Chapter 9: EC Strategy and Implementation Plan docx

IBM focused on key initiatives: e-commerce — selling more goods via the Web  e-care for customers — providing all kinds of customer support on - line  e-care for business partners —

Chapter 9

EC Strategy and Implementation Plan

Learning Objectives

 Describe what a business strategy and

implementation plan are

 Understand the process of formulating EC

 Characterize how the strategic planning evolves

throughout the business cycle

 Describe the key management issues in the

strategic planning

IBM’s E-Business’s Strategy

 Following four goals:

 To lead IBM’s strategy to transform itself into

e-business and to act as a catalyst to help facilitate that

transformation.

 To help out business units become more effective in

their use of the Internet/intranet, both internally and with their customers.

 To establish a strategy for the corporate Internet site

This would include a definition of how it should look,

‘feel’ and be navigated In short, to create an online

environment most conducive to customers doing

business with IBM.

 To leverage the wealth of e-business transformational

case studies there are within IBM to highlight the

potential of e-business to IBM’s customers.

IBM focused on key initiatives:

 e-commerce — selling more goods via the Web

 e-care for customers — providing all kinds of customer support

on - line

 e-care for business partners — dedicated services providing faster, better information for these important groups

 e-care for employees — improving the effectiveness of IBMers

by making the right information and services available to them

 e-procurement — working closely with IBM’s customers and

suppliers to improve the tendering process and to better

administer the huge number of transactions involved

 e-marketing communications — using the Internet to better

communicate IBM’s marketing stance

Strategic Planning for EC

Industry and

competitive

analysis

Strategy formulation

Strategy reassessment

Implement-ation plan

Industry and Competitive Analysis

 Monitoring, evaluating, disseminating of

information from the external and internal

Strengths (S) Weaknesses (W)

Opportunities (O)

Threats (T)

INTERNAL FACTORS EXTERNAL

FACTORS

SO Strategies Generate strategies here that use strengths to take advantages of opportunities

WO Strategies Generate strategies here that take advantage of opportunities by overcome weaknesses

ST Strategies Generate strategies here that use strengths to avoid

threats

WT Strategies Generate strategies here that minimize weaknesses and avoid

threats

Strategy Formulation

Strategy formulation

 Development of long-range plans

 Organization’s mission

 Purpose or reason for the organization’s existence

 3 main reasons for establishing Web site

 MARKETING, CUSTOMER SUPPORT, and SALES

 Products with good fit for EC

 Shipped easily or transmitted electronically

 Targets knowledgeable buyers

 Price falls within certain optimum ranges

EC Critical Success Factors

 Special products or services traded

 Top management support

 Project team reflecting various functional areas

 Technical infrastructure

 Customer acceptance

 User friendly Web interface

 Integration with the corporate legacy systems

 Security and control of the EC system

 Competition and market situation

 Pilot project and corporate knowledge

 Promotion and internal communication

 Cost of the EC project

 Level of trust between buyers and sellers

 A Value Analysis Approach

 Value chain

a series of activities a company performs to

achieve its goal(s)

 Value added

 contributes to profit and enhances the asset value

as well as the competitive position of the company

in the market

 to create additional value using EC channels, a company should consider the competitive market and rivalry in order to best leverage its EC assets

 Value Analysis Questions

 Representative Questions for Clarifying Value Chain Statements

Can I realize significant margins by consolidating parts

of the value chain to my customers?

 Can I create significant value for customers by reducing the number of entities they have to deal with in the value chain?

 Representative Question for Creating New Values

 Can I offer additional information of transaction service

to my existing customer base?

 Can I use my ability to attract customers to generate new sources of revenue, such as advertising or sales of complementary products?

EC Critical Success Factors (cont.)

Gartner’s Model of Customer Interaction

Customers Extension

Customers Retention

Customers

Selection

Customers Acquisition

Relationship Marketing

“What criteria

determine who will be

our most profitable

customers?”

“How can we acquire this customer in the most efficient and effective way?

“How can we keep this customer for as long as possible?”

“How can we increase

the loyalty and the

profitability of this

customer?”

