E-Business Strategy, Models and Processes - Ch02 Ch03 Ch04

Chapter 2
e-Business Strategy
Program
What is an e-business strategy?

Strategic positioning
Three levels of e-business strategy
The changing competitive agenda
The strategic planning process
Strategic alignment
Consequences: theoretical foundations
Implementation
www.wiley.com/go/ebusiness
What is e-business strategy?
The set of plans and objectives by which applications of

internal and external electronically mediated
communication contribute to the corporate strategy
Two Forms of Strategy

Achieving higher-level goals
A strategy is developed in order to achieve a goal like
implementing an organizational change, of a large
software package
A strategy related to plans concerning the long

term position of the firm
A strategic planning that has to do with the external
positioning of the firm in its competitive environment
Relationship between e-business

and other organization strategies
Corporate
strategy
E-business
strategy
Functional
strategies
IS
strategy
5
Strategic positioning
A company must start with the right goals;
A companys strategy must enable it to deliver a value
proposition, or set of benefits, different from those that its
competitors offer;
Company strategy needs to be reflected in a distinctive
value chain;
Robust company strategies involve trade-offs;
Company strategy defines how all the elements of what a
company does fit together;
Company strategy involves continuity of direction.
Three Levels of e-Business

Strategy
The supply chain or industry value chain level;
The line of business or (strategic) Business Unit
level;
The corporate of enterprise level for each firm
that encompasses a collection of business units.
The supply chain or industry

value chain level
This analyses gives an impetus to insight in
upstream and downstream data and information
flows.
Important issues
Who are the direct customers?

What is the value proposal to those customers?
Who are the suppliers?
How does the firm add value to those suppliers?
Etc..
The line of business or (strategic)

Business Unit level (1)
This is the level where the competitive strategy in
a particular market for a particular product and so
the strategic positioning is developed
The Line of Business or (Strategic)

Business Unit level (2)
Four generic strategies for achieving a profitable business:
Differentiation; a strategy that refers to all the ways
producers can make their products unique and distinguish
them from those of competitors;
Cost; this strategy that means that a company primarily
competes with low costs;
Scope; a strategy to compete in market world-wide, rather
than merely in local, regional or national markets;
Focus; a strategy to compete within a narrow market
segment or product segment.
10
The corporate or enterprise level

for each firm that encompasses a
collection of business units
This level addresses the problem of synergy through a firmwide available common IT infrastructure.
Commonality of E-business is basically needed for two
reasons:
From an efficiency point of view; having different
applications for the same functionality in different lines of
business is needlessly costly;
From an effectiveness point of view; there is a need for
cross line of Business communication and share-ability of
data.
11
Changing competitive agenda

In every business agenda change is a top level
priority
From a supplier driven economy to a consumer driven
economy
From mass production and mass distribution to
customization and customer-driven planning
From a producer focus to a consumer focus
12
Types of Strategic Systems

Systems that link the company with customers and
suppliers and change the nature of the relationship;
Systems that lead to more effective integration of internal
processes of the organization;
Systems that enable the organizations to bring new or
improved information based products and services to the
market;
Systems that provide the executives with high quality
information to support the development and
implementation of strategy.
13
The strategic planning

process
Most strategic planning methodologies are based on:
Situation; where a company is right now and how did it
get there;
Target; where does a company want to be;
Path; how can it get there.
14
The strategic planning process

Management statement
of organization
Analysis of external &
internal information
Planning strategies &
objectives of organization
Implementation &
control of plans
15
Forms of Strategy
Intented
strategy
Unrealised
strategy
Well considered strategy
Realised
strategy
Emergent
strategy
16
Strategic alignment
Alignment between business and IT is not only
feasible to design and build a technically
sophisticated (inter-organizational) infrastructure
for e-Business, but also to formulate business
strategies that complement and support this
infrastructure.
17
IT supporting e-business
strategic objectives
Enterprise
strategy
Business
functions
Application
architecture
e-Business
infrastructure
Sourcing /
staffing
Financing
18
The Consequences of
e-Business
When analyzing the business effects of E-business
consider the next approaches:
The theory of competitive strategy;
The resource based view;
The theory of transaction costs;
19
Theory of competitive strategy

Porters five forces model of competition:
The barriers to entry

for new competitors
The bargaining
power of customers
The competition among

existing firms in industry
The bargaining
power of suppliers
The threat of new substitute

products or services
20
The resource-based view

The resource-based view considers internal
resources and competencies and sources of
potential competitive advantage, instead of
looking at the environment and making strategy
plan accordingly.
21
Transaction Cost Economics

