Chapter 12: Planning for Electronic Commerce

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Chapter 12Planning for Electronic Commerce

• Electronic Commerce, Seventh Annual Edition

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Objectives

• In this chapter, you will learn about
• Planning electronic commerce initiatives
• Strategies for developing electronic commerce Web
  sites
• Managing electronic commerce implementations

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Planning Electronic Commerce Initiatives

• Objectives of electronic commerce
• Increasing sales in existing markets
• Opening new markets
• Serving existing customers better
• Identifying new vendors
• Coordinating more efficiently with existing
  vendors
• Recruiting employees more effectively

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Linking Objectives to Business Strategies

• Downstream strategies
• Used to improve the value that the business
  provides to its customers
• Upstream strategies
• Focus on reducing costs or generating value
• Work with suppliers or inbound shipping and
  freight service providers

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Linking Objectives to Business Strategies
(continued)

• Electronic commerce opportunities can inspire
  businesses to undertake activities such as
• Building brands
• Enhancing existing marketing programs
• Selling products and services
• Selling advertising
• Developing a better understanding of customer
  needs

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Measuring Benefits

• Tangible benefits of electronic commerce
  initiatives include
• Increased sales
• Reduced costs
• Intangible benefits of electronic commerce
  initiatives include
• Increased customer satisfaction

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Managing Costs

• Total cost of ownership
• Includes costs of hardware, software, design work
  outsourced, and salaries
• Change management
• Process of helping employees cope with changes
• Opportunity costs
• Lost benefits from an action not taken

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Web Site Costs

• International Data Corporation and Gartner, Inc.
  estimate that the cost for a large company to
  build and implement an entry-level electronic
  commerce site is about 1 million
• 79 percent of cost is labor related
• 10 percent is the cost of software
• 11 percent is the cost of hardware

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Web Site Costs (continued)

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

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Comparing Benefits to Costs

• Capital projects (capital investments)
• Major investments in equipment, personnel, and
  other assets
• Key part of creating a business plan for
  electronic commerce initiatives includes
• Identifying potential benefits
• Identifying costs required to generate benefits
• Evaluating whether benefits exceed costs

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Return on Investment (ROI)

• Return on investment techniques provide a
  quantitative expression of a comfortable
  benefit-to-cost margin
• Built-in biases that can lead managers to make
  poor decisions
• ROI requires that all costs and benefits be
  stated in dollars
• Focus is on benefits that can be predicted
• Tends to emphasize short-run benefits over
  long-run benefits

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Strategies for Developing Electronic Commerce Web
Sites

• Typical early Web site
• Static brochure not updated frequently
• Seldom had any capabilities for helping the
  companys customers
• Todays Web site includes
• Transaction-processing tools
• Automated homes for business processes of all
  kinds

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Internal Development vs. Outsourcing

• Outsourcing
• Hiring another company to provide outside support
  for all or part of a project
• Internal team
• Should include people with enough knowledge about
  the Internet and its technologies
• Should be creative thinkers
• Measuring achievements of internal team is very
  important

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Early Outsourcing

• Outsource the initial site design and development
  to launch a project quickly
• Outsourcing team trains the companys information
  systems professionals in the new technology
• It is best to have the companys own information
  systems people working closely with the
  outsourcing team

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Late Outsourcing

• Information systems professionals
• Do initial design and development work
• Implement the system
• Operate the system until it becomes a stable part
  of the business operation
• Once a company has gained a competitive
  advantage, maintenance of the electronic commerce
  system can be outsourced

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Partial Outsourcing

• Company identifies specific portions of the
  project that can be completely designed,
  developed, implemented, and operated by another
  firm
• Many smaller Web sites outsource their e-mail
  handling and response functions

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Selecting a Hosting Service

• Factors to evaluate when selecting a hosting
  service include
• Functionality
• Reliability
• Bandwidth and server scalability
• Security
• Backup and disaster recovery
• Cost

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New Methods for Implementing Partial Outsourcing

• Incubators
• Company that offers start-up companies a physical
  location with
• Offices, accounting, and legal assistance
• Computers and Internet connections
• Receive ownership interest in the company

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New Methods for Implementing Partial Outsourcing
(continued)

• Fast venturing
• Existing company that wants to launch an
  electronic commerce initiative joins external
  equity partners and operational partners
• Equity partners
• Banks or venture capitalists
• Operational partners
• Firms that have experience in moving projects
  along and scaling up prototypes

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Managing Electronic Commerce Implementations

• Project management
• Formal techniques for planning and controlling
  activities undertaken to achieve a specific goal
• Project plan
• Includes criteria for cost, schedule, and
  performance
• Project management software products
• Microsoft Project
• Primavera Project Planner

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Project Portfolio Management

• Each project is monitored as if it were an
  investment in a financial portfolio
• Chief Information Officer
• Records projects in a list
• Updates the list with current information about
  each projects status
• Assigns a ranking for each project based on
  importance and level of risk

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Staffing for Electronic Commerce

• General areas of staffing include
• Business managers
• Project managers
• Account managers
• Applications specialists
• Web programmers
• Web graphics designers
• Customer service
• Systems administration

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Staffing for Electronic Commerce (continued)

• Business manager
• Should be a member of the internal team that sets
  objectives for a project
• Project manager
• Person with specific training or skills in
  tracking costs and accomplishment of specific
  objectives
• Account manager
• Keeps track of multiple Web sites in use by a
  project

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Staffing for Electronic Commerce (continued)

• Applications specialists
• Maintain accounting, human resources, and
  logistics software
• Web programmers
• Design and write underlying code for dynamic
  database-driven Web pages
• Web graphics designer
• Person trained in art, layout, and composition
• Understands how Web pages are constructed

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Staffing for Electronic Commerce (continued)

• Customer service personnel
• Help design and implement customer relationship
  management activities
• Call center
• Company that handles incoming customer telephone
  calls and e-mails for other companies
• Systems administrator
• Responsible for the systems reliable and secure
  operation

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Postimplementation Audit

• Formal review of a project after it is up and
  running
• Gives managers a chance to examine
• Objectives
• Performance specifications
• Cost estimates
• Scheduled delivery dates

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Postimplementation Audit (continued)

• Allows internal team, business manager, and
  project manager to
• Raise questions about the projects objectives
• Provide feedback on strategies
• Final report should analyze
• Projects overall performance
• How well the project was administered
• Specific performance of the project team(s)

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Summary

• Plans for electronic commerce implementations
  include
• Setting objectives
• Determining benefit and cost objectives which
  should be stated in measurable terms
• Project evaluation technique
• Return on investment
• Determining an outsourcing strategy
• Form an internal team that includes knowledgeable
  individuals from within the company

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Summary (continued)

• Project management
• Formal way to plan and control specific tasks and
  resources used in a project
• Project portfolio management techniques
• Used to track and make trade-offs among multiple
  ongoing projects
• Critical staffing areas
• Business management
• Application specialists
• Systems administration