Ebusiness strategy

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Chapter 14

• E-business strategy

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Learning objectives

• After this lecture, you should be able to
• outline alternative strategic approaches to
  achieve e-business
• evaluate the relevance of key decisions for
  e-business strategy definition to an
  organisation
• define the main control issues in managing an
  e-business infrastructure.

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Management issues

• This lecture explores strategic issues such as
  how the Internet is integrated into existing
  planning approaches, and implementation issues of
  creating and maintaining service levels such that
  the competitiveness of the business does not
  suffer through problems with the e-business
  infrastructure.

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Figure 14.1 Time taken for different
technologies to reach 1 million adopters
in the UK Source Online Research
Agency.
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Figure 14.2 Adoption steps of e-business
services Source DTI (2000).
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Focus of online presence

• 1. Transactional e-commerce site Provides
  products available for purchase online. The main
  business contribution is through sale of these
  products. The sites also support the business by
  providing information for consumers that prefer
  to purchase products offline.
• 2. Services-oriented relationship-building web
  site Provides information to stimulate purchase
  and build relationships. Products are not
  typically available for purchase online.
  Information is provided through the web site and
  e-newsletters to inform purchase decisions. The
  main business contribution is through encouraging
  offline sales and generating enquires or leads
  from potential customers.
• 3. Brand-building site Provides an experience to
  support the brand. Products are not typically
  available for online purchase, although
  merchandise may be. The main focus is to support
  the brand by developing an online experience of
  the brand. They are typical for low-value,
  high-volume fast-moving consumer goods (FMCG
  brands) for consumers.
• 4. Portal or media site These sites provide
  information or news about a range of topics.
  Portal refers to a gateway of information. This
  is information both on the site and links through
  other sites. These are the three different types
  of destination sites described above. Portals
  have a diversity of options for generating
  revenue including advertising, commission-based
  sales and sale of customer data (lists).

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Factors influencing adoption of Internet
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SME issues of e-business adoption

• 1. Revenue This suggests comparison of the
  importance of online channels for direct or
  indirect revenue. If revenue becomes significant,
  then steps must be put in place to avoid outages.
  
• 2. Reputation Again, if a significant proportion
  of trade is online, there is a reputational
  damage if the web site becomes defaced,
  unavailable.
• 3. Strategic importance How important is the web
  site to you? Would there be a significant impact
  if it were to become unavailable?
• 4. Regulatory compliance If a company is
  processing or storing data which is subject to
  legislative control (i.e. customer or employee
  data), then the penalties or reputational damage
  from not providing adequate safeguards may be
  high if the data is compromised.

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Figure 14.3 Summary applications portfolio
analysis for a B2B company Source Chaffey (2004).
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Figure 14.4 Customer demand for e-marketing
services for the B2B company Source Chaffey
(2004).
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Figure 14.5 Competitive threats acting on the
e-business Source Chaffey (2004).
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• Competitive threats
• 1. Threat of new e-commerce entrants.
• 2. Threat of new digital products.
• 3. Threat of new business models.
• Sell-side threats
• 1. Customer power and knowledge.
• 2. Power of intermediaries.
• Buy-side threats
• 1. Power of suppliers.
• 2. Power of intermediaries.

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Figure 14.6 Grid of product suitability against
market adoption for transactional
e-commerce (online purchases) Source Chaffey
(2004).
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Objective setting objective types

• Put simply, effectiveness is doing the right
  thing. Doing the right thing means using the
  most appropriate strategies and undertaking the
  appropriate e-business activities.
• Efficiency is doing the thing right it
  defines whether e-business processes and
  marketing communications occur using the least
  financial resources and in the shortest time
  possible.

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Strategic decision 1 e-business priorities

• Emphasis
• buy-side, sell-side
• Emphasis
• online channels, offline channels

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Figure 14.7 Strategic options for a company in
relation to the importance of the Internet as a
channel
Source Chaffey (2004).
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Strategic decision 2

• Restructuring to accommodate changed emphasis
• How is e-business focus achieved
• New responsibilities?
• New teams?
• New steering groups?
• New profit centres?
• New cost centres?

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Figure 14.8 Summary of alternative
organisational structures for e-commerce
suggested in Parsons et al. (1996) Source
Chaffey (2004).
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Strategic decision 3

• Business and revenue models
• Business model
• An architecture for product, service and
  information flows, including a description of the
  various business actors and their roles and a
  description of the potential benefits for the
  various business actors and a description of the
  sources of revenue.
• Describe methods of generating income for an
  organisation.

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Strategic decision 4

• Marketplace changes
• disintermediation (sell-direct)
• create new online intermediary (countermediation)
  
• partner with new online or existing
  intermediaries
• do nothing!

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Strategic decision 5 market and
product growth strategies

• 1. Market penetration.
• 2. Market development.
• 3. Product development.
• 4. Diversification.

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Figure 14.9 Strategic options for market
development and product innovation Source
Chaffey (2004).
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Strategic decision 6

• Positioning and differentiation strategies
• Product performance excellence.
• Price performance excellence.
• Transactional excellence.
• Relationship excellence.

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Figure 14.11 Members of the value network of an
organisation Source Chaffey (2004).
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E-business strategy implementation 1

• Content The effective presentation of products
  or services.
• Convenience The usability of the web site.
• Control The extent to which organisations have
  defined processes that they can manage.
• Interaction The means of relationship building
  with individual customers.
• Community The means of relationship building
  with groups of like-minded individuals or
  organisations.

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E-business strategy implementation 2

• Price sensitivity The sensitivity of a product
  or service to price competition on the Internet.
• Brand image The ability to build up a credible
  brand name for e-commerce.
• Commitment A strong motivation for using the
  Internet and the will to innovate.
• Partnership The extent to which an e-commerce
  venture uses partnerships (value chain
  relationships) to leverage Internet presence and
  expand its business.
• Process improvement The extent to which
  companies can change and automate business
  processes.

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Figure 14.12 Variation in average transfer rate
of data from a web server, compilation of UK ISPS
from Zeus (www.webperf.net)
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Figure 14.13 Differing use of applications at
levels of management within companies
Source Chaffey (2004).