Transaction cost economics theory provides a
theoretical framework for discussion of market
structures and addresses the question why
necessary resources are obtained ether true the
market of through internal production.
Two key issues concerning firms are:
Which activities should a firm keep within its
boundaries and activities should it outsource?
In which should a firm manage its relationship with its
customers, suppliers and other business partners?
22
Implementation of e-Business
Strategies
Top down and bottom up
Program Management
Organization
Policies
Plans
Communication
Alignment
Change Agentry
23
Chapter 3
Business Models
Program
Introduction
Pressures forcing business changes
Business models-definitions
Business models-classification
25
Introduction
The vertical bureaucratic structure in a firm is built on the
assumption that concentrating similar activities within
functions, and thus separating activities which are not
similar,would result in economies of scale.
The internet and related technologies reduce coordination
costs and transaction costs.
Traditional business models focused on creating value at
the line-of-business level while the new business models
focus on the customers and creating value at the
relationship level across products and channels.
26
Pressures Forcing Business

Changes
The unprecedented challenges which businesses are facing
nowadays makes competition fiercer and more global.
Customers become increasingly demanding because of
competing products and service offerings.
The increasingly competition leads companies to rethink
their position in the market place fundamentally.
To have success in todays market, business networking
strategies are required to provide high quality, costefficient products reflecting the customers need. This is
made possible by the development of modern information
technology.
27
Business Strategy Vs.

Business Model
In a companys e-business plan the business model takes a
central position which consolidates its purpose and goals to
outline all kinds of aspects relating to e-business including:
marketing plan, competition, sales strategy, operations
plan, management plan and financial plan.
The business model must effectively address aspects such
as: value proposition, revenue model, market opportunity,
competitive advantage, market strategy, organizational
development and management [Ghosh 98].
28
Business Models types of

definitions
Definitions that relate to participants in a joint
business venture.
Definitions that relate to the processes and
structure of a business organization.
Definitions that relate to how business models are
seen from the perspective of a marketplace.
29
First Type of Definition

This definition may describe business models as follows:
A business model describes how the enterprise
produces, sells and delivers products and services,
thus showing how it delivers value to the customers
and how it creates wealth [Margretta 2002].
A business model addresses a simple equation
(profit = revenue costs) [Elliot 2002]. .
30
Second Type of Definition

This definition describes business models as follows:
An architecture for the product, service and
information flows, including a description of the
various business actors and their roles.
A description of the potential benefits for the
various actors.
A description of the sources of revenues.
31
Third Type of Definition

According to this definition business models can be analyzed
from various perspectives [Chaffey 2002]:
Is the company involved in business-to-business activities,
business-to-customer activities or both?
Which position does the company have in the value chain
between customers and suppliers?
Which is its value proposition, and which are its target
customers?
Which are the specific revenue models that will generate
its various income streams?
How is it represented: by physical shops (bricks) or
online, in the virtual world (licks); or even by a mixture
of these two (bricks and clicks)?
32
Business Strategy Vs.

Business Model
Business strategies specify how a business model
can be applied to differentiate a company from its
competitors [Elliot, 1999].
Marketing model was introduced to encompass
both the business model and the strategy
[Timmers 1998]
33
The Important Elements When

Taking the Internal Aspects of a
Business Into Account:
The product or service that a company delivers to
its customers.
The sources of revenue.
The activities to deliver products or services and
realize strategic objectives.
The organization a company has established to
realize its objectives.
34
Conclusion: This Books

Definition
A business model is a descriptive representation of the
planned activities of a business (sometimes referred to as
business processes) that involves three integral
components, which specify:
The internal aspects of a business venture;
The type of relationships of the enterprise with its external business
environment and its effective knowledge regarding these relationships;
How a companys information assets, e.g., information systems and
effective business processes typically grouped in the customer
relationship management (CRM), supply chain management (SCM)
and core business operations domains, are embedded in the business
venture.
35
Business Models
Classification
Traditional organisational structure
VS
New organisational structure
36
Traditional Organisational
Structure
Vertical and hierarchical

Function-based
Product-based
Geography-based
Matrix-based
High coordination costs (costs of sending, storing
and retrieving information)
Seller- or product-driven, aiming to generate value
at the of line-of -business level
37
New Organisational Structure

