Intro to e-Commerce

Rayport, Jaworski

Chapter 1 Lecture Slides

A Framework for E-Commerce

Exhibits and Tables

Copyright 2001 by Marketspace LLC

CONFIDENTIAL

Last Updated: 08/22/01 Copyright 2001 by Marketspace LLC

A Framework for E-Commerce Todays Objective

The objective of this chapter is to provide a framework for the study and practice of e-commerce.

Last Updated: 08/22/01 Copyright 2001 by Marketspace LLC

Chapter 1: A Framework for E-Commerce

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Definition and scope of e-commerce Strategy-making in a rapidly changing environment The framework for the field of e-commerce What do senior e-commerce managers do? Key challenges for senior leadership in todays environment Overview of book chapters Conclusion

Last Updated: 08/22/01 Copyright 2001 by Marketspace LLC

Chapter 1: A Framework for E-Commerce

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Definition and scope of e-commerce Strategy-making in a rapidly changing environment The framework for the field of e-commerce What do senior e-commerce managers do? Key challenges for senior leadership in todays environment Overview of book chapters Conclusion

Last Updated: 08/22/01 Copyright 2001 by Marketspace LLC

Networked Economy

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Create value through the collection, organization and distribution of information Strategy formulation to make management of the enterprise and management of technology convergent Competition in real time Low barriers to entry Organize resources around the demand side Technology for managing relationships with customers and markets Use of technology-mediated channels
Last Updated: 08/22/01 Copyright 2001 by Marketspace LLC

Attributes and Definition of E-Commerce

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Exchange of digitized information between parties Technology-enabled Technology-mediated Intraorganizational and interorganizational activities to support exchanges E-commerce: Technology-mediated exchanges between parties (individuals or organizations) as well as the electronically based intraorganizational or interorganizational activities that facilitate such exchanges

Last Updated: 08/22/01 Copyright 2001 by Marketspace LLC

Table 11: Four Categories of E-Commerce

Business originating from . . .

Business Consumers

And selling to . . .

Business

B2B B2B

C2B C2B

Consumers

B2C B2C

C2C C2C

Last Updated: 08/22/01 Copyright 2001 by Marketspace LLC

Exhibit 11: Convergence of E-Commerce Categories

Business originating from . . .

Business Consumers

And selling to . . .

Business

Publishers order paper Publishers order paper supplies from paper supplies from paper companies companies Amazon orders from Amazon orders from publishers publishers

Consumers aggregate to Consumers aggregate to bulk purchase from Amazon bulk purchase from Amazon

Consumers

Consumers buy thousands Consumers buy thousands of Harry Potter books from of Harry Potter books from Amazon Amazon

Consumers resell copies on eBay

Last Updated: 08/22/01 Copyright 2001 by Marketspace LLC

Chapter 1: A Framework for E-Commerce

l l l l l l l l l l l l l

Definition and scope of e-commerce Strategy-making in a rapidly changing environment The framework for the field of e-commerce What do senior e-commerce managers do? Key challenges for senior leadership in todays environment Overview of book chapters Conclusion

Last Updated: 08/22/01 Copyright 2001 by Marketspace LLC

Exhibit 12: Classical Framework for Strategic Management

Mission Mission

Objectives Objectives

External External Analysis Analysis

Strategy Strategy lCorporat Formulation Formulation e lBusiness Unit lFunction al lOperatin g Implementation Implementation

Internal Internal (Company) (Company) Analysis Analysis

Control Control and and Monitoring Monitoring

Last Updated: 08/22/01 Copyright 2001 by Marketspace LLC

Sense-and-Respond Strategy

Easy, actionable and easy to respond to experiment with solutions l Proactively solicit feedback from customers
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Drawbacks l Reactive approach appropriate for incremental competitive moves l More appropriate for traditional offline companies

Last Updated: 08/22/01 Copyright 2001 by Marketspace LLC

Table 12: Three Approaches to Strategy

Position
Strategic Logic
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Resources
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Simple Rules
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Establish position

Leverage resources

Pursue opportunities

Strategic Steps

Identify an attractive market l Locate a defensible position l Fortify and defend

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Establish a vision l Build resources l Leverage across markets

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Jump into the confusion l Keep moving l Seize opportunities l Finish strong
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Strategic Question Source of Advantage Works Best In Duration of Advantage Risk Performance Goal

