Chapter 9

EC Strategy and
Implementation Plan

© Prentice Hall, 2000 1

 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 2
 IBM’s E-Business’s Strategy
Following four goals:
To lead IBM’s strategy to transform itself into e-
business 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 IBM’s customers.
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 IBM’s E-Business’s 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 IBM’s 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 IBM’s marketing stance

© Prentice Hall, 2000 4

 Strategic Planning for EC

Industry and Implement-

Strategy Strategy
competitive ation
formulation reassessment
analysis plan

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Industry and Competitive Analysis

Monitoring, evaluating, disseminating of

information from the external and internal
environments
SWOT Analysis
Strengths
Weaknesses
Opportunities
Threats

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Industry and Competitive Analysis (cont.)

INTERNAL
EXTERNAL FACTORS
Strengths (S) Weaknesses (W)
FACTORS
SO Strategies WO Strategies
Generate strategies Generate strategies
here that use here that take
Opportunities (O) strengths to take advantage of
advantages of opportunities by
opportunities overcome weaknesses

ST Strategies WT Strategies
Generate strategies Generate strategies
Threats (T) here that use here that minimize
strengths to avoid weaknesses and avoid
threats threats

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 Strategy Formulation
Strategy formulation
Development of long-range plans
Organization’s mission
Purpose or reason for the organization’s 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
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 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
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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
“How can we acquire
determine who will be
Customers this customer in the
our most profitable
Acquisition most efficient and
customers?”
effective way?

Customers Relationship Customers

Selection Marketing Retention

“How can we increase “How can we keep this

the loyalty and the Customers customer for as long as
profitability of this Extension possible?”
customer?”
Gartner’s Model of Customer Interaction
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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 13

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
© Prentice Hall, 2000 14
 Electronic Commerce Scenarios
Open, Global Commerce Scenario Members-Only Subnets Scenario
IT Events : Internet standards,new IT Events : Standards vary between
media, proprietary solutions marginalized, industries, objective measures of Internet
intranets, highly distributed, fat-client security, EDI standards widely adopted
architectures prevail Business Events : High-performance
Business Events : Global trade, logistics on information networks, cumbersome global
the Internet, pay bills electronically, digital EC
cash widely used, smart cards, and fewer
wholesaler/salespeople

Electronic Middlemen Scenario New Consumer Marketing Channels

IT Events : Transaction processing and Scenario
interface, distributor drive EC, EC activity IT Events : Activity oriented to consumers,
expands rapidly, and transaction security price of wireless drops, and growth of
deeply embedded networked multimedia
Business Events : One-stop shopping Business Events : Online transactions seen
popular, professional services popular with as less convenient, security not widely
smaller enterprises trusted, basic international norms accepted,
© Prentice Hall,
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2000 and2000
Hall, wireless links increase sales productivity15
 Competitive Strategy
Offensive strategy— usually takes place in an
established competitor’s 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 competitor’s 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
firm’s 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
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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 18

 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 19

 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
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Competitive Intelligence on the Internet

Review competitor’s 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

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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

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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

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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 what’s going on
Use analogies from similar industries or business
processes
Use a conventional IS requirement analysis
approach

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 Organization and Staffing

Define the roles and responsibilities of:

Senior management Gatekeepers
Web champion Web team
Webmaster
Building Business
Web Page Security
System Process
Design and Control
Infrastructure Reengineering
Marketing
Finance
Accounting
Information
Technology
EC Project Team
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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
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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 Market’s Transact and LiveCommerce
Microsoft Corp.’s Site Server Commerce Edition
IBM Corp.’s Net. Commerce Pro
Saqqara Systems’ StepSearch Professional
AT&T

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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

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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 Training requirements
How much your company can Installation and server
contribute to the site, from maintenance
manpower to electronic Programming
content On corporate site hosting Vs.
The time to design your site off-site
The time to create and Secure Server for financial
program your site transactions
Extra fees for software Your bandwidth needs
development Your server capacity needs
Fees for off-the-shelf Location of your server at the
applications tools Web company or ISP
The size of the site company location
The amount of traffic the site
generates Vs. flat rate
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 Web Content Design (cont.)
Web Application Features Audio
Video
Electronic shopping mall FTP
Unique URL Forms
Electronic Chat rooms
commerce/financial VRML
transactions Statistics
Customer tracking
Shopping cart software
E-mail response and
Online catalogs forwarding
Direct order procedures Java applications
Animation
Dynamic databases
Security
Static databases
Multimedia
Telephony
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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 35

 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 What costs did you hope to reduce?
distribution costs? Did other costs increase unexpectedly?
What were the sales objectives? Were your expectations
Were those goals realistic? 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 37
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? © Prentice Hall, 2000 38
 Management Issues

Considering the strategic value of EC

Conducting strategic planning

Considering the risks

Integration

Pilot project

© Prentice Hall, 2000 39