STRATEGIES for e-BUSINESS pot

2.3.1 Case studies as a context for the analysis of e-business issues 41 2.3.2 Case studies as a context for the application of e-business concepts 41 2.3.3 Case studies as a stimulus fo

S TRATEGIES for e - B USINESS

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S TRATEGIES for e - B USINESS

Creating Value through Electronic

and Mobile Commerce

Concepts and Cases

TAWFIK JELASSI

ALBRECHT ENDERS

Edinburgh Gate

Harlow

Essex CM20 2JE

England

and Associated Companies throughout the world

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First published 2004

© Pearson Education Limited 2004

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1

1

3 The impact of the Internet on the macro-environment and

Case studies

1 Establishing a national IT infrastructure: the case of the French

2 Business process redesign at CompuNet: standardizing top-quality

3 e-Government: the role of information and communication

4 The Euro-Arab Management School 247

5 To be or not to be on the shelf: grocery retailing through the

6 Fighting over the Internet: the virtual battle between Amazon.com

7 Cyber-entrepreneurship: the Nettimarket.com venture in Finland 288

10 Banking on the Internet: the Advance Bank in Germany 325

11 The Electronic Purse in Portugal: a mere payment system or a

12 From e-banking to e-business at Nordea (Scandinavia): the world’s

13 Ducati Motorcycle (Italy): riding traditional business channels or

14 Ducati (Italy) v Harley-Davidson (USA): innovating business processes

15 Terra Lycos: creating a global and profitable integrated media company 400

16 Google.com: the world’s number-one Internet search engine 420

18 Competing through EDI at Papeteries Brun Passot: making paper passé 449

19 CitiusNet: the emergence of a global electronic market 462

20 Business-to-business electronic commerce: Mondus.com –

an e-marketplace for small and medium-sized enterprises 480

21 B2B e-marketplace in the automotive industry: Covisint –

25 Online file-sharing: the music industry’s paradigm shift 539

26 12Snap (Germany, UK, Italy): from B2C mobile retailing to B2B

Appendix Technologies for electronic and mobile commerce 601

FT article:It’s too early for e-business to drop its ‘e’ 5

FT article: Burning money at Boo: the founders of the infamous Internet company were fools rather than knaves 21

FT article: eBay leads online revival as net hits the refresh button 28

2.3.1 Case studies as a context for the analysis of e-business issues 41 2.3.2 Case studies as a context for the application of e-business concepts 41 2.3.3 Case studies as a stimulus for creative e-business strategies 42 2.4 Learning about e-business through concepts and frameworks 43 Strategy in action 2.1:Business thinking: on finding the right balance between

Strategy in action 2.2: ‘Why?’ – the importance of questions in strategy

The e-business strategy framework

Chapter 3 The impact of the Internet on the macro-environment and

on the industry structure

3.2 Examining industry structure with the five forces framework 64

Critical Perspective 3.1:Co-opetition in e-commerce 70

FT article:Will Amazon.com’s co-opetition gamble pay off? 72

Chapter 4 Markets for e-business

e-Business Concept 4.1:The e-business market segmentation matrix 79 e-Business Concept 4.2:Segments of one and mass customization in the

Classification of B2B e-marketplaces based on the ‘what’ and ‘how’

Classification of B2B e-marketplaces based on their degree of

FT article:Covisint fails to move up into the fast lane 87

Chapter 5 Value creation in e-business

5.1 The generic concepts of value creation and value capturing 96

Consumer benefit 96

e-Business Concept 5.1:Electronic customer relationship management 104

Strategy in Action 5.1:easyJet.com’s low-cost strategy and the Internet 109

Strategy in Action 5.2:The virtual value chain at FedEx 113 Critical Perspective 5.1: The resource-based view and core competences 114

Chapter 6 Strategy options for value creation in market spaces

6.1 Exploring generic strategies in existing market spaces 122

Strategy in Action 6.1:Amazon.com CEO Jeff Bezo’s letter to shareholders 125

FT article: Dell’s move from PCs into complementary products 129 6.2.2 Pinpointing possibilities for new value creation 132

Chapter 7 Impact of the Internet on the horizontal boundaries of a firm

Chapter 8 Impact of the Internet on the vertical boundaries of a firm

8.1 Reasons determining ‘make-or-buy’ decisions in e-business 156

8.2 Value-chain deconstruction through the Internet

Critical Perspective 8.1:The limitations of deconstruction and unbundling 159

Chapter 9 Internal organization of a firm’s e-business activities

9.3 Choosing the organizational structure for e-business activities 174

FT article: Chapter closes for online books venture 176

10.2 What are the quantifiable objectives for our e-business activities? 186 10.3 What type of customer value do we want to create through e-business? 186 10.4 What market and customer segments are we targeting through e-business? 187 10.5 What organizational set-up should we have for our e-business activities? 188 10.5.1 What scale should our e-business activities have? 188 10.5.2 What scope should our e-business activities cover? 188 10.5.3 How integrated should our e-business activities be? 189

