are in stock, etc. To do this, a method will
need to be set up on the Web site.

Q.39. Fulfill Order
Once we have a valid order, it needs to be fulfilled. This can actually be the most challenging business
process to work on. Many different scenarios come into play depending on the type of business you are in.
If you are a traditional retailer with storefronts, there may be an issue of having central inventory to fulfill
from. And, even though 90% of the transactions are electronic, there will be those customers who need to
make a phone call or send an e-mail to the business.
If you provide fulfillment via a fulfillment house or service, then there might be integration issues with the
fulfillment house’s system. Even if you do your own fulfillment, there may be integration issues between the
Web server and your back end fulfillment systems.

Q.40. Ship Order
The last step in the process is to get the product to the customer. As in the “Process Order” stage, we can
provide order status back to the customer. In this case at may include the UPS or FedEx shipping member
for the customer to track their shipment.

Q.41. Managing the Storefront
There is more to an e-commerce Web site than just the user side of things. There are also all the aspects of
managing the store. The right tools to manage the e-commerce Web site are as critical as the right tools to
engage the site visitor.
The management tools needed can range from simple order reporting and tracking to full-fledged store
database management tools. Keep in mind, all of these can be built on the same technology as the storefront.
In fact, the sample stores in Site Server 3, Commerce Edition, come complete with a management interface.

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Q.42. Storefront Management Tools
Function Description
Security High levels of security will be critical for ensuring
the right people have the right access to the
appropriate functions. The customer too needs to
have confidence that his credit card and order details
will not be compromised en route to the supplier.
Product The products in the storefront can be management
Management right on the Web servers if desired. Adding,
updating, and deleting of products can be done
directly in a Web page environment. An automated
process might be necessary to reconcile the online
store with a traditional product management system.
Order Tracking There are many opportunities to perform order
and Reporting tracking and general order management. Order data
can be downloaded into a database format such as
Microsoft Access or a comma delimited ASCII file,
perhaps for integration with separate data analysis
tools. Various reports can be created to analyze
order history, etc.
Department/Cat Along with managing products, you can build in
egory functionally to manage product categorization into
Management departments.
Promotion A critical aspect of managing the site might include
Management administrating product promotions, sales, message
text, cross sells, up sells, and anything else your
marketers can come up with.
Shopper If your e-commerce site has profiling of shoppers
Management and shopper recognition you may need features to
manage those profiles.
Business Rule Virtually any aspect of the site should be
Management customizable from a solid management tool. Tax,
shipping, and other critical business rules of the
Web site could be easily managed from a Web
interface.
The technology behind the management interface does not have to be in a Web page, tradition CUP client
server development can also provide all the tools needed to manage the online store. The only potential
downside is that remote management via the Web may be difficult to do with Visual Basic when your server

29

farm is not located on the premises. Certainly database connections can be made with technologies such as
Remote Data Services (RDS), but that may not be as flexible as a Web browser based interface will be.

Summary
E-commerce can be as simple as a single form online that accepts a credit card. Or it can be as complex as
integrating disparate vendor systems to support supply chain purchasing.
In this book we are going to focus on the technology behind the e-commerce process. It is important to point
out that underlying e-commerce are the basics of any business – customer service, fulfillment, marketing,
inventory management, and much more.
A lot of planning needs to go into a successful e-commerce business. This book will show you how to utilize
the products you already know – Visual Basic, SQL Server, Windows NT, and more – to build a successful,
feature rich online presence for your business.

Q.43. Importance of Trend Spotting for Managers
Planning for the future requires managers to become trend spotters in an environment in which the
globalization of markets and the pace and scope of change make it hard for companies to follow rapid shifts
in technology, processes and consumer taste. They must learn to identify discontinuous change. This
provides an entirely new landscape for managers to navigate and only the trend spotters hope to conquer it.
Benjamin Franklin said it succinctly: “Look before, or you will find yourself behind.”
Identifying trends is a neat way to synthesize consumer behavior, help eliminate uncertainty and identify
new opportunities.
In the 1980s, the most significant trends were increasing competition from all corners of the globe, greater
demands for quality, shorter product life cycles, process improvement and the need to create an agile work
force.
What are the new trends today?
Most obvious is the Internet. With 50 million people connected in only five years, the Internet has become
the fastest accepted communications medium ever. It is no longer just a data network; it’s a sales and
distribution channel, and it has facilitated e-commerce, the ability to do business over the Web.
e-Commerce is enabling the integration of information industries – content, storage, networks, business
applications and consumer devices – that have been isolated until recently. This integration is leading to
industry convergence: the melding of consumer electronics, television, publishing, telecommunications, and
computers for the purpose of facilitating new forms of value.
20. Implication of e-commerce on the form and function of modern organizations
E-commerce is slowly affecting the distribution channels through which consumers and businesses have
traditionally bought and sold goods and services. The online channel provides sellers with the ability to
reach a global audience and operate with minimal infrastructure, reduced overhead, and greater economies

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of scale, while providing consumers with a broad selection and unparalleled convenience. As a result, a
growing number of consumers conduct business on the Web, such as buying products, trading securities,
paying bills and purchasing airline tickets.