Hierarchical, procedural and other new
coordination mechanisms wich leads to network
based business models.
Team-based structure.
Customer focused: value is generated at the
relations level, across products and channels.
Creation of internet based business models (5
Business models Classifications)
38
5 Business Models
Classifications
Internet-enabled
Value-web
E-business enabled
Market participant
Cyber-intermediary
39
Internet Enabled Business

Model
10 different types of business models that are facilitated by
the internet
Based on analysis of Porters value chain
Internet enabled models are classified according to the
degree of innovation and functional integration involved.
1st dimension Innovation: Ranges from basically
applying the internet to replace a more traditionally way of
doing business to more innovative business models.
2nd dimension Functional Integration: Ranges from
business models that encompass one function, such an eshop, to a business model that fully integrates multiple
functions
40
Internet Enabled Business models

P. Timmers (1998) continued
41
Internet Enabled Business models

P. Timmers (1998)
E-shop
Value chain service provider
E-procurement
Value chain integrator
E-auction
Collaboration platform
E-mall
Information brokerage, trust
Third party marketplace

Virtual communities
and other services

Trust services
42

Model
E-shop: Website used by a company to give/get
information for marketing purposes
E-procurement: Process that involves purchasing goods
and services through the web.
E-mall: Collections of E-shops under 1 umbrella (special
service or product types, brands etc.).
E-auctions: Internet bidding mechanisms that can be
applied to both B2B and B2C contexts.
Third party marketplaces: Virtual marketplaces where
potential suppliers and buyers interact and transact.
43

Model
Virtual Community: Offers people with a common interest, such as a
profession or expertise, facilities to share information; thus they add
value for their members and so become important for marketing
purposes.
Collaboration platforms: Enable companies and individuals to work
together by providing an environment and a set of collaboration tools.
Value chain integrators: Focus onintegrating multiple steps of the
value chain.
Value chain service providers: Specialized in providing specific
functions such as electronic payments.
Information brokers: New, emerging information service providers
working for both consumers and businesses; They provide information
and help parties generate trust in one another.
44
Value-web Business Model
45

Value-web business model: A conception of an emerging
form form of a fluid and flexible organization.
Value-web brokers: Having the central value web function
of coordinator, integrator and interface.
Consisting of several key building blocks:
Markets
Hierarchies
Networks
Information Technology
New-old business models
46

Markets: Purpose of markets is to bring together buyers
and sellers and automate business transactions.
Hierarchies:Traditional and inflexible bureaucratic
structure.
Networks: These arise because companies move away
from the old ways of doing business(customer value
created by 1 single organization) to the new ways of doing
business (customer value created by a network of
organizations). A network consists of nodes and
relationships and cannot function without any missing part.
Information Technology: Evolution of which the future is
difficult to predict.
New-old business models: They still may have value.
47
The Family of e-Business Enabled

Business Models
higher
Value-chain
Value-chain
integration
integration
model
model
Collaborative
Collaborative
product
productdevelopment
development
model
model
Degree of
integration
Process
Process
outsourcing
outsourcing
model
model
Virtual
Virtual
Organization
Organization
model
model
Tele-working
Tele-working
model
model
lower
48
Market Participant Business

Models
Two roles key: producers & distributors
Producers (design and produce products and services)
Manufacturers of physical products
Less physical products (such as services provisioning, education and
consultancy)
Distributors (consists of focused distributors and portals)

Retailers (who sell inventory of which they have assumed control online)
Market places (without having physical control over the inventory sold)
Aggregators (who provide information on products or services sold by
others in the channel)
Exchanges (who may or may not complete sales online/assume control
over inventory)
Infomediaries ( a type of aggregator that brings together the sellers and
buyers of information-based products)
49
The Market Participants

Business Model
Producers
Producers
Internet
Distributors
Distributors
Horizontal
Horizontal
Focussed
Focussed
distributors
distributors
Retailers
Retailers
Exchanges
Exchanges
Portals
Portals
Infomediaries
Infomediaries
Marketplaces
Marketplaces
Vertical
Vertical
Affinity
Affinity
Aggregators
Aggregators
50
Role of a Portal
Partner
Content
E-Business Portals
Employee
Content
Content
Customer
51
Definition of a Portal
Portals are web sites targeted at specific audiences
and communities, providing:
content aggregation/delivery of information relevant to
the audience
collaboration and community services
services/applications access for target audiences
52
Portal Include Three Types:

Horizontal Portals: Originally created to provide
search engine services, these portals focus on the
entirety of the Internet, not specified audiences,
from various industries
Vertical Portals: Often referred to as Vortals,
these sites focus on targeted areas of interest, such
as healthcare or financial services.
Affinity Portals: Provide highly specific
information, much like vertical portals but focused
on specific interest groups or market segments.
53
Cybermediaries Business
Model
Cybermediaries: New Network-Based
Intermediaries
Eleven business models are proposed based on
this assumption
Each business model is characterized by its
functions
54
Cybermediaries Business
Model
Directories: Directory service intermediaries help consumers find
producers by categorizing Web sites and providing structured menus to
faciliate navigation.
Search Services: In contrast to the directories, search sites (e.g. Lycos
and Infoseek) provide users with the capabilities for conducting
keyword searches of extensive databases of Web sites/pages.
Malls: The term virtual mall or internet mall is often used to refer to
any site that has more than two commercial sites linked to it.
Virtual Resellers: The malls described above provide cyberinfrastructure, but they do not own inventory or sell products directly.
Web Site Evaluators: Consumers may be directed to a producer's site
via a new type of site that offers some form of evaluation, which may
help to reduce some of the risk to consumers.
55
Cybermediaries Business Model

Publishers Publisher Web sites are "traffic generators" that offer content
of interest to consumers (e.g. Information Week or Wired Magazine).
Auditors Auditors are not direct intermediaries, but serve the same
functions as audience measurement services in traditional media.
Forums, Fan Clubs, and User Groups Sites such as these are also not
necessarily direct intermediaries, but can play a large role in facilitating
customer-producer feedback and supporting market research.
Financial Intermediaries Any form of electronic commerce will require
some means of making or authorizing payments from buyer to seller.
Spot Market Makers The emergency of such a service isnt surprising
considering the speed with which e-networks can distribute information.
Barter Networks Buyers and sellers exchange goods rather than pay for
them with money.
Intelligent Agents Intelligent agents are often discussed as the answer to
user problems with navigation in the chaos of the Internet.
56
Chapter 4
E-Business Relationships
Program
Modeling business activities
Business Processes
e-Business relationships
58
Modeling Business Activities
The (Business Unit) Value

Chain
Distinction between what we do and how
From function to processes
Traditional value chain: manufacturing
Problematic for services, insurance, banking etc.
Alternative models suggested

Major objective:
Identify critical processes, information exchange with
suppliers and customers
Effectiveness of information flows through processes
60
Firm Infrastructure
Human Resource Management
Support
activities
Technology Development
Procurement
Primary
activities
Profit
margin
Inbound
Outbound Marketing
Operations
Service
Logistics
Logistics and sales
61
The (internal) value chain

Supporting Activities
Operational Activities
IT has the potential to:

To improve efficiency and effectiveness
To fundamentally change the activity
To alter the relationship between activities
62
Management
Marketing
Sales
Finance
Investments New Product

Development
Service
Value chain :
Individual Checking and savings
Value chain :
Business Checking and Savings
Value chain :
New savings Product Development
Value chain :
Business Loans
63
Value Chain Analysis

1.
2.
3.
4.
Defining the strategic business unit,

Identifying critical activities,
Defining products, and
Determining the value of an activity.
64
Unbundling the Value Chain
65
The Industry Value Chain or

the Value System
Basic raw
material
Manufacturing
Assembly
Wholesale
Retail
Consumer
66
Supply Chain
Demand
Basic raw
material
Manufacturing
Assembly
Wholesale
Retail
Consumer
Supply
Four types of info flows:
Transaction: orders, bills
Customer demand
Supplier information
Knowledge flows
67
Business Processes
Business Process
Management
The focus on the final customer as opposed to the focus on
vertical functional activities has lead in the 90s to an
increased interest for processes and their management.
A (business) process view implies an horizontal view on a
business organization and looks at processes as sets of
interdependent activities designed and structured to
produce a specific output for a customer or a market.
A process is an ordering of activities with a beginning and
an end; It has inputs (in terms of resources, materials and
information) and a specified output. Processes can be
measured, and different performance measures apply, like
cost, quality, time and customer satisfaction.
69
The Process view de-emphasizes the

functional structure
Research &
Marketing
Manufacturing
Development
New Product Development
Most companies can be broken down into fewer than