PART 4

10.5.4 How should we align our physical-world strategy with our e-strategy? 189 10.5.5 What organizational structure should our e-business activities have? 190 10.6 What is the business model for our e-business activities? 191 10.6.1 What is the cost structure for our e-business activities? 191 10.6.2 What is the revenue structure for our e-business activities? 191

Notes and references

Case studies

IT infrastructure and services

1 Establishing a national IT infrastructure: the case of the French videotext

2 Business process redesign at CompuNet: standardizing top-quality service

e-Government

3 e-Government: the role of information and communication technologies in

e-Education

B2C in retailing

5 To be or not to be on the shelf: grocery retailing through the Internet –

6 Fighting over the Internet: the virtual battle between Amazon.com (USA)

7 Cyber-entrepreneurship: the Nettimarket.com venture in Finland 199

B2C in financial services

10 Banking on the Internet: the Advance Bank in Germany 200

11 The Electronic Purse in Portugal: a mere payment system or a

12 From e-banking to e-business at Nordea (Scandinavia): the world’s

B2C in manufacturing

13 Ducati Motorcycle (Italy): riding traditional business channels or racing

14 Ducati (Italy) v Harley-Davidson (USA): innovating business processes and

B2C in media

15 Terra Lycos: creating a global and profitable integrated media company 202

16 Google.com: the world’s number-one Internet search engine 203

B2B e-commerce and B2B e-marketplaces

18 Competing through EDI at Papeteries Brun Passot: making paper passé 204

19 CitiusNet: the emergence of a global electronic market 204

20 Business-to-business electronic commerce: Mondus.com –

an e-marketplace for small and medium-sized enterprises 204

21 B2B e-marketplace in the automotive industry: Covisint –

Case studies

1 Establishing a national IT infrastructure: the case of the French

2 Business process redesign at CompuNet: standardizing top-quality

3 e-Government: the role of information and communication technologies

5 To be or not to be on the shelf: grocery retailing through the Internet –

6 Fighting over the Internet: the virtual battle between Amazon.com

7 Cyber-entrepreneurship: the Nettimarket.com venture in Finland 288

10 Banking on the Internet: the Advance Bank in Germany 325

11 The Electronic Purse in Portugal: a mere payment system or a

12 From e-banking to e-business at Nordea (Scandinavia): the world’s

13 Ducati Motorcycle (Italy): riding traditional business channels or

14 Ducati (Italy) v Harley-Davidson (USA): innovating business

15 Terra Lycos: creating a global and profitable integrated media company 400

16 Google.com: the world’s number-one Internet search engine 420

18 Competing through EDI at Papeteries Brun Passot: making paper passé 449

19 CitiusNet: the emergence of a global electronic market 462

20 Business-to-business electronic commerce: Mondus.com –

an e-marketplace for small and medium-sized enterprises 480

21 B2B e-marketplace in the automotive industry: Covisint –

25 Online file-sharing: the music industry’s paradigm shift 539

26 12Snap (Germany, UK, Italy): from B2C mobile retailing to B2B

Appendix Technologies for electronic and mobile commerce

3.2.5 Internet programming languages and protocols 605

3.3.4 Metropolitan area network (MAN) and campus network 611

3.4 Applications 611

3.4.3 e-Telephony, voice over Internet Protocol (VoIP) and

3.4.6 e-Customer Relationship Management (e-CRM) 613

3.4.11 Integrated Services Digital Network (ISDN) and Digital

Foreword to be supplied.

‘People tend to overestimate new technology in the short run and underestimate it inthe long run’.