Where should we be? Unique, valuable position with tightly integrated activity system Slowly changing, wellstructured markets Sustained It will be too difficult to alter position as conditions change Profitability

What should we be? Unique, valuable, inimitable resources Moderately changing, wellstructured markets Sustained Company will be too slow to build new resources as conditions change Long-term dominance

How should we proceed? Key processes and unique simple rules Rapidly changing, ambiguous markets Unpredictable Managers will be too tentative in executing on promising opportunities Growth

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Source:Kathleen M. Eisenhardt and Donald Soll, Strategy As Simple Rules, Hayward Business Review (January 2001), 109.
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Consumer Behavior Constants in the Networked Economy

Customization Personalization l Interactivity Ability to conduct two-way communication

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Chapter 1: Framework for E-Commerce

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Definition and scope of e-commerce Strategy-making in a rapidly changing environment The framework for the field of e-commerce What do senior e-commerce managers do? Key challenges for senior leadership in todays environment Overview of book chapters Conclusion

Last Updated: 08/22/01 Copyright 2001 by Marketspace LLC

Exhibit 13: A Comprehensive Framework

Media Media Infrastructure Infrastructure

Technology Technology Infrastructure Infrastructure

E-Commerce E-Commerce Strategy Strategy

Capital Capital Infrastructure Infrastructure

Media Media Infrastructure Infrastructure

Last Updated: 08/22/01 Copyright 2001 by Marketspace LLC

Exhibit 14: E-Commerce Strategy

Market Market Framing the Market Opportunity Business Model Customer Interface Communication Implementation Framing the Market Opportunity Business Model Customer Interface Communication Implementation and Branding and Branding

Metrics Metrics

Last Updated: 08/22/01 Copyright 2001 by Marketspace LLC

The Four Infrastructures

Technology Infrastructure l Technology foundation enables e-commerce enterprises l Hardware computers, routers, servers l Software
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Capital Infrastructure l Funding the business sources of funds l Valuing the business

Last Updated: 08/22/01 Copyright 2001 by Marketspace LLC

The Four Infrastructures

Media Infrastructure l Internet as a mass communication medium l Publish, design and edit digital content

Public Policy Infrastructure l Laws and regulations l Impact of the Internet on society

Last Updated: 08/22/01 Copyright 2001 by Marketspace LLC

Chapter 1: Framework for E-Commerce

l l l l l l l l l l l l l

Definition and scope of e-commerce Strategy-making in a rapidly changing environment The framework for the field of e-commerce What do senior e-commerce managers do? Key challenges for senior leadership in todays environment Overview of book chapters Conclusion

Last Updated: 08/22/01 Copyright 2001 by Marketspace LLC

Exhibit 15: Relevant Disciplines for a Senior E-Commerce

Executive

Strategic Management Strategic Management

Finance Finance

Marketing Marketing

Entrepreneurship Entrepreneurship Accounting Accounting Operations Operations and Logistics and Logistics

Technology Technology

New Media New Media

Note: Shaded boxes reflect new capabilities

Last Updated: 08/22/01 Copyright 2001 by Marketspace LLC

Exhibit 16: A Flow Diagram of the Strategic Responsibilities

Set Vision Set Vision

Establish Goals Establish Goals

Formulate Formulate Strategy Strategy

Drive Drive Implementation Implementation

Be Accountable Be Accountable for Performance for Performance

Last Updated: 08/22/01 Copyright 2001 by Marketspace LLC

Table 13: Where to Find Senior E-Commerce Managers

Within Existing Bricks-and-Mortar Companies

Corporate Line Executive

Corporate site management l Cross business unit integration site
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Business Unit
Report to GM of business unit
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Stand-Alone
Separate business from corporate parent

Staff Executive

Supports corporatewide initiatives

Supports and advises SBU ecommerce initiatives

Note: Line executives are accountable for profit and loss of the business; Staff personnel provide support services to line personnel

Last Updated: 08/22/01 Copyright 2001 by Marketspace LLC

Chapter 1: A Framework for E-Commerce

Definition and scope of e-commerce Strategy-making in a rapidly changing environment The framework for the field of e-commerce What do senior e-commerce managers do? Key challenges for senior leadership in todays environment Overview of book chapters Conclusion