Q.44. How will existing companies make the transition into e-commerce companies?
Unquestionably, the opportunities for digital revolution are many and largely unexplored. An entrepreneurial
manager should begin by looking for ways to anticipate consumer trends, foresee technology trends, and
envision new organizational forms.
Trend spotting isn’t just for entrepreneurs looking to start new companies or for marketers attempting to sell
old products in new packages. It is useful for identifying new business opportunities as well.
Mastering the patterns of e-business requires understanding that the future will be built on a new set of
operating assumptions. But first we must become expert in differentiating fads from trends.
Fads catch on quickly, spread and then die a fast death.
In contrast, trends often start slowly but spread like wild fire as mass-market consumers and companies fan
the flames with their pent-up demands. Trends are global, tend to last approximately five to ten years and
may evolve dramatically.
The Web is a great example of a trend. It started slowly in 1989 in a remote lab in Switzerland and with the
advent of Mosaic browser burst onto the mass market, taking everyone by surprise.

Q.45. MAJOR TRENDS
Consumer Trends
1Speed of Service
2Self-Service
3Integrated Solutions, not piecemeal products

Service /Process Trends
rgence of Sales and
e: Customization and
ation
f use: Make Service
tent and Reliable
le Fulfillment and
nient Service Delivery:
mline your supply chain

Organizational Trends

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1Contract Manufacturing: Becoming Brand Intensive
2Retain the Core, outsource the rest: BPO
3Increasing Process Transparency and Visibility

Enterprise Technology Trends
rise applications:
ct the corporation
ructure convergence:
sing melding of voice,
nd video
hannel Integration:
uter telephony
ation and voice
ition
less applications enter
mainstream
raging legacy
tments: The rise of
leware for application
ration

Q.46. Increase Speed of Service: For the Customer, Time is Money
Customers count speed of service as a key reason why they do business with certain companies. They hate
delays and waiting for service and look for companies that serve them faster. This is evident from the
success of drive-through oil changes, drive-through fast food and other quick turnaround businesses. We can
also look at new trends in online car purchasing and home financing.
Therefore, in order to succeed, companies must reduce the processing time between search, selection, order
entry and order fulfillment. Delays at any step of the process are unacceptable.
Why do delays occur?
Often they are due to excessive handoffs. Consider the case of a stainless steel producer that wanted to
improve its on-time delivery record. The company identified unnecessary handoffs as delaying the
production process. For example, each order was entered into the system three times during Customer
Service, Operations and Production Control. This repetition caused significant delays and errors.
To solve the handoff problem, companies are investing billions of dollars in integrated systems, which is
exactly what the stainless steel producer did. They decided that one possible solution was an integrated
system for most of its business operations: accepting orders, triggering receivables, sending orders to

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production, sending requisitions to the warehouse, updating inventory, updating accounting and replenishing
stock with suppliers.
What does this trend mean for e-business?
e-Business applications must cut the time customers wait for service. Customers now penalize companies
that infringe on their time through delays, mistakes, or inconveniences. If companies don’t expedite
processes, customers will go to someone who does it faster.
It is very important that managers understand and diagnose the cause behind service delays. They need to
analyze if an integrated system can speedup service. If so, they need to strategize, design and implement
such systems as soon as possible.

Q.47. Empower your customer: Self Service
Customers dislike poor service and inconvenience and hence look for solutions that increase the value of
their time. Today customers with more money and less time usually avoid difficult, slow business
experiences that involve dealing with intermediaries. They are embracing 24-hours-a-day, seven-days-a-
week self-service systems in which they look for information and merchandise without the aid of sales
personnel.
Self-service is rapidly forcing change on a huge sector of business, the intermediary or middlemen. E.g. real
estate, insurance, travel and car purchase to auctions, parts sourcing, and retailing, very few intermediaries
are left standing when buyers and sellers realize they can meet directly online. They are finding fresh
opportunities on the Web, and they all will have to change how they do business.
e-Commerce is a big enabler of self-service and market leaders are giving customers the means to serve
themselves whenever possible. For instance, the customers of Gateway Computer can assess their needs,
then configure order and pay for new systems – in addition to getting limited technical support –without
ever having to talk to a person.
Another example of self-service is online-trading. Companies such as E*TRADE and eSchwab make it easy
for customers to trade by themselves without the help of a broker. Round-the-clock availability gives
customers access to their account anywhere, anytime.
Before self-service can become a reality, a new infrastructure must be built and new protocols must be
designed to streamline the process. Integration of processes will be essential for serving the customer well.