 Return on Investment and Risk Analysis

 A ratio of resources required and benefits

generated by an EC project

 Includes both quantifiable items (cost of

resources, computed monetary savings) and non quantifiable items

 Some intangible benefits

effective marketing channel

 increased sales

 improved customer service

Return on Investment and Risk Analysis

 Classified generic IT values and risks falls into the

following five categories

 Values

• Financial values — measurable to some degree

• Strategic values — competitive advantage in the market and benefits generated by business procedures

• Stakeholder values— reflections of organizational redesign, organizational learning, empowerment, information technology architecture of a company, etc.

Electronic Commerce Scenarios

Open, Global Commerce Scenario

IT Events : Internet standards,new

media, proprietary solutions marginalized,

intranets, highly distributed, fat-client

architectures prevail

Business Events : Global trade, logistics on

the Internet, pay bills electronically, digital

cash widely used, smart cards, and fewer

wholesaler/salespeople

Members-Only Subnets Scenario

IT Events : Standards vary between industries, objective measures of Internet security, EDI standards widely adopted Business Events : High-performance information networks, cumbersome global EC

Electronic Middlemen Scenario

IT Events : Transaction processing and

interface, distributor drive EC, EC activity

expands rapidly, and transaction security

deeply embedded

Business Events : One-stop shopping

popular, professional services popular with

New Consumer Marketing Channels Scenario

IT Events : Activity oriented to consumers, price of wireless drops, and growth of

networked multimedia Business Events : Online transactions seen

as less convenient, security not widely

Competitive Strategy

 Offensive strategy — usually takes place in an

established competitor’s market

 Frontal Assault— attacker must have superior resources

and willingness to persevere

 Flanking Maneuver— attack a part of the market where

the competitor is weak

 Bypass Attack— cut the market out from under an

established defender by offering a new type of product that

makes the competitor’s product unnecessary

 Encirclement— greater product variety and/or serves

more markets

 Guerrilla Warfare— use of small, intermittent assaults on different market segments held by the competitor

 Defensive strategies — takes place in the

firm’s own current market position as a defense

against possible attack by a rival

 Lower the probability of attack

 Divert attacks to less threatening avenues

 Lessen the intensity of an attack

 Make competitive advantage more

sustainable

Cooperative Strategies

Collusion— active cooperation of firms within an industry to reduce

output and increase prices in order to get around the normal economic

law of supply and demand (illegal)

 Strategic Alliance— partnership of two or more corporations or business units to achieve strategically significant objectives that are mutually beneficial

 Joint Venture— a way to temporarily combine the different

strengths of partners to achieve an outcome of value to both

 Value-Chain Partnership— a strong and close alliance in which one company or unit forms a long-term arrangement with a key

supplier or distributor for mutual advantage

EC Strategy in Action

What questions should a strategic plan answer?

 How is Electronic Commerce going to change our business?

 How do we uncover new types of business opportunities?

 How can we take advantage of new electronic linkages with

customers and trading partners?

 Will intermediaries be eliminated in the process? Or do we become intermediaries ourselves?

 How do we bring more buyers together electronically (and keep

them there)?

 How do we change the nature of our products and services?

 Why is the Internet affecting other companies more than ours?

 How do we manage and measure the evolution of our strategy?

 The steps to Successful EC Programs

Conduct necessary education training

 Review current distribution and supply chain models

 Understand what your customers and partners expect from the Web

 Reevaluate the nature of your products and services

 Give a new role to your human resources department

 Extend your current systems to the outside

 Track new competitors and market shares

 Develop a Web-centric marketing strategy

 Participate in the creation and development of virtual

marketplaces

 Install electronic commerce management style

Competitive Intelligence on the Internet

 Review competitor’s Web sites

 Analyze related newsgroups

 Examining publicly available financial documents

 You can give prizes

 Use an information delivery service

 Use research companies

 Solicit opinions in a chat room

Using Push Technology for Competitive Intelligence

Competitive Intelligence on the Internet (cont.)

 Allow users to request updates of topics and have the latest records automatically delivered to users’ e-mail address

 Provide corporate snoopers with lots of information, save search time and monitoring time

 Several ways push models can provide competitive intelligence information:

broadcast model

 selective pull model

 distributed push pull model

 interactive push model

Implementation EC Plan

 Starts with organizing a project team

 Undertake a few pilot projects (help discover

problems early)

 Implementing EC

 Redesigning existing business processes

 Back-end processes must be automated as

much as possible

 Company must set up workflow applications by

integrating EC into existing accounting and

financial back-ends

Uncovering Specific EC Opportunities and Application

 Understand:

 How digital markets operate

 How Internet customers behave

 How competition is created and what infrastructure

is needed

 What are the dynamics of EC

 Map opportunities that match current

competencies and markets

 Many opportunities to create new products and

services

 Opportunities

Uncovering Specific EC Opportunities and Application (cont.)