20 processes [Davenport]
70
Typical Processes in a
Manufacturing Firm [Davenport]
Product development
Customer acquisition
Manufacturing
Order management
After-sales service
Human resource management
71
Value Chain
Business process
Subprocess
Activity
Simple Activity
Step
Compound Activity
Step
72
Characteristics of Business
Processes
Environment
Customer and initiated by a customer order
Processing
Communication
Inventories or queues
Decision points
Delivery of a product
73
Environment
Business Process
WF
Customer order
Mngtm
Workflow
: Decision point
: Inventory or Queue
: Processing step
: Coordination of decision
points
: Transfer of activity
: transfer of
workflow decision
74
Types of Business Processes

Workflows where information processing supports
a physical process
Workflows where information processing is the
process itself
The degree of repetition and the level of expertise
or knowledge required to execute the process
The level of anticipation of the stimulus that
triggers the process.
75
Four Basic Forms (Mintzberg)
Environments Stable
Complex
Simple
Dynamic
Professional
Bureaucracy
Adhocracy
Machine
Bureaucracy
Simple Structure
Divisions: each division may have a different structure

01/06/2004
Pieter Ribbers
31
76
Its Impact on Business Processes

CAPABILITY
ORGANIZATIONAL IMPACT / BENEFIT
TRANSACTIONAL
UNSTRUCTURED PROCESS INTO ROUTINIZED TRANSACTIONS
GEOGRAPHICAL
AUTOMATIONAL
ELECTRONIC TRANSFER MAKES PROCESSES INDEPENDENT

OF GEOGRAPHY
REPLACES/REDUCES HUMAN LABOR
ANALYTICAL
USES COMPLEX ANALYTICAL METHODS
INFORMATIONAL
BRINGS GREAT AMOUNTS OF DETAILED INFORMATION

INTO PROCESS
ENABLES CHANGES IN SEQUENCE OF TASKS; POSSIBLE
TO RUN SIMULTANEOUSLY
CAN CAPTURE, DISSEMINATE KNOWLEDGE, EXPERTISE
TO IMPROVE PROCESS
SEQUENTIAL
KNOWLEDGE
MANAGEMENT
TRACKING
ALLOWS DETAILED TRACKING OF TASK STATUS, INPUTS,

OUTPUTS
DISINTERMEDIATION
CAN CONNECT PARTIES DIRECTLY, NO LONGER REQUIRING
INTERMEDIARY
Source: Davenport & Short The New Industrial Engineering(1990)
77
Degree of Collaboration
Low
Degree of Mediation
High
High
A
B
B
C
A
C
A
C
Low
C
A
: The final step in the process
: participating functions
: Collaborative activities
:input/output relationship
78
E-Business Relationships
Types of e-Business
Relationships
Strategic
planning
Strategic
planning
Tactical
planning
Tactical
planning
Operational
planning
Operational
planning
Enterprise-A
Enterprise-B
80
B2B vs. B2C

Economic value per individual company, and per
transaction
Buying processes
Products may be highly customer specific
Modern logistic concepts
Buying expertise
Pricing
IT-infrastructure
81
Types of temporal
interbusiness relationships
Spotmarket
Longer term
Partnership
82

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Chapter 2

What is an e-business strategy?

What is e-business strategy?

The set of plans and objectives by which applications of

Two Forms of Strategy

A strategy related to plans concerning the long

Relationship between e-business

Three Levels of e-Business

The supply chain or industry

Who are the direct customers?

The line of business or (strategic)

The Line of Business or (Strategic)

The corporate or enterprise level

Changing competitive agenda

Types of Strategic Systems

The strategic planning

The strategic planning process

Well considered strategy

Theory of competitive strategy

The barriers to entry

The competition among

The threat of new substitute

The resource-based view

Transaction Cost Economics

Pressures Forcing Business

Business Strategy Vs.

Business Models types of

First Type of Definition

Second Type of Definition

Third Type of Definition

Business Strategy Vs.

The Important Elements When

Conclusion: This Books

Vertical and hierarchical

New Organisational Structure

Internet Enabled Business

Internet Enabled Business models

Internet Enabled Business models

Value chain service provider

Value chain integrator

Information brokerage, trust

Third party marketplace

and other services

Internet Enabled Business

Internet Enabled Business

Value-web Business Model

Value-web Business Model

Value-web Business Model

The Family of e-Business Enabled

Market Participant Business

Distributors (consists of focused distributors and portals)

The Market Participants

Portal Include Three Types:

Cybermediaries Business Model

Modeling Business Activities

The (Business Unit) Value

Alternative models suggested

The (internal) value chain

IT has the potential to:

Investments New Product

Value Chain Analysis

Defining the strategic business unit,

Unbundling the Value Chain