Q.48. Provide Integrated
Solutions, Not Piecemeal Products
In the last decade, there has been an interesting shift toward convenient integrated solutions. A good
example is the Microsoft Office Suite. The Microsoft office product has made significant contribution in the

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Microsoft’s Revenue since customers love its integrated functionality. In fact, core design objective in many
of their products is seamless integration.
This trend can be observed in retailing. Customers are increasingly demanding one-stop, all-under-one-roof
solutions. In response, the retail industry has created various models: One-stop life-needs providers (e.g.,
Wal-Mart), one-stop life-style providers (e.g., The Gap) and one-stop life-path providers (e.g., Toys “R”
Us).
The trend of life-needs integration can be observed in the success of the Wal-Mart superstore, which is
marketed as an integrated retailer for the busy, price-sensitive shopper. Wal-Mart’s execution of one-stop
shopping has increased customer loyalty, the number of items sold per transaction and the average
transaction size.
An example of lifestyle integration trend is Gap in the apparel retailing business. The Gap provides a great
illustration of a company that has effectively marketed an image to its customers. Gap mannequins are
outfitted with three or four layers of shirts, blue jeans, a belt, a baseball cap, sun glasses, socks, shoes,
gloves, and a knapsack.
Toys are a model of life path integration. Consider the strategy of Toys “R” Us, a life-path retailer for kids
that sells to parents. The Toys “R” Us marketing strategy is three-pronged: baby goods at Babies “R” Us,
kids’ clothes at Kids “R” Us and toys at Toys “R” Us.
What does this trend mean e-business? Consumers don’t need another retailer of another electronic
distribution channel. They want integrated-service offering businesses that solve their one-stop shopping
needs.

Q.49. Convergence of Sales and Service: Customization and Integration
The need to attract, acquire, leverage and retain customers is still of primary concern to most businesses.
Revenue growth through customer acquisition and retention remains a major competitive requirement.
To improve customer retention, companies are developing and managing customer relationships via better
sales/service integration and new technology. Managers must realize that customers in modern era have
diversified tastes and demands. The sales and service message needs to be tailored to each customer.
Most customers view sales and service as separate functions. A sale occurs during sales cycle and service is
an after-sales activity. However, the latest trend requires firms to sell to customers while serving them. You
can see it at your local bank when the teller tries to sell you a new product while making a product. In other
words, the bank is trying to become an integrated sale and service environment.
What does this trend mean e-business? New organizational models need to be developed to further narrow
the gap between sales and service. For instance telephone call centers must blur the lines between sales and
service. Look at Home Depot which attracts prospective customers by giving them easy access to
information about products and services before they buy. The success of Home Depot illustrates that
customers want fast, accurate, consistent information.

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Q.50. Ease of Use: Make Customer Service Consistent and Reliable
As the speed of service increases, the expectations for customer service grow higher. Making customer
service easy and solution oriented is probably one of the most important trends in business today. The
customer service process must be friendly and easy to use. Companies must present customers with single
points of contact rather than shuffling them from one department to another department.
What does this trend mean e-business? To achieve business objective, companies need to adopt integrated
applications that address the entire customer relationship, rather than focusing on departmental solutions that
address only one part of the customer account relationship. These integrated applications will be critical not
only within a company but also with their partners.

Q.51. Flexible Fulfillment and Convenient Service Delivery: Streamline your supply chain
The hectic schedules and multiple responsibilities of today’s consumers are forcing retailers to produce
innovative products and services. Today, companies bring service to the customer rather than waiting for the
customer to come to them. To deliver the right product to the customer, companies must streamline their
supply chain. The simple view of the integrated supply chain is as follows: Take an order, give an accurate
promise date, manufacture the right goods, allocate properly, ship efficiently and do all of this in a cost-
efficient manner while maintaining a minimal finished goods inventory.
e-Commerce enabled supply chain management has been growing in popularity for the past couple of years.
All the software companies are gearing up to support it and the consulting firms are preaching it.

Q.52. Contract Manufacturing: Become Brand Intensive, Not Capital Intensive
Contract manufacturing has its roots in the high-tech industry. For example, management at Sun
MicroSystems decided to focus on designing hardware and software and subcontracting or purchasing
virtually all the workstation’s components. By relying on suppliers, Sun was able to introduce four major
new product generations in its first five years of operation, doubling the price-performance ratio with each
successive year.
The trend toward specialization (marketing versus manufacturing) means that companies have to focus on
what they do best. The goal: Move from a capital/asset (or manufacturing) intensive company to a
knowledge (and marketing) intensive firm.
What does this trend mean e-business? To achieve better asset utilization, technology is being used to enable
organizations to segregate marketing from manufacturing by quickly developing contract partnerships and
distributing manufacturing globally.

