EC Strategy and Implementation
Plan
Copyright Guy Harley 2004
Growth in US eCommerce
Copyright Guy Harley 2004
IBM’s E-Business’s Strategy – 4 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.
Copyright Guy Harley 2004
IBM’s E-Business’s Strategy – 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
Copyright Guy Harley 2004
IBM’s E-Business’s Strategy – Key Initiatives
 e-care for employees— improving the
effectiveness of IBM employees 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
Copyright Guy Harley 2004
Internet
Business
Value
Extranets
eCommerce
Internet
Presence
Corporate
Intranet
Internet
Access
Integration of Tecnology
Copyright Guy Harley 2004
Strategic Planning for EC
Industry and
competitive
analysis
Strategy
formulation
Copyright Guy Harley 2004
Implementation
plan
Strategy
reassessment
Industry and Competitive Analysis
 Monitoring, evaluating, disseminating of
information from the external and internal
environments
 SWOT Analysis
Strengths
Weaknesses
Opportunities
Threats
Copyright Guy Harley 2004
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
Copyright Guy Harley 2004
Strategy Formulation
 Strategy formulation
 Development of long-range plans
 Organization’s mission
 Purpose or reason for the organization’s
existence
Copyright Guy Harley 2004
Strategy Formulation (cont.)
 3 main reasons for establishing Web site
 MARKETING
 CUSTOMER SUPPORT
 SALES
 Products with good fit for EC
 Shipped easily or transmitted electronically
 Targets knowledgeable buyers
 Price falls within certain optimum ranges
Copyright Guy Harley 2004
Pure versus partial EC
Virtual Product
Electronic Commerce Areas
Pure EC
Virtual Process
Digital
Product
Digital Process
Physical
Product
Traditional
Commerce
Physical Process
Virtual Player
Physical
Agent
Copyright Guy Harley 2004
Digital
Agent
Cost Curves
Digital Products
Cost
Cost
Physical Products
Quantity
Copyright Guy Harley 2004
Quantity
Labour Force Composition USA 1990 - 1996
70.0%
60.0%
White Collar
50.0%
40.0%
30.0%
Blue Collar
20.0%
Service
10.0%
Farming
0.0%
1900
1910
Copyright Guy
Harley
2004
1920
1930
1940
1950
1960
1970
1980
1990
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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
Copyright Guy Harley 2004
EC CSF’s - Value Analysis (cont.)
 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
Copyright Guy Harley 2004
EC CSF’s - Value Analysis (cont.)
 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?
Copyright Guy Harley 2004
EC CSF’s - Value Analysis Questions
 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?
Copyright Guy Harley 2004
Value Chain Analysis
Firm Infrastructure
Human Resource Management
Technological Development
Procurement
Marketing
& Sales
Outbound
Logistics
Operations
Information Systems
Inbound
Logistics
Primary Activities
Support Activities
identifies which resources and capabilities can add value
Value Chain Analysis
Firm Infrastructure
Human Resource Management
Technological Development
Procurement
Marketing
& Sales
Production
Control &
transaction
systems
Warehouse
& logistic
systems
Outbound
Logistics
eProcurement
Operations
Information Systems
Inbound
Logistics
Primary Activities
Support Activities
identifies which resources and capabilities can add value
CRM Apps
eSales
ERP/Supply Chain Applications
Functional Business applications
Strategic
Systems
Management
Systems
Knowledge
Systems
Operational
Systems
Sales &
Production
Copyright Guy
Harley 2004
Marketing
Accounting
Human
resources
Transaction Cost
eCommerce & transactions costs
Firm Size (Employees)
Copyright Guy Harley 2004
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?”
Copyright Guy Harley 2004
Gartner’s Model of Customer Interaction
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
Copyright Guy Harley 2004
Return on Investment & Risk Analysis
Generic IT values & risks fall into the following 5 categories
Values
1. Financial values— measurable to some degree
2. Strategic values— competitive advantage in the market and
benefits generated by business procedures
3. Stakeholder values— reflections of organizational redesign,
organizational learning, empowerment, information technology
architecture of a company, etc.
