Slide 5.

CHAPTER 5
E-BUSINESS STRATEGY

Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Slide 5.2

Learning outcomes
 Follow an appropriate strategy process model for e-
business;
 Apply tools to generate and select e-business
strategies;
 Outline alternative strategic approaches to achieve e-
business.

Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Slide 5.3

Management issues
 How does e-business strategy differ from traditional
business strategy?
 How should we integrate e-business strategy with
existing business and IS strategy?
 How should we evaluate our investment priorities
and returns from e-business?

Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Slide 5.4

E-business Strategy
 Strategy
Definition of the future direction and actions of a
company defined as approaches to achieve specific
objectives

Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Slide 5.5

Alternative definitions of strategy

What is strategy?
 “Defines how we will meet our objectives”

 “Sets allocation of resources to meet goals”

 “Selects preferred strategic options to

compete within a market”

 “Provides a long-term plan for the development of the

organization”.

Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Figure 5.1 Different forms of organizational strategy
Slide 5.7

The imperatives for e-business

strategy
 Missed opportunities from lack of evaluation of
opportunities
 Inappropriate direction of e-business strategy
 Limited integration of e-business at a technical
level
 Resource wastage

Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Slide 5.8

E-channel strategies
 How a company should set specific objectives and
develop specific differential strategies for
communicating with its customers and partners
through e-media

Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Figure 5.2 Relationship between e-business strategy and other strategies
Slide 5.10

Multi-channel e-business strategies

 Characteristics:
 E-business strategy is a channel strategy
 Specific e-business objectives need to be set
 Creating differential values
 Defines how an organization gains value internally

Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Slide 5.11

What happens where there is

no e-business strategy?
 Missed opportunities for additional sales on the sell-
side and more efficient purchasing on the buy-side
 Fall-behind competitors in delivering online services
– may become difficult to catch-up, e.g. Tesco, Dell
 Poor customer experience from poorly integrated
channels.

Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Figure 5.3 BA communicates their online value proposition (www.britishairways.com)
Source: Based on Revolution (2005)
Slide 5.13

Strategy process models

 A management team needs to agree on the
framework they will follow
 Common element:
 Internal and external environment scanning
 A clear statement of vision and objectives
 Can be broken down to option generation, evaluation
and selection
 Implementation
 Control is required

Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Slide 5.14

Suggestions on e-business strategy

 Hackbarth and Kettinger (2000)
 Four-stage ‘strategic e-breakout’
 Deise et al. (2000)
 Approach based on work conducted on PWC
 Rowley (2002)
 Strategy development similar with other business
context
 Venkatram (2000)
 Five-stage strategy process

Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Slide 5.15

Venkatram (2000)
 What is your strategic vision?
 How do you govern dot-com operations?
 How do you allocate key resources?
 What is your operating infrastructure?
 Is your management team aligned for the dot-com
agenda?

Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Figure 5.4 A generic strategy process model
Figure 5.5 Dynamic e-business strategy model
Source: Adapted from description in Kalakota and Robinson (2000)
Slide 5.18

Strategic Analysis
 Collection and review of information about an
organization’s internal processes and resources and
external marketplace factors in order to inform
strategy definition
 Involves reviews of:
 Resources and processes
 Competitive environment
 Wider environment

Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Figure 5.6 Elements of strategic situation analysis for the e-business
Slide 5.20

Resource Analysis
 Review of the technological, financial and human
resources of an organization and how they are
utilized in business processes

Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Slide 5.21

Decision on marketing services

 Level 0: No web site or presence on the web
 Level 1: Basic web presence
 Level 2: Simple static informational web site
 Level 3: Simple interactive site
 Level 4: Interactive site supporting transaction with
users
 Level 5: Fully interactive site supporting the whole
buying process

Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Slide 5.22

Brochureware

Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Slide 5.23

Product sourcing development (Buy-side

E-Commerce)
 Level I: No use of the web
 Level II: Review and selection from competing suppliers
using intermediary web
 Level III: Orders placed electronically through EDI
 Level IV: Orders placed electronically with integration of
company’s procurement system
 Level V: Orders placed electronically with full
integration of company’s procurement, manufacturing
requirements planning and stock control system

Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Slide 5.24

Applications portfolio analysis

 Used to assess current information systems
capability and also to inform future strategies

Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Figure 5.7 Summary applications of a portfolio analysis for The B2B Company
Slide 5.26

Organizational and IS SWOT analysis

 Help organization analyze their resources in term

of strengths and weaknesses and match them
against threats and opportunities

Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Figure 5.8 SWOT analysis for The B2B Company
Slide 5.28

Human and financial resources

 Human resources
 Financial resources

Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Slide 5.29

Demand Analysis
 Assessment of the demand for e-commerce
services amongst existing and potential customer
segments

Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Figure 5.9 Customer demand for e-marketing services for The B2B Company
Slide 5.31

Competitive Threats
1. Threat of new e-commerce entrants
2. Threats of new digital products
3. Threat of new business models

Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Slide 5.32

Sell-side threats
1. Customer power and knowledge
• Use Internet to evaluate products and compare
prices
2. Power of intermediaries
• Channel conflicts result of disintermediation

Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Slide 5.33

Buy-side threats
1. Power of suppliers
• An opportunity for buyers
2. Power of intermediaries
• Risk include cost of integration

Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Figure 5.10 Competitive threats acting on the e-business
Slide 5.35

Porter’s five forces

Bargaining
powers of
customers

Power of Threat of
The business
suppliers substitutes

Extent of rivalry
Threat of new
between
entrants
competitors

Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Figure 5.11 Elements of strategic objective setting for the e-business
Slide 5.37

Defining vision and mission

 Company vision will be based on the managers’ view
of the future relevance of the Internet to their industry
 Can the Internet primarily complement the company
other channel or whether it will replace other
channel?
 Customer access to Internet is high
 Offer a better value proposition
 Product can be delivered over the Internet
 Product can be standardized

Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Slide 5.38

How can e-business create business

value?
 Adding value
 Providing better-quality products and services
 Reduce costs
 Making business process more efficient
 Manage risks
 Create different functions and professions
 Create new reality
 Can be used to innovate

Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
 An evaluation tool relating information to business value. An
Figure 5.12
organization’s use of information on each axis can be assessed from 1 (low use
of information) to 10 (high use of information)
Source: Marchand et al. eds (1999)
Figure 5.13 Capital One web site (www.capitalone.co.uk)
Slide 5.41

Objective Setting
 Objectives
 Develop revenue from new geographical markets
 Strategies to achieve goals
 Create EC facility for standard products and assign
agents to these markets
 Key performance indicators
 Achieve combined revenue of RM1mil by year-end
online revenue contribution of 70%

Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Slide 5.42

Online Revenue Contribution

 States the percentage of company revenue directly
generated through online transaction

Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Figure 5.14 Direct and indirect Internet contributions for fast-growth companies in
the USA
Source: PricewaterhouseCoopers (2000)
 Grid of product suitability against market adoption for transactional
Figure 5.15
e-commerce (online purchases)
Figure 5.16 Elements of strategy definition for the e-business
Slide 5.46

Decision 1: E-business channel

priorities
 Strategic e-commerce alternatives for companies
should be selected according to the percentage of
target market who can be persuaded to migrate use
the e-channel
 Bring benefits to the company by bringing higher
sales volume and reduce costs for customer
acquisition and retention

Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Slide 5.47

Right Channelling
 Right channelling can be summarized as:
 Reaching the right customer
– Using the right channel
 With the right message or offering
– At the right time

 Examples:
 B2B serve SMEs through e-channels and larger clients through personal
service
 Encourage consumers to buy and serve through lower cost electronic
channels
 Encourage offline fulfillment/conversion as appropriate
 Different levels of service/promotion for different customers.

Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
 Strategic options for a company in relation to the importance of the
Figure 5.17
Internet as a channel
Figure 5.18 Liveperson – an example of a service to assist with ‘right-channelling’
Source: www.liveperson.com
Slide 5.50

Decision 2: Organizational
restructuring
 How the company should restructure in order to
achieve the priorities set for e-business
 The choices are:
 In-house division
 Joint venture
 Strategic partnership
 Spin-off

Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Slide 5.51

Decision 3: Business, service and

revenue models
 Review of opportunities from new business and
revenue models
 Need to review new revenue opportunities and
competitor innovations

Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Slide 5.52

Decision 4: Marketplace
restructuring
 Consider options created through disintermediation
and reintermediation

Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Slide 5.53

Decision 5: Market and product

development strategies
 Decide on which market to target

Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Figure 5.19 Using the Internet to support different growth strategies
Figure 5.20 smile (www.smile.co.uk)
Source: Reprinted by permission of The Co-operative Bank
Slide 5.56

Decision 6: Positioning and

differentiation strategies
 Strategies should review the extent to which
increases in product and service quality can be
matched by decreases in price and time

Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Figure 5.21 Dabs.com (www.dabs.com)
Figure 5.22 Elements of strategy implementation for the e-business
Slide 5.59

Failed e-business strategies

 Timing errors
 Lack of creativity
 Offering free services
 Over-ambition

Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Slide 5.60

Classic Mistakes Business Made

 Situation analysis
 Objective setting
 Strategy definition
 Implementation

Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Slide 5.61

EB Strategy Implementation
Success
1. Content
2. Convenience
3. Control
4. Interaction
5. Community
6. Price sensitivity
7. Brand image
8. Commitment
9. Partnership
10. Process improvement
11. Integration

Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007