Q.53. Learn to OutSource

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To survive, firms are turning toward business process outsourcing (BPO), which is defined as the delegation
of one or more business processes to an external provider to improve overall business performance in a
particular area. For example, gas and electric companies are outsourcing their cost centers – human
resources and purchasing functions – so they can concentrate on their core competence, making and selling
energy.
The market trends that drive the adoption of BPO include pressure to increase earning and reduce costs and
an increased need to create and maintain a competitive edge. Traditionally, outsourcing has been used as a
cost-control technique to move cost-centers such as data processing, payroll processing and systems
development to outside specialists.

Q.54. What does this trend mean for e-business?
Outsourcing lays the foundation for creating the virtual enterprise, the core of the e-business concept. It is
clear that a single organization working alone is no longer a justifiable business model.

Q.55. Increase Process Visibility
Process visibility implies that business customers need to have access to order status, product information,
pricing and availability. Providing visibility to products and services helps create additional demand.
Consider the example of United Parcel Service (UPS) tracking system. Customers can use the internet to
track air and ground parcels anytime, anywhere and anyplace. Sophisticated information systems allow
shippers to call any time of the day or night and find out exactly where their packages are.
What does this trend mean for e-business? Companies must strive to build internal applications and
processes that open the black box and make internal operations more transparent. Increasing visibility can
have a significant impact on creating demand as well as on retaining customers.

Q.56. Learn the Trends in Employee Retention
To continually grow, deliver better service, or reduce prices, an enterprise must become a learning
organization that can prosper in a fast-paced, demanding business environment. For this purpose, the
management must develop an organization that is capable of innovating constantly and learning
continuously which is only possible by retaining employees. Management must use exceptional incentives to
motivate employees, including paying very high commissions and cash rewards given to outstanding
employees.
What does this trend mean for e-business? Supporting and sustaining a culture that can succeed and innovate
is not only a requirement but also a prerequisite for doing e-business. The old ways of command and control
over knowledge workers will not work well in the future.

Q.57. Integrate Enterprise Applications: Connect the Corporation

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Integration is the key to unlocking information and making it available to any user, anywhere, anytime.
Why is integration hard?
1Most Companies separate their business applications, creating functional specialists: accounting, finance,
manufacturing and customer service.
2This is divide and conquer: If the job could be defined specifically enough, a specialized application could
optimize functions in a particular area.
3The assumption was that if all functional links in a company were optimized, the company itself would
function at an optimum level.
4However, modern business theorists recognize that if a chain of processes is to run at a high-performance
level, the individual applications must be tightly linked with other processes around them.
5This thinking gives birth to the notion of a connected corporation built on a foundation of well-integrated
enterprise application software. Enterprise applications help companies connect disparate systems, provide
greater access to information, and more closely link employees, partners and customers.
6The future techno-enterprise will be built on a well-integrated set of enterprise software applications. For
example, enterprise applications such as SAP, PeopleSoft and Baan, represent the backbone of the modern
corporation.

Q.58. Meld Voice, Data and Video
1A major trend in the infrastructure for e-business is the convergence of various data and voice transport
networks.
2Throughout the world, telephone networks, cable TV networks, wireless networks and computer networks
are converging into a powerful, unified network based on the internet protocol (IP).
3Infrastructure convergence encompasses many mini trends happening simultaneously:
– The race to improve last-mile bandwidth
– The race to provide quality of service
– The race to provide integrated services
– The race to dominate the customer home contact point.
4The business driver behind infrastructure convergence is service convergence. For example, the recent
formation of EnregyOne, a venture that jointly markets phone, security, gas and electric services to
homeowners, highlights this growing market for convenience and one-stop shopping.
5. Telecommunications companies want to offer customers a bundled package of services that includes local
and long distance phone services, online services, high speed internet connections, wireless phones,
paging etc.
6. Another business driver behind infrastructure convergence

Q.59. Multichannel Integration

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Today, there is an explosion of access alternatives and capabilities – the Web, direct dialup, interactive voice
response (IVR) and kiosks. With all these service channels proliferating, customers are demanding
multichannel service integration. It is critical because customers expect consistent service – no matter which
channel they use - when they interact with a company.
Multichannel service integration is not a technical issue; It is a management issue. You have to get managers
to look at the whole picture. The success of the individual parts must be defined in sync with the overall
system. Otherwise each delivery channel may be considered a success but the delivery system as a whole is
not.

Q.60. Wireless Application Enter the Mainstream
With the widespread rollout of a wireless infrastructure, a new wave of both consumer and business
applications will begin using airwaves for much more than phone calls. The power and convenience of these
wireless applications when combined with the decreasing cost of wireless usage, will increase the efficiency
with which consumers perform everyday tasks like making phone calls, organizing business affairs, sending
e-mail.
The first generation of these devices that deliver these services will vary from cell phones to handheld
devices like 3Com’s PalmPilot and the Nokia 9000 Communicator, which consists of a phone, a Web
browser and a personal-messaging and data organizing system bundled into a single unit.