Bo Harald, Head of e-banking at Nordea Bank, Finland 1

When we talked to colleagues and friends during the last few months about our e-business book project, many of them asked whether we were arriving too late withthis book They reminded us that the Internet bubble had burst three years ago andthat most online companies had since gone bankrupt This is certainly true, yet wenonetheless believe that it is indeed a very timely moment to publish a book on e-business and strategy

Since the spectacular burst of the bubble in 2000, companies all over the worldhave continued to develop and implement e-business strategies, albeit with much lesspublic attention and media coverage than before Similar to other important techno-logical revolutions such as railways or steam engines, the Internet has also undergone

a typical cycle of boom and bust Following a bust, technological revolutionsrebound, and it is only then – during the ‘Golden Age’ – that they show their trueimpact At the time of the writing of this book, it looks as if e-business has enteredthis golden age

However, this development is not adequately mirrored in the e-business literature.During the boom and bust years, there was plenty of interest in the academic andbusiness communities about Internet start-ups, their value creation potential, therising stock valuations and, subsequently, the bankruptcies of many fallen stars Eversince the bubble burst, though, this interest has waned considerably During ourresearch, we found very few recent books published after the collapse of the dot.combubble that specifically address e-business strategy issues We also noticed that therewere many excellent books on strategy and many books on e-business, yet there wererelatively few books that attempted to bring the two fields together in a comprehen-sive and rigorous manner

This book, as its title suggests, attempts to close these gaps It aims at providingreaders with a holistic and integrated view of the realms of strategy and e-business byfocusing on strategy concepts and linking them to actual cases of companies engaged

in e-business activities It also aims at going beyond the hype by closely analyzingexamples of failure as well as success in order to help readers assess the underlyingdrivers for a successful e-business strategy

Context and positioning of the book

1 Personal interview with Bo Harald, September 20, 2003.

Strategies for e-Business is a textbook targeted to senior managers, business strategists,

entrepreneurs, consultants and participants enrolled in MBA, Masters and executiveeducation programs and students in the final year of their undergraduate education

It should be of interest to general management programs and seminars as well as tothose specializing in e-business, e-commerce, technology management, marketing,entrepreneurship, and business strategy

The key differentiating features of this book include the following:

■ A detailed study approach for e-business strategy Creativity and analytical ability

are of fundamental importance in the strategy formulation process Chapter Two

of this book discusses how to improve these qualities through the use of conceptsand cases

■ A comprehensive e-business strategy framework This framework serves as a

com-prehensive basis for e-business strategy formulation It is based on rigorous andtime-proven concepts from the field of strategic management, which were adapted

to the specific context of e-business

■ An e-business roadmap Part 3 of the book contains an e-business roadmap that is

meant as a guide to help in the formulation process of an e-business strategy Itprovides an overview of the key issues in strategic management At the same time,extensive cross-references to the more detailed e-business strategy frameworkallow the reader to obtain more in-depth information when needed

■ In-depth case studies The book contains 28 real-world case studies, which provide

in-depth accounts of how companies in several industries and different countrieshave developed and implemented electronic and mobile commerce strategies Allthe cases result from first-hand field-based research, which the case authors havepersonally conducted, in most cases in cooperation with executives and top-levelmanagers of the companies involved

■ Broad coverage of the time horizon covered by the cases The time period that the

cases cover spans from the grassroots of e-commerce (1993–1995), to the rise ofthe Internet (1996–2000), to the subsequent burst of the bubble (in 2000), to thecurrent consolidation period (from 2001 to the present) By doing so, we hope toprovide a much broader perspective and thereby offer a more longitudinal andenriching view of the subject and the way it has evolved over time in terms of con-cepts and frameworks as well as strategies and practices

■Geographic focus on Europe While most of the existing e-business casebooks focus

on companies that are based in the U.S., this book focuses primarily on companiesoperating in Europe In addition to the US and Japan, European countries covered

by the case studies of the book include Denmark, France, Germany, Finland, Italy,

Target readers

Key features

Norway, Portugal, Spain, Sweden, the Netherlands, and the UK In addition to thetechnological aspects discussed in the cases, the wide variety of countries helps toprovide insights into the specific business environment and national culture thatcharacterize the different countries covered.

Content-wise, Part I presents the context of the book Chapter 1 introduces the keyterminology and evolution of e-business It emphasizes the distinct phases that tech-nological revolutions go through before reaching their full potential Chapter 2 looks

at how the concepts and cases presented in the book can help managers and studentsinterested in e-business strategies to expand their skills along the dimensions of cre-ativity and analytical ability

Part 2 suggests a strategy framework for the formulation of e-business strategies.Chapter 3 presents the external environment of e-business ventures This includes ananalysis of the macro-environment and the industry structure Chapter 4 focuses onmarket segmentation and market targeting for e-business Chapter 5 is concernedwith understanding the generic concept of value and the Internet-impacted valuechain It also discusses the conflict between the market-based and the resource-basedview of strategy formulation Chapter 6 analyzes different strategy options for creat-ing value in the market space Chapter 7 is concerned with the impact of the Internet

on the horizontal boundaries of a firm In particular, it deals with the concepts ofeconomies of scale and scope and the optimal timing of market entry Chapter 8 con-siders the impact of the Internet on the vertical boundaries of a firm Chapter 9outlines the internal organization of a firm’s e-business activities

