Chapter 9

EC Strategy and
Implementation Plan

Prentice Hall, 2000

Learning Objectives
Describe what a business strategy and
implementation plan are
Understand the process of formulating EC
strategies
Explain the issues involved in EC implementation
planning
Experience the role of intelligent agents in the
strategic perspective

Characterize how the strategic planning evolves

throughout the business cycle
Describe the key management issues in the
strategic planning
Prentice Hall, 2000

IBMs E-Businesss Strategy

Following four goals:
To lead IBMs strategy to transform itself into ebusiness 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 IBMs customers.
Prentice Hall, 2000

IBMs E-Businesss Strategy (cont.)

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 IBMs 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 IBMs marketing stance
Prentice Hall, 2000

Strategic Planning for EC

Industry and
competitive
analysis

Strategy
formulation

Implementation
plan

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Strategy
reassessment

Industry and Competitive Analysis

Monitoring, evaluating, disseminating of
information from the external and internal
environments
SWOT Analysis
Strengths

Weaknesses
Opportunities
Threats

Prentice Hall, 2000

Industry and Competitive Analysis (cont.)

INTERNAL
EXTERNAL FACTORS
FACTORS

Strengths (S)

Weaknesses (W)

Opportunities (O)

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

Threats (T)

ST Strategies
Generate strategies
here that use
strengths to avoid
threats

WT Strategies
Generate strategies
here that minimize
weaknesses and avoid
threats

Prentice Hall, 2000

Strategy Formulation
Strategy formulation
Development of long-range plans

Organizations mission
Purpose or reason for the organizations 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
Prentice Hall, 2000

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
Prentice Hall, 2000

EC Critical Success Factors (cont.)

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
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EC Critical Success Factors (cont.)

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?
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EC Critical Success Factors (cont.)

What criteria
determine who will be
our most profitable
customers?

Customers
Selection

Customers
Acquisition

Relationship
Marketing

How can we acquire

this customer in the
most efficient and
effective way?

Customers
Retention

How can we increase

How can we keep this
Customers
the loyalty and the
customer for as long as
Extension
profitability of this
possible?
customer?
Gartners Model of Customer Interaction
Prentice Hall, 2000

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EC Critical Success Factors (cont.)

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
Prentice Hall, 2000

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EC Critical Success Factors (cont.)

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.

Risks
Competitive strategy risk external, due to joint venture,
alliances, or demographic changes among others
Organizational risk and uncertainty internal to company
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Electronic Commerce Scenarios

Open, Global Commerce Scenario

Members-Only Subnets 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

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

New Consumer Marketing Channels

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
smaller enterprises

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
trusted, basic international norms accepted,
and2000
wireless links increase sales productivity15
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2000
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Competitive Strategy
Offensive strategy usually takes place in an
established competitors 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 competitors 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
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Competitive Strategy (cont.)

Defensive strategies takes place in the
firms 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
Prentice Hall, 2000

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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
Prentice Hall, 2000

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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?

Prentice Hall, 2000

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EC Strategy in Action (cont.)

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
Prentice Hall, 2000

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Competitive Intelligence on the Internet

Review competitors 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
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Competitive Intelligence on the Internet (cont.)

Using Push Technology for Competitive
Intelligence
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
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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
Prentice Hall, 2000

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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
Prentice Hall, 2000

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Uncovering Specific EC
Opportunities and Application (cont.)
Opportunities
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
Prentice Hall, 2000

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Uncovering Specific EC
Opportunities and Application (cont.)
Finding IT applications
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 whats going on
Use analogies from similar industries or business
processes
Use a conventional IS requirement analysis
approach
Prentice Hall, 2000

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Organization and Staffing

Define the roles and responsibilities of:
Senior management
Web champion
Webmaster
Web Page
Design

Gatekeepers
Web team

Building
System
Infrastructure

Business
Process
Reengineering

Security
and Control

Marketing
Finance
Accounting
Information
Technology

EC Project Team
Prentice Hall, 2000

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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
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Web Hosting
Hosting Internally Vs. Hosting Using
ISP
System Cost
bandwidth
capabilities and specifications
firewall system
wireless delivery
buy, rent, or lease
maintenance, upgrade, and service of the
equipment
Prentice Hall, 2000

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Web Hosting (cont.)

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 Markets Transact and LiveCommerce
Microsoft Corp.s Site Server Commerce Edition
IBM Corp.s Net. Commerce Pro
Saqqara Systems StepSearch Professional
AT&T

Prentice Hall, 2000

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Web Hosting (cont.)

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

Prentice Hall, 2000

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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
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Web Content Design (cont.)

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
generates Vs. flat rate

Training requirements
Installation and server
maintenance
Programming
On corporate site hosting Vs.
off-site
Secure Server for financial
transactions
Your bandwidth needs
Your server capacity needs
Location of your server at the
Web company or ISP
company location

Prentice Hall, 2000

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Web Content Design (cont.)

Web Application Features Audio
Electronic shopping
mall
Unique URL
Electronic
commerce/financial
transactions
Shopping cart software
Online catalogs
Direct order procedures
Dynamic databases
Static databases
Multimedia
Prentice Hall, 2000
Telephony

Video
FTP
Forms
Chat rooms
VRML
Statistics
Customer tracking
E-mail response and
forwarding
Java applications
Animation
Security
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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

Prentice Hall, 2000

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Strategy Reassessment
Webs grow in unexpected ways
e.g. Genentec and Lockheed Martin

Reasons for a not having a worthwhile project

The goals were unrealistic
The web server was inadequate to handle traffic
The actual cost savings were not as much as expected

Important
Develop a checklist
Project Team compiles statistics that can be tracked
CIOs and other executives are trying to extract the
business value from their investment in information
technologies
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Questions to Address in Order to Assess

EC Project Effort and Outcome
What were the goals?
Did unanticipated problems occur?
What products and services did If so, how were those handled?
your company want to offer?
What were the expectations?
Did you intend to reduce
distribution costs?

What costs did you hope to reduce?

Did other costs increase unexpectedly?

What were the sales objectives?

Were those goals realistic?

Were your expectations

reasonable?

Did you intend to reduce travel

Are Web and Internet
expenses for corporate staff?
communications reducing
Did you intend to improve
traditional communication costs?
customer relations?
How can those errors be
If you did not, what went
corrected?
wrong?
Prentice Hall, 2000

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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?
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Management Issues
Considering the strategic value of EC
Conducting strategic planning
Considering the risks
Integration
Pilot project

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