Q.61. Middleware: Supporting the Integration Mandate
To meet business and technology needs, a new class of technology, called middleware is emerging.
Integration based on middleware makes financial sense. Customers are reluctant to throwaway their existing
legacy investment. Most mission-critical operations still run on mainframe-based systems due to concerns
about security, reliability and speed. For this reason, companies are looking for robust connectivity and
seamless interoperability between their mainframe and Internet applications. As corporations and vendors
respond to these demands, they are discovering that middleware provides the essential glue that enables
large complex business software to run effectively and reliably.

Q.62. What is common to all these trends?
I.Effectiveness
Effectiveness trends are those that directly affect the relationship between the enterprise’s customers
and its environment.
I.Efficiency
Efficiency trends affect the internal structure and operating activities of the enterprise.

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I.Integration
Integration trends are those that push for one-stop-shopping consolidation.

Q.63. The Third Step of e-Business: Choosing a Narrow Focus
Market leaders use three types of e-business designs to narrow their focus and retain leadership, because
they know that few organizations can do many things well. No company can do well in all the dimensions of
business: cost, quality, price, convenience and ease of use.
In order to narrow their circle of competence, successful firms choose among the following:-
Service excellence: Delivering what customers want with hassle-free service and superior value.
Operational excellence: Delivering high-quality products quickly, error free, and for a reasonable price.
Continuous innovation excellence: Delivering products and services that push performance boundaries and
delight customers
The main objective is to succeed by focusing on one e-business design and then put a lot of resources behind
it.
Now we describe the philosophy and operation of these three e-business designs.

Q.64. Think e-Business Design, Not Just Technology

The reason for the success of many organizations is their ability to use state-of-the-art technology to
transform themselves. They do three things well as follows:-

i.Redefine value for their customers

ii.Build powerful e-business designs that outperform the competition

iii.Understand customer priorities and consistently raise customer expectations to new heights.

Companies that succeed in doing these three things are practicing technology management in its highest
form: creating new e-business designs. In other words, they are using business designs that leverage
emerging trends before the rest of the world catches on.

The focus is no longer limited to process design: it’s shifted to business design. Innovation in business
design is gathering momentum with e-commerce. Consider the case of retail drug stores. Retailers CVS,
Walgreen and Rite Aid are suddenly facing competition from Internet startups such as Drugstore.com and
Soma.com which sell over-the-counter medicines, medical supplies and prescription drugs. The race to
become amazom.com of health care is on. Established companies are responding by revamping their
business models. Now, members of Merck-Medco Managed Care, which handles prescriptions for more
than 51 million consumers, can refill their orders electronically. Walgreen customers can also order refills
on the Web, and Rite Aid not only offers online refills but also uses the Web to remind its customers when
their prescriptions are due to be refilled.

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Success depends on how quickly companies can formulate novel business designs and adapt them to their
markets. Business designs are strategic weapons in the digital economy. In an environment in which
multiple variables – technology, customer requirements, supply chains are changing simultaneously, the old
weapons of differentiation – low cost, quality and incremental process improvement – are of little hope for
sustaining growth. The business design dimension has now become the core part of corporate strategy.

Q.65. Constructing an e-Business Design

To create innovative business designs that deliver value, we must first answer some questions:-
First answer the question; What business design do we need to make our customers’ experiences unique and
memorable? i.e. a good way to outdo competition is to please customers in new ways. E-Business uses
technology and e-commerce processes to build better customer relationships and create new value
propositions. This can be achieved, for instance, by providing good service which is important because it is
what a customer expects.

Next answer the question, What capabilities and competencies do we need to create rich experiences? Here
we define capabilities needed to match customers’ most important priorities e.g. good service. These
decisions determine what the customer sees when interacting with an e-business design. For instance, value
according to Dell Computer translates into convenience of purchasing a high-quality product at a low cost.
By enabling web-based sales, they have reduced the hassle as well as the cost of purchasing for a customer.
The Dell is not only innovative in how it sells, but also in how customers purchase computers.

Now, answer these questions: How much does your company manufacture internally and how much does it
outsource? How do you structure your organization for efficiency? Are you function or process oriented?
How do you sell to the customer – through a sales force, reseller channels or a call center (direct)? How do
you distribute your product?
Once these tough decisions required to coordinate processes are made, we must then figure out how to
change our company in the desired manner (e.g. to gain desired profitability). We must decide to integrate
and tailor legacy infrastructure to meet new requirements.

Q.66. The First Step of e-Business Design: Self-Diagnosis
To perform self-diagnosis, ask yourself following questions about the impact of customer, business, and
technology trends on your company:-
1Has the recent wave of technology innovation created new ways of doing business?

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2Is your company responding to changing customer expectations?
3Is your company willing to take advantage of new opportunities while preserving existing investments in
people, applications and data?
4Is your company successful at lowering operational costs while making complex business applications
adaptive and flexible?