Part 3 provides a road map for the formulation for e-business strategies Throughthe use of cross-references, this roadmap is closely linked to the e-business strategyframework presented in Part 2

Part 4 contains the case studies on e-business To provide an overview of all casestudies, it starts with a brief synopsis of each case, and is then followed by each full-length case studies At the end of each case study, we suggest a number of questionsfor personal reflection and group discussion These questions are meant to guide theanalysis among colleagues (and classmates) of the case study at hand

In order to gain the most benefit from this book, we recommend that you try to achieve the following when working through the book chapters:

■ Thoroughly understand the theoretical concepts presented in the e-business egy framework

strat-■ Critically assess the strengths and weaknesses of each concept and determine thecontext for its appropriate use

Structure and content

Getting the most from Strategies in e-Business

■ Apply the concepts when analyzing the cases and make action-oriented mendations backed up by logical reasoning and supporting arguments.

recom-■ Expand the usage of the concepts and the frameworks into other business tions that you encounter in your daily work or study

situa-To make your learning experience more effective and enriching, the book containsthe following features:

■ Chapter at a glance at the beginning of each chapter provides a quick overview of

the most important topics discussed in the chapter

■ Related case studies are included at the beginning of each chapter to illustrate

which cases are most relevant for the topics discussed For more information onthis, Exhibit P.1 illustrates the relationships between the case studies and specificchapters and sections of the book

■ Learning outcomes offer a brief description of what you should have achieved after

reading the chapter

■ Different types of illustration are contained in the text body of each chapter toprovide added information about the concepts that are discussed

■ FT articles are taken from the Financial Times to provide a journalistic perspective

(within the timeframe context) of the issue discussed in the section

■ Critical perspectives present a different, if not opposing, view to the position taken

in the main text of the chapter For instance, the resource-based view is presented

as a critical perspective of Porter’s market-based view to strategy formulation.Weighing the merits of each view is a valuable exercise for gaining a more in-depthunderstanding of the concept that is presented

■ Additional e-business concepts, such as e-CRM or the ‘blow up’ between richness and

reach, are intended to expand the conceptual thinking presented in the chapter

■ Strategy in action boxes are minor case examples that provide an additional

illus-tration of the concepts discussed in the chapter These examples feature specifice-business strategy issues at companies such as EasyJet, FedEx or Amazon.com

■ Chapter summaries at the end of each chapter allow you to review the most

impor-tant points that were discussed in the chapter

■ Review questions help you assess your understanding of the material presented in

the chapter In general, the answers to these questions are straightforward sincethey are based on the material presented in the chapter

■ Discussion questions help you transfer the concepts from the chapter into different

business contexts They are also meant as a starting point for discussions withyour colleagues and peers

■ Recommended key reading provides a select list of additional books and articles

that you can read if you wish to find out more about a specific topic

■ Useful weblinks provide either the source or additional information on some

mate-rial contained in the chapter

Exhibit P.1 The cases cover different industries and focus on a variety of different themes

Guided tour.

Throughout the writing and publication process of this book, we have received able support and contributions from many people Therefore, we would like to thankand express our gratitude to the following individuals:

valu-■ The authors who worked with us during the development of the case studies tained in the book These are Bill Anckar, William Cats-Baril, Leslie Diamond,Carlos Faria, Hans- Manuel Joao-Pereira, Joachim Jost, Han-Sheong Lai, StefanieLeenen, Timothy Lennon, Philipp Leutiger, Claudia Loebbecke, Morven McLean,Michael Müller, Pirkko Walden, Charles Waldman

con-■ The authors of the remaining case studies contained in the book: our INSEADcolleagues Ben Bensaou, Sumittra Dutta, Chan Kim, Renée Mauborgne, DavidMidgley, Subramanian Rangan and Theodoros Evgeniou; also Thimothy Devinneyfrom the Australian Graduate School of Management, Sid Huff from theUniversity of Wellington (New Zealand), Michael Wade from the Schulich School

of Business at York University (Canada), S S George and A Mukund from theCenter for Management Research in Hyderabad (India), and Patricia Reese andYasushi Shiina from INSEAD

