COMM 4313

INTERNET MARKETING COMMUNICATION

INTERNET STRATEGY
LORA LOUISE BROADY

Source: E-Marketing by Judy Strauss, Adel I. El-Ansary, and Raymond Frost Chapter 2: Strategic E-Marketing

Overview
Strategic Planning SWOT Analysis Strategic Objectives Strategy Strategy to Electronic Strategy Business Models to E-Business Models E-Business Models Value and Revenue Strategic E-Business Models

* Note: performance metrics will be discussed in Week 8

Strategic Planning
Amazon uses strategic planning to get ready for a profitable and sustainable business future. Strategic planning = the managerial process of developing and maintaining a viable fit between the organizations objectives, skills, and resources and its changing market opportunities. Two key elements of strategic planning are: - The preparation of a SWOT analysis, - The establishment of strategic objectives.

SWOT Analysis
Strengths, Weaknesses, Opportunities, and Threats

It examines: - The companys internal strengths and weaknesses with respect to the environment, - The competition and looks at external opportunities and threats. Opportunities may help to define a target market or identify new product opportunities, while threats are areas of exposure.

Example
The Amazon story
Strength Weakness A smart and talented team that stayed focused and learned what it didn t know. No experience in: -Selling books -Processing credit card transactions -Boxing books for shipment To sell online. A full-scale push by one of the large bookstore chains to claim the online market.

Opportunity Threat

Bricks vs Clicks...


A companys strengths and weaknesses in the online world may be somewhat different from its strengths and weaknesses in the brick-and-mortar world. Barnes & Noble has enormous strengths in the brick-and-mortar world but these do not necessarily translate into strengths in the online world: Channel conflict = having to explain to channel partners why customers can purchase for less online than in the store.

Key Internal Capabilities for E-Business Internal Capability Customer interactions Production and fulfillment People Technology Core infrastructure Examples E-commerce, customer service, distribution channels SCM, production scheduling, inventory management Culture, skills, knowledge management, leadership and commitment to e-business ERP systems, legacy applications, networks, Web site, security, IT skills Financial systems, R&D, HR

Source: Adapted from Kalakota and Robinson (1999)

Strategic Objectives
The firm sets objectives such as:

Growth. How much can the firm reasonably expect to grow in terms of revenues, and how fast? Competitive position. How should the firm position itself against other firms in the industry? Viable positions are:
-

Industry leader (Microsoft), Price leader (Priceline.com), Quality leader (Mercedes), Niche firm (Google.com), Best customer service (Dell.com).

Strategic Objectives

Geographic scope. Where should the firm serve its customers on the continuum of local to multinational? Other objectives. Companies often set objectives for the number of industries they will enter, the range of products they will offer, the core competencies they will foster, and so on.

Strategy
It is the means to achieve a goal. It is concerned with how the firm will achieve its objectives, not what its goals are: 1. The firm sets its growth and other objectives, 2. It decides which strategies it will use to accomplish them, 3. The tactics are detailed plans to implement the strategies. It is important to note that objectives, strategies, and tactics can exist at many different levels in a firm.

From Strategy to Electronic Strategy

E-business strategy: The deployment of enterprise resources to capitalize on technologies for reaching specified objectives that ultimately improve performance and create sustainable competitive advantage. Corporate-level business strategies including information technology components (Internet, digital data, databases, and so forth) become e-business strategies. E-Business Strategy = Corporate Strategy + Information Technology

-business strategy lows rom the irms environmental analysis.

Le al - t ical ec l etiti t er fact rs

Internet
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Pla - ar eti ix

si ess trate

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Perf r a ce

etrics

hibit 2 - 1 Focusing on trategy and er ormance

From Strategy to Electronic Strategy

Marketing strategy becomes e-marketing strategy when marketers use digital technology to implement the strategy:

E-marketing strategy = marketing strategy + Information technology

From Strategy to Electronic Strategy

Most strategic plans e plain the rationale for the chosen objectives and strategies. There are four appropriate types of rationale: 1. Strategic justification shows how the strategy fits with the firms overall mission and business objectives, 2. Operational justification identifies and quantifies the specific process improvements that will result from the strategy, 3. Technical justification shows how the technology will fit and provide synergy with current information technology capabilities, 4. inancial justification e amines cost/benefit analysis and uses standard measures (ROI, N V).