It all of your answers are yes, then you are in the innovator or market leader category. You are lucky and
rare.
If most of your answers are yes, then you are in the early adopter or visionary category. You too are rare and
among the first to exploit new technological innovations to achieve a competitive advantage over your
rivals. For example, Charles Schwab, a brokerage house, is building its entire business model around an e-
business infrastructure. This includes eSchwab, the largest online brokerage service, with more than 1.5
million customers. In 1998, eSchwab customers moved more than $100 billion worth of assets through
online connection.
If most of your answers to the questions are no, then your firm belongs to the silent majority category. The
silent majority is often made up of three types:-
i.Pragmatists
ii.Old-guard conservatives
iii.Die-hard skeptics
These three types vary in the degree of risk they are willing to take.
Management of pragmatic firms sees the world changing around them but they want proof that the changes
are long-term before they commit to action. Pragmatists often stay very close to their current customer base
in order to keep focused on delivering superior customer value.

Q.67. The Second Step of e-Business Design: Reversing the Value Chain
Successful companies no longer just add value, they invent it. To invent value, managers must reverse the
traditional value-chain thinking (inside-out models) by which businesses define themselves in terms of the
product they produce. (See figure 3.1 on page 60). In the traditional model, managers concentrate on being
effective and competitive by putting well-understood products on the market. In the new world, however,
the business design is outside in.
In the outside-in approach, the strategy revolves around the customer. This is crucial because from time to
time, conditions suddenly change direction, causing industries to completely rethink the way they do
business. Often, a business condition change is due to a new entrant that poses a challenge for the existing
companies.
Traditional coffee companies such as Folgers and Maxwell House experienced this change firsthand when
they failed to see the shirting consumer trend toward gourmet coffee. Starbucks saw it and created a business
around the gourmet coffee drinker. If the management at the established coffee companies had stayed
41

focused on changing customer tastes, they would have migrated toward gourmet coffee, changed delivery
system and restructured prices.
The need for an outside-in approach becomes essential in times of great structural transition when old
categories suddenly become obsolete. Businesses must define new offerings that satisfy customer needs.
Dell, American Express, Microsoft and Wal-Mart are shining examples of firms that seem to understand
what the customer wants.

Q.68. Service Excellence
Service excellence involves selecting a few high-value customer niches, then making a concerted effort to
serve them well. A firm with service excellence will be extremely responsive to and in tune with your
customer desires. This strategy requires customer relationship management: anticipating the target
customer’s needs and frequently sharing information to provide the expediency of self-service, if that’s what
the customer wishes.
The operating principles of service excellence are as follows:-
1Prepare your company for the unforeseen.
2Gather and maintain all the up-to-date, accurate information you need, where you need it and when you
need it.
3Employ customer contact management.
4Develop a forward thinking corporate philosophy about customer service.

Q.69. Operational Excellence
Operational excellence involves providing the lowest cost goods and services while simultaneously
minimizing problems for the customer. A business with a focus on operational excellence finds that working
with customers and partners can be a lot like working with departments within its own company. For
example, allowing suppliers to see such things as inventory levels, production plans, and product designs
would make them more responsive in meeting our needs. We would spend a lot less time on the phone or at
the fax machine coordinating routine purchasing.
The success of operational excellence depends on several key principles:-

Q.70. Efficient leveraging of assets: Resources are allocated in the most efficient manner and at the lowest
cost possible.
Management of efficient transactions: For greater efficiency and speed, processes between suppliers and
the organization are often integrated.

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Management of sales intelligence: For example, a sales person needs to know what is selling, where it is
selling, when it is selling and what trends are catching on.
Dedication to measurement systems: Businesses dedicated to operational excellence monitor and measure
all processes, continually searching for ways to reduce cost and improve both service and quality.

Q.71. Continuous Innovation Excellence
Continuous innovation demands dedication not only to providing the best possible products, but also to
offering the customer more exciting features and benefits than your competitors. Continuous innovation
results in product leadership. For example, Microsoft is expert in continuous innovation in several markets,
including operating systems, productivity packages, and online services.
Continuous innovation is based on the following principles:-
Risk-oriented management style: Innovation requires that there are risks inherent in new ventures.
Growth by mergers and acquisitions: It means acquisition of new products and those who design them.
A market-education style: Your company must lead the market in educating customers about how to use
and benefit from new products.
Encouraging innovation: If we create innovation system that rewards success, then constant product
innovation will be encouraged.

Q.72. Business Design Lessons Learned
Effective business design and execution depends on how managers use technology to deliver services faster,
cheaper and with better quality than their competitors. Following is a review of lessons learned from e-
business design:-

Q.73. Be customer focused
To accomplish this, innovative companies are using the Web and the Internet to build interactive
relationships between prospects, customers, resellers, employees and suppliers.