Risks
4. Competitive strategy risk— external, due to joint venture, alliances,
or demographic changes among others
5. Organizational risk and uncertainty— internal to company
Copyright Guy Harley 2004
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
Copyright
Guy Harley 2004
© Prentice Hall, 2000
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,
and wireless links increase sales productivity
Supply Chain
 Upstream Supply Chain
 1st tier suppliers
 2nd tier suppliers
 Etc. to origin of materials
 Internal Supply Chain
 Downstream Supply Chain
 Distribution
 Warehousing
 Transportation
 After sales service
Copyright Guy Harley 2004
Traditional Supply Chain Integration
Copyright Guy Harley 2004
eCommerce Supply Chain Integration
Copyright Guy Harley 2004
E-Supply Chains
 The ability of all supply chain partners to view partner
collaboration as a strategic asset
 Trust generates speed, agility & lower cost
 Information visibility along the entire supply chain
 Strict management of information
 Speed, cost, quality and customer service
 The metrics by which supply chain is measured
 Integrating the Supply Chain more tightly
 Within the firm and across an extended enterprise
Copyright Guy Harley 2004
E-Supply Chains
Components:
 Supply chain replenishment
 E-procurement
 Collaborative planning
 Collaborative design & product development
 E-logisitics
 B2B exchanges and supply webs
Copyright Guy Harley 2004
E-Supply Chains
Tools:
 Extranets
 Intranets
 Corporate portals
 Workflow systems & tools
 Groupware and other collaborative tools
Copyright Guy Harley 2004
E-Supply Chains
Problems:
 Incorrect demand forecasting
 Lack of logistics infrastructure
 Quality control
 Production delays
 Bullwhip effect
 Incomplete & inaccurate information
Copyright Guy Harley 2004
Target’s
Extranet
Connection via
Public Internet
GE Private VAN
VPN, encryption
Global reach
Private line
secure
Web Applications
Customer services
Portal services
Inventory
management
Quality assurance
Supply chain
Process design
New products
Budget control
E-procurement
Copyright Guy Harley 2004
Security
GE
InterBusiness
Partner
Extranet
Legacy Systems
EDI
ERP
Access control
Registration
Authentication
Digital signature
Certification
Architecture of an Intranet
Client
(browsers)
ERP
Servers
Legacy
System
Internet
Intranet
Web Publishing
Firewall
Web
Servers
and Email
Copyright Guy Harley 2004
Databases
(products, customers)
Competitive Strategy
 Offensive strategy
Usually takes place in an established
competitor’s market
 Defensive strategies
Takes place in the firm’s own current market
position as a defense against possible attack by
a rival
Copyright Guy Harley 2004
Offensive Strategies
 Frontal Assault— attacker must have superior
resources and willingness to persevere
 Flanking Manoeuvre— 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
Copyright Guy Harley 2004
Defensive Strategies
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Lower the probability of attack
Divert attacks to less threatening avenues
Lessen the intensity of an attack
Make competitive advantage more sustainable
Copyright Guy Harley 2004
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
Copyright Guy Harley 2004
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?
Copyright Guy Harley 2004
EC Strategy in Action (cont.)
What questions should a strategic plan answer?
 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?
Copyright Guy Harley 2004
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
Copyright Guy Harley 2004
Steps to Successful EC Programs (cont.)
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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
Copyright Guy Harley 2004
Internet Competitive Intelligence
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:
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broadcast model
selective pull model
distributed push pull model
interactive push model
Copyright Guy Harley 2004
Implementing the 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
Copyright Guy Harley 2004
Uncovering EC Opportunities
 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
Copyright Guy Harley 2004
EC 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
Copyright Guy Harley 2004
EC Opportunities
 Smart needs adviser— if you want it 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
Copyright Guy Harley 2004
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
Copyright Guy Harley 2004
Organization and Staffing
 Define the roles and responsibilities of:
 Senior management  Gatekeepers
 Web champion
 Web team