From Business Models to E-Business Models

Business model: a method by which the organization sustains itself in the long term, and includes its value proposition for partners and customers as well as its revenue streams. A firm will select one or more business models as strategies to accomplish enterprise goals.

How does a firm select the best business models?

Critical components: Customer value. Does the model create value through its product offerings that is differentiated in some way from that of competitors? Scope. Which markets do the firm serve, and are they growing? Are these markets currently served by the firm, or will they be higher risk new markets? Price. Are the firms products priced to appeal to markets and also achieve company share and profit objectives?

How does a firm select the best business models?

Revenue sources. Where is the money coming from? Is it plentiful enough to sustain growth and profit objectives over time? Connected activities. What activities will the firm need to perform to create the value described in the model? Does the firm have these capabilities? Implementation. The company must have the ability to actually make it happen. Capabilities. Does the firm have the resources (financial, core competencies, and so on) to make the selected models work? Sustainability. The e-business model is particularly appropriate if it will create a competitive advantage over time.

E-Business Models
The direct connection with information technology makes a business model an e-business model: E-Business Model = Business Model + Information Technology E-business model: method by which the organization sustains itself in the long term using information technology, which includes its value proposition for partners and customers as well as its revenue streams. It can capitalize on digital data collection and distribution techniques without using the Internet.

Value and Revenue

Whether online or offline, the value proposition involves knowing what is important to the customer or partner and delivering it better than other firms. Value encompasses the customer's perceptions of the products benefits, specifically its attributes, brand name, and support services. Subtracted from benefits are the costs involved in acquiring the product, such as monetary, time, energy, and psychic. Value = Benefits - Costs

E-Marketing Contributes to the E-Business Model

E- arketi g I creases e efits Online mass customization ersonalization 24/7 convenience el -service ordering and tracking One-stop shopping E- arketi g Decreases osts Lo cost distribution o communication messages Lo cost distribution channel or digital products Lo ers costs or transaction processing Lo ers costs or kno ledge acquisition reates e iciencies in supply chain Decreases the cost o customer service E- arketi g I creases Reve ues Online transaction revenues such as product, in ormation, advertising, and subscriptions sales; or commission/ ee on a transaction or re erral dd value to products/services and increase prices Increase customer base by reaching ne markets uild customer relationships and thus increase current customer spending

Menu of Strategic E-Business Models

A key element in setting strategic objectives is to take stock of the company's current situation and decide the level of commitment to e-business in general and e-marketing in particular. Questions prior to embarking on any e-business strategies: .Are the business models likely to change in my industry? .What does the answer to question 1 mean to my company? .When do I need to be ready? .How do I get there from here?

evel of business impact

Business transformation (competit ive advantage, industry redefinition)

Pure Play Enterprise

Pure dot-com (Amazon)

Click and Mortar (eSchwab, most retailers) Customer Relationship Management Brochureware E-mail

Effectiveness (customer retention)

Business Process

Efficiency Activity (cost reduction) E hibit 2 - 1 evel of Commitment to E-business Source: dapted rom .mohansa hney.com

E-Business Models at Various Levels of Commitment

Each level of the pyramid indicates a number of opportunities for the firm to provide stakeholder value and generate revenue streams using information technology. Because there is no single, comprehensive, ideal ta onomy of ebusiness models, we categorize the most commonly used models based on the firm's level of commitment.

y y y y y y y y

Activity Level Order processing Online purchasing E-mail Content publisher Business intelligence (BI) Online advertising Online sales promotions Dynamic pricing strategies online

Business Process Level Customer relationship management (CRM) Knowledge management (KM) Supply chain management (SCM) Community building online Database marketing Enterprise Resource Planning (ERP) Mass-customization

y y

Enterprise Level E-Commerce, direct selling, content sponsorship Portal Broker models Online e change, hub Online auction Agent models Manufacturers agent Catalog aggregator Metamediary Shopping agent Reverse auction Buyers cooperative Virtual mall

E hibit 2 - 1 E-Business Model Classification

Activity Level E-Business Models

Online purchasing. Firms can use the Web to place orders with suppliers, thus automating the activity. Order processing. This occurs when online retailers automate Internet transactions created by customers. E-mail. When organizations send e-mail communications to stakeholders, they save printing and mailing costs. Content publisher. Companies create valuable content or services on their Web sites, draw lots of traffic, and sell advertising. Another type of content publishing, the firm posts information about its offerings on a Web site, thus saving printing costs = brochureware.

Activity Level E-Business Models

Business intelligence (BI). This refers to the gathering of secondary and primary information about competitors, markets, customers, and more. Online advertising. As an activity, the firm buys advertising on someone elses e-mail or Web site. Online sales promotions. Companies use the Internet to send samples of digital products (e.g., music or software), or electronic coupons, among other tactics. Pricing strategies. With dynamic pricing, a firm presents different prices to various groups of customers, even at the individual level.

Business Process Level E-Business Models

Customer relationship management (CRM) = retaining + growing business / individual customers through strategies that ensure their satisfaction with the firm and its products = keep customers for the long term + increase the number and frequency of their transactions. Knowledge management (KM) = combination of a firms database contents + the technology used to create the system + the transformation of data into useful information and knowledge. Supply chain management (SCM) = coordination of the distribution channel to deliver products more effectively and efficiently to customers. With community building, firms build Web sites to draw groups of special-interest users. Firms invite users to chat / post e-mail on their Web sites to attract potential customers to the site.

Business Process Level E-Business Models

Affiliate programs = when firms put a link to someone elses retail Web site and earn a commission on all purchases by referred customers. Database marketing = collecting, analyzing, and disseminating electronic information about customers, prospects, and products to increase profits. Enterprise resource planning (ERP) = a back-office system for order entry, purchasing, invoicing, and inventory control. Mass customization = Internets unique ability to customize marketing mixes electronically and automatically to the individual level.

Enterprise Level E-Business Models

E-commerce refers to online transactions: selling goods and services on the Internet, either in one transaction or over time with an ongoing subscription. Direct selling refers to a type of e-commerce in which manufacturers sell directly to consumers, eliminating intermediaries such as retailers. Content sponsorship online is a form of e-commerce in which companies sell advertising either on their Web sites or in their e-mail. A portal is point of entry to the Internet, such as the Yahoo! and AOL Web sites. They are portals because they provide many services in addition to search capabilities.

Enterprise Level E-Business Models

A portal is point of entry to the Internet, such as the Yahoo! and AOL Web sites. They are portals because they provide many services in addition to search capabilities. Online brokers are intermediaries that assist in the purchase negotiations without actually representing either buyers or sellers. The revenue stream in these models is commission or fee-based:
 

The brokerage model are E*Trade (online exchange), and eBay (online auction), A B2B exchange is a special place because it allows buyers and sellers in a specific industry to quickly connect.

Enterprise Level E-Business Models

Online agents represent either the buyer or the seller and earn a commission for their work. Selling agents help a seller move product. Manufacturers agents represent manufacturing firms that sell complementary products to avoid conflicts of interest. The catalog aggregator, brings together many catalog companies to create a new searchable database of products for buyers. A special type of agent = the metamediary, it represents a cluster of manufacturers, online retailers, and content providers organized around a life event or major asset purchase

Enterprise Level E-Business Models

Purchasing agents represent buyers. Shopping agents help individual consumers find specific products and the best prices online (e.g., www.mysimon.com). The reverse auction, allows individual buyers to enter the price they will pay for particular items at the purchasing agents Web site, and sellers can agree or not. An online purchasing agent is called a buyer cooperative or a buyer aggregator. A virtual mall is similar to a shopping mall in which multiple online merchants are hosted at a Web site.

Pure Play
Pure plays = businesses that began on the Internet, even if they subsequently added a brick-and-mortar presence. E.g. E*Trade is a pure play, beginning with only online trading Pure plays face significant challenges: They must compete as new brands and take customers away from established brick-andmortar businesses. One way to change the rules is to invent a new e-business model, as Yahoo! and eBay did.

An Optimized System of E-Business Models

E-business is the continuous optimization of a firms business activities through digital technology. Firms usually combine traditional business and e-business models. E.g. Schwab = combined its online and offline brokerages in a unified system. The challenge: customers expect a high degree of coordination between online and offline operations. The danger: the established corporate culture might squash e-commerce initiatives or slow them down with the best of intentions. The solution: Many businesses have spun off their e-commerce operations as wholly owned subsidiaries or pure plays so they can compete without the weight of the parent business.

An Optimized System of E-Business Models

A fully optimized e-business that uses the Internet to sell is the sum of multiple e-business activities and processes: E-commerce, business intelligence, customer relationship management, supply chain management, and enterprise resource planning as represented in the following equation:

EB = EC + BI + CRM + SCM + ERP