Q.74. Value creation is a continuous process
A business that is currently being successful should not become complacent, move too slowly, incorrectly
anticipate competitor’s moves, or miss strategic opportunities. They should work to continuously improve
and create new values by providing new features and services in the product.

Q.75. Transform businesses processes into digital form
In an e-business organization, all information must be available in digital form. Digital information is more
efficient to create and maintain because each item is entered only once. Moreover, the digital information
can be analyzed creatively, searched quickly, updated easily and shared broadly.

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Q.76. Decentralize management but centralize coordination
Integration efforts should concentrate on coordinating independent departments and try to control every
thing from one point. IT calls for breaking up large applications into smaller pieces that each have defined
responsibilities and can communicate with one another using a common language.

Q.77. Integrate but plan for continuous growth and change
Integration efforts must work with the prospect of continuous change and should try to maximize the value
they derive from their technology investment.

Q.78. Importance of Trend Spotting for Managers
Planning for the future requires managers to become trend spotters in an environment in which the
globalization of markets and the pace and scope of change make it hard for companies to follow rapid shifts
in technology, processes and consumer taste. They must learn to identify discontinuous change. This
provides an entirely new landscape for managers to navigate and only the trend spotters hope to conquer it.
Benjamin Franklin said it succinctly: “Look before, or you will find yourself behind.”
Identifying trends is a neat way to synthesize consumer behavior, help eliminate uncertainty and identify
new opportunities.
In the 1980s, the most significant trends were increasing competition from all corners of the globe, greater
demands for quality, shorter product life cycles, process improvement and the need to create an agile work
force.
What are the new trends today?
Most obvious is the Internet. With 50 million people connected in only five years, the Internet has become
the fastest accepted communications medium ever. It is no longer just a data network; it’s a sales and
distribution channel, and it has facilitated e-commerce, the ability to do business over the Web.
e-Commerce is enabling the integration of information industries – content, storage, networks, business
applications and consumer devices – that have been isolated until recently. This integration is leading to
industry convergence: the melding of consumer electronics, television, publishing, telecommunications, and
computers for the purpose of facilitating new forms of value.
20. Implication of e-commerce on the form and function of modern organizations
E-commerce is slowly affecting the distribution channels through which consumers and businesses have
traditionally bought and sold goods and services. The online channel provides sellers with the ability to
reach a global audience and operate with minimal infrastructure, reduced overhead, and greater economies
of scale, while providing consumers with a broad selection and unparalleled convenience. As a result, a
growing number of consumers conduct business on the Web, such as buying products, trading securities,
paying bills and purchasing airline tickets.

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21. How will existing companies make the transition into e-commerce companies?
Unquestionably, the opportunities for digital revolution are many and largely unexplored. An entrepreneurial
manager should begin by looking for ways to anticipate consumer trends, foresee technology trends, and
envision new organizational forms.
Trend spotting isn’t just for entrepreneurs looking to start new companies or for marketers attempting to sell
old products in new packages. It is useful for identifying new business opportunities as well.
Mastering the patterns of e-business requires understanding that the future will be built on a new set of
operating assumptions. But first we must become expert in differentiating fads from trends.
Fads catch on quickly, spread and then die a fast death.
In contrast, trends often start slowly but spread like wild fire as mass-market consumers and companies fan
the flames with their pent-up demands. Trends are global, tend to last approximately five to ten years and
may evolve dramatically.
The Web is a great example of a trend. It started slowly in 1989 in a remote lab in Switzerland and with the
advent of Mosaic browser burst onto the mass market, taking everyone by surprise.

Q.79. MAJOR TRENDS
Consumer Trends
4Speed of Service
5Self-Service
6Integrated Solutions, not piecemeal products

Service /Process Trends
rgence of Sales and
ce: Customization and
ration
of use: Make Service
istent and Reliable
ble Fulfillment and
enient Service Delivery:
mline your supply chain

Organizational Trends
4Contract Manufacturing: Becoming Brand Intensive
5Retain the Core, outsource the rest: BPO
6Increasing Process Transparency and Visibility

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Enterprise Technology Trends
prise applications:
ect the corporation
structure convergence:
asing melding of voice,
and video
channel Integration:
puter telephony
ration and voice
nition
less applications enter
mainstream
raging legacy
tments: The rise of
leware for application
ration

Q.80. Increase Speed of Service: For the Customer, Time is Money
Customers count speed of service as a key reason why they do business with certain companies. They hate
delays and waiting for service and look for companies that serve them faster. This is evident from the
success of drive-through oil changes, drive-through fast food and other quick turnaround businesses. We can
also look at new trends in online car purchasing and home financing.
Therefore, in order to succeed, companies must reduce.