■ Erkki Liikanen (European Union Commissioner in charge of Enterprises and theInformation Society) and Bolko von Oetinger (Senior Vice President and Director

of the Strategy Institute of The Boston Consulting Group) for taking the time out

of their busy schedules to write forewords for the book

■ The colleagues and staff at the Ecole nationale des ponts et chaussées School ofInternational Management (ENPC MBA), in particular Danielle Colletti whohelped with the editing of some of the chapters of this book

■ The colleagues at The Boston Consulting Group for their continuing support andtheir helpful feedback In particular, we would like to thank Ralf Ermisch, ThomasRöhm, Gunther Schwarz, Just Schürmann, and Pierre Yogeshwar

■ Our friends in academia and the business world who took the time to review themanuscript of the book In particular, we would like to thank Hervé Bousset(Madras Digital), Harald Hungenberg and Andreas König (NurembergUniversity), Andreas Keck (Premedion), and Paul Smith (PSA International)

■ The MBA and executive participants of several programs and business schoolswho, through their analysis and discussion of the case studies, contributed to theshaping of the book

■ The executives and managers of the companies featured in the case studies tained in the book

con-■ The R&D Department of INSEAD, in particular Isabel Assureira

■ The staff at Pearson Education In particular, we would like to thank our editorsJacqueline Senior and Sarah Wild for their outstanding support throughout thewhole publication process

Author acknowledgements

■ The numerous reviewers who provided valuable insights through their detailed feedback on the book proposal These were [text to be supplied]

We are interested in hearing your comments about this book We appreciate both criticaland supportive feedback, which can help us to improve our future research work You canreach us via e-mail at jelassi@enpcmbaparis.comand enders.albrecht@bcg.com

Tawfik Jelassi Albrecht Enders April 2004

Feedback

Tawfik Jelassi

Tawfik Jelassi (right) is Professor of e-Business and IT and Co-Dean of the School ofInternational Management at the Ecole Nationale des Ponts et Chaussées (Paris) He

is also Adjunct Professor of Technology Management at INSEAD (Fontainebleau)

Dr Jelassi holds a PhD from New York University (Stern School of Business), ate degrees from the Université de Paris-Dauphine, and an undergraduate degreefrom the Institut Supérieur de Gestion (Tunis) His research focuses on e-business

gradu-and the strategic use of IT This research has appeared in his books: Competing

through Information Technology: Strategy and Implementation (Prentice Hall, 1994),

and Strategic Information Systems: A European Perspective (Wiley, 1994) Professor

Jelassi has also published over eighty research articles in leading academic journalsand conference proceedings, and was awarded several teaching and research excel-lence awards He has taught extensively on MBA and executive programs in over adozen countries around the world and has served as an advisor to several interna-tional and government organizations

Albrecht Enders

Albrecht Enders (left) is a consultant with The Boston Consulting Group in thecompany’s Cologne office Previously, he worked as a Research Fellow at INSEADwhere he conducted research in mobile and electronic commerce He has authorednumerous articles and case studies on e-business and strategy Albrecht Enders holds

a PhD in strategic management from the Leipzig Graduate School of Management

in Germany and a BA in Economics from Dartmouth College in the United States

Acknowledgements.

P a r t 1

PA R T O V E R V I E W

This introductory part sets up the

overall context for the book It

contains the following elements:

■ A definition of the key terminology

used throughout the book

■ An overview of the evolution of

e-business over time

■ A discussion of how concepts and

cases contribute to building

e-business competence

The goal of this introductory part is to provide a guide and a context for the content of the book Chapter 1 starts out with definitions of the most important terms used in the book, such as e-business, electronic commerce and mobile e-commerce, and the concepts of strategy and value cre- ation It then provides an overview of the evolution of e-business over the past decade and recognizes four distinct periods: (1) the grassroots of e-business, (2) the rise of the Internet, (3) the crash, and (4) the consolidation phase Chapter 2 shows how cases and concepts help to enhance creativity and analytic abilities, leading to increased overall e-business competence.

Key terminology and evolution of e-business

1.1.4 The concept of strategy

1.1.5 The concept of value creation

1.2 The evolution of e-business

1.2.1 The grassroots of e-business

1.2.2 The rise of the Internet

1.2.3 The crash

1.2.4 The consolidation phase

Learning outcomes

After completing this chapter you should be able to:

■ Understand what the terms of ‘e-business’, ‘electronic commerce’ and

‘mobile e-commerce’ mean

■ Define the concept of strategy and differentiate between different levels ofstrategy development

■ Describe the life cycle of technological revolutions and illustrate it throughdifferent historic examples

■ Recognize the four main periods of the e-business evolution over the pastdecade and explain the peculiar characteristics of each period

C H A P T E R 1