 Matchmaking— matching buyers’ needs from seller

without a priori knowledge of either one

 Aggregation of services— combines several existing

services to create a new service

 Bid/ask engine— creates a demand/supply floating pricing

system

 Notification service— tells you when the service becomes

available, or when it becomes cheaper

 Smart needs adviser— if you want …, then you should…

 Negotiation— price, quantity, or features are negotiated

 Upsell— suggests an additional product or service

 Consultative adviser— provide tips on using the product

 Finding IT applications

Uncovering Specific EC Opportunities and Application (cont.)

 Brainstorming by a group of employees

 Soliciting the help of experts, such as consultants

 Review what the competitors are doing

 Ask the vendors to provide you with suggestions

 Read the literature to find out what’s going on

 Use analogies from similar industries or business

processes

 Use a conventional IS requirement analysis

approach

Organization and Staffing

 Define the roles and responsibilities of:

 Gatekeepers

 Web team

Building System Infrastructure

Web Page Design

Business Process Reengineering

Security and Control

Evaluating Outsourcing

 Factors to consider:

 Ease of configuration and setup

 Database and scripting support

 Payment mechanism

 Sample storefronts

 Workflow management

 Documented database support

 Integration into existing accounting and financial back ends

 buy, rent, or lease

 maintenance, upgrade, and service of the equipment

 Purchase a suite of software that claims to

integrate storefront functions into a single box

 iCat Corp.’s Electronic Commerce Suite and

Commerce Publisher

 Open Market’s Transact and LiveCommerce

 Microsoft Corp.’s Site Server Commerce Edition

 IBM Corp.’s Net Commerce Pro

 Saqqara Systems’ StepSearch Professional

 AT&T

Making a Web catalog into a multimedia

extravaganza

 Not easy and expensive

 Lower end systems : begin at $25,000

 High end systems : $250,000 to $2 million

Web Content Design

 Content takes many shapes

 Will change dramatically

 More robust, comprehensive, and usable medium

 Challenges in developing a successful online

storefront

 Choosing the right software solution for your site

 3 options

build your own software

 purchase a commercial software product

 rent from a Web host

 Web content design considerations

 The services wanted

 How much your company can

contribute to the site, from

manpower to electronic

content

 The time to design your site

 The time to create and

program your site

 Extra fees for software

development

 Fees for off-the-shelf

applications tools

 The size of the site

 The amount of traffic the site

 Your bandwidth needs

 Your server capacity needs

 Location of your server at the Web company or ISP

company location

 Web Application Features

 Electronic shopping mall

Security and Control in EC

 80% of all computer crimes reported involve

the use of the Internet to break into computer

systems

 Effective guidelines would be needed to:

 Address the Internet features that must be

monitored for developing policy on access and

use

 Disclosure of information through the Internet

Strategy Reassessment

 Webs grow in unexpected ways —

 Reasons for a not having a worthwhile project

 Important

business value from their investment in information

technologies

Questions to Address in Order to Assess

EC Project Effort and Outcome

What were the goals?

What were the expectations?

What products and services did

your company want to offer?

Did unanticipated problems occur?

If so, how were those handled?

What costs did you hope to reduce? Did other costs increase unexpectedly? What were the sales objectives?

Were those goals realistic?

Did you intend to reduce

distribution costs?

Were your expectations

reasonable?

Did you intend to reduce travel

expenses for corporate staff? communications reducing Are Web and Internet

traditional communication costs?

Did you intend to improve

customer relations?

If you did not, what went How can those errors be

Revisit Each Phase of EC Project

 Is each needed service performing as expected?

 Is each needed service still relevant?

 What, if any, additional services are needed?

 What do customers want that you are not providing?

 What impact will they have on the infrastructure, from bandwidth

to software?

 What will the additional services cost?

 What specific changes have taken place among your

competitors that might affect what you are trying to accomplish?

 Have your vendors provided adequate service?

 Has training of employees been adequate, or is more required?

 What new internal needs have arisen that need to be addressed?