Q.81. E-Commerce Vs E-Business
 E-Commerce is the buying and selling over digital media
 The transactions, processes and systems that support the act of doing business through electronic
networks.
 E-business in addition to encompassing e-commerce includes both front and back-office applications
that form the engine for modern business. It is not just about e-commerce transactions; it is about
redefining old business models, with the aid of technology, to maximize customer value.
 e-Business is the overall strategy and e-commerce is an extremely important facet of e-business.
 CEOs in different organizations are investigating new strategic initiatives to deliver results and many
are looking at using technology to transform the business model – in other words, harnessing the
power of e-business.

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 In technical terms, e-Business has been around for a long time. EDI (Electronic Data Interchange)
was the mother of today’s e-Business. Organizations that had a large, valuable need to communicate
together created business networks and specialized applications to do business together.

Q.82. E-Business Driving force
 Every day, more and more individuals and companies worldwide are being linked electronically.
 Digitally binding consumers and companies in a low-cost way is as significant as the invention of the
steam engine, electricity, the telephone, and the assembly line.
 Business have developed XML and other standards to create B2B applications much more quickly
and at a reduced cost.

Q.83. First Rule of E-business
Technology is no longer an after thought in forming business strategy but the actual cause
and driver.
 The technology has deep impact on business strategy so a business strategy should be chosen by
keeping technology in mind.
 E-commerce is not something that business ignores since the technology can erode strategies causing
an entire business model to behave in hard-to-predict ways.
 E-commerce poses the most significant challenge to the business model since the advent of
computing itself; it has fundamentally altered the business foundation.
 If an entity in the value chain begins to do business electronically, companies up and down that value
chain must follow suit or risk being substituted.
 Rethinking and redesigning the business model is the first step to profiting even surviving in the
information era.

Q.84 E-Business = Structural
Transformation
 e-Business results in growing pace of application innovation, new distribution channels and
competitive dynamics that are baffling even the smartest managers.
 Value is found not in tangible assets such as products but in intangibles: branding, customer
relationship, supplier integration and the aggregation of key information assets.
 This leads to second rule of e-business:-
The ability to streamline the structure and to influence and control the flow of information is dramatically
more powerful and cost-effective than moving and manufacturing physical products.
 It seems that few companies have developed the necessary information-centric business designs to
deal with the issues of business change and innovation.

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 Unless an enterprise develops an explicit strategy to accommodate the accelerated flow of
information, the enterprise will find it scrambling, working harder and faster just to stay afloat.

Q.85. Third Rule of E-business
Inability to overthrow the dominant, outdated business design often leads to business failure.
Perhaps the greatest threat the companies face today is adjusting to nonstop change in order to sustain
growth. Constant change means organizations must develop the ability to detect emerging trends faster than
the competition, make rapid decisions and be agile enough to create new business models.
If a business design is faulty or built on old assumptions, no amount of fixing or patching will do any good
for competing in the digital economy. It has been widely accepted that the survival of a company depends on
its ability to anticipate, gauge and respond to changing customer demands in a timely manner.

Q.86. Fourth Rule of E-business
The goal of new business designs is to create flexible outsourcing alliances between companies that not only
off-load costs but also make customers ecstatic.
In order to deal with change, companies and autonomous business units need an effective business design
that allows them to react rapidly and continuously, innovate ceaselessly and take on new strategic
imperatives faster and more comfortably.
To deal with dynamic change, many organizations have adopted the option of outsourcing. The simple
reason is that individual companies simply cannot do everything well. In the first generation of outsourcing,
the focus was on gaining efficiency and cost reduction. For instance, because of the increasing complexity of
computers and networks, more and more firms began outsourcing their technology management. Among the
biggest beneficiaries of this trend have been computer services firms such as IBM, Anderson Consulting and
EDS. BellSouth outsourced its entire information technology (IT) function to EDS and Anderson Consulting
in a contract worth more than $4 billion.

Q.87. Fifth Rule of E-business
E-commerce is enabling companies to listen to their customers and become either the cheapest, the most
familiar or the best.
In recent years, value innovation across all service dimensions – speed, convenience, personalization and
price – has accelerated due to technological innovations such as the Web and e-commerce. Companies
provide value innovation by providing either the cheapest, the most familiar or the best-quality product.
The companies are providing lower prices by reducing their inventory and distribution costs. For example,
Wal Mart has brought a revolution in American retailing with its discount superstore format.

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With the most familiar, customers know what they are getting. McDonald’s is a great example of a familiar
brand. McDonald’s is a great example of a familiar brand. Often visitors to foreign countries seek local
McDonald’s just because they know what to expect.
Being the best involves reinventing service processes and raising relationships with customers and suppliers
to unprecedented levels of intimacy. The most obvious example of the best in exceptional service is
American Express, exemplified in their Return Protection Plan. This customer benefit refunds card members
for items purchased with an Amex card within 90 days from the date of purchase, if the store won’t accept
returns.

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E business architecture final copy

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