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Last Updated: 08/22/01 Copyright 2001 by Marketspace LLC

The Challenges

Understanding Customer Evolution l Tablestakes or cost of doing business l Market research to understand how customer needs are evolving

Charting Changing Technology l Choosing the right technologies matching consumer tastes to technology choices
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Balancing Irrational Exuberance and Irrational Doom l Estimating the impact of technology l Weathering the storm reassuring stakeholders
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Last Updated: 08/22/01 Copyright 2001 by Marketspace LLC

The Challenges

Integration of Offline and Online Activities l Integration of customer-facing activities advertising, branding, retail and store design, service, warranties l Integration of systems, structure and processes

Identifying Key Levers of Competitive Advantage l Reallocating resources as competitive advantage levers evolve
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Last Updated: 08/22/01 Copyright 2001 by Marketspace LLC

Chapter 1: A Framework for E-Commerce

l l l l l l l l l l l l l

Definition and scope of e-commerce Strategy-making in a rapidly changing environment The framework for the field of e-commerce What do senior e-commerce managers do? Key challenges for senior leadership in todays environment Overview of book chapters Conclusion

Last Updated: 08/22/01 Copyright 2001 by Marketspace LLC

Book Overview

The Basic Technology of the Internet and Web l Chapter 2 Introduction to the Web and Internet basic technology concepts: webpages, hyperlinks, protocols l Chapter 3 The basic of doing business on the Internet security, payment processing, customer service, etc.

Strategy Formulation for Online Firms l Chapter 4 Framing the market opportunity How to do a market analysis for networked-economy businesses l Chapter 5 Business models The four components of a Marketspace business model l Chapter 6 The customer interface The 7Cs of customer interface l Chapter 7 Communication and branding Using new media communication approaches for competitive advantage
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Last Updated: 08/22/01 Copyright 2001 by Marketspace LLC

Book Overview

Strategy Formulation for Online Firms l Chapter 8 Implementation How to do it l Chapter 9 Metrics The performance dashboard

Technology Infrastructure l Chapter 10 The emergence and growth of B2B marketplaces Net marketplaces and associated technologies l Chapter 11 Collaborative commerce Software and applications for a collaborative enterprise

Last Updated: 08/22/01 Copyright 2001 by Marketspace LLC

Book Overview
Capital Infrastructure l Chapter 12 Early-stage business development: Human and financial capital Writing a business plan l Chapter 13 Working with funders from seed stage to liquidity Sources and stages of funding Media Infrastructure l Chapter 14 Media transformation From analog to digital platforms l Chapter 15 The Future of media usage Dealing with media fragmentation Public Policy Infrastructure l Chapter 16 Regulation Self regulation vs. government regulation l Chapter 17 Internet and society Changes and implications for society

Last Updated: 08/22/01 Copyright 2001 by Marketspace LLC

Chapter 1: A Framework for E-Commerce

l l l l l l l l l l l l l

Definition and scope of e-commerce Strategy-making in a rapidly changing environment The framework for the field of e-commerce What do senior e-commerce managers do? Key challenges for senior leadership in todays environment Overview of book chapters Conclusion

Last Updated: 08/22/01 Copyright 2001 by Marketspace LLC

Conclusion

Attributes of e-Commerce: Digitized exchanges Technology-enabled and technology-mediated Intra- and inter-organizational activities that support the exchange The four categories of e-commerce are: Business-to-business Business-to-consumer Consumer-to-consumer or peer-to-peer Consumer-to-business Strategy lies at the heart of e-commerce activities. Wrapped around the strategy are technology, capital, public policy and media infrastructures.

Last Updated: 08/22/01 Copyright 2001 by Marketspace LLC

Conclusion

Classic strategic planning is inadequate for managing an e-commerce enterprise. Sense-and-respond and strategy-as-rules approaches complement classic strategic planning.

Senior e-commerce managers are responsible for: Articulating a vision Setting process and outcome goals Formulating strategic direction and choice Driving implementation Being accountable for performance The challenges of a senior e-commerce manager include: Understanding how customers are evolving Anticipating technology changes Setting realistic expectations regarding e-commerce benefits Integrating online and offline activities Identifying how e-commerce activities can be a source of competitive advantage
Last Updated: 08/22/01 Copyright 2001 by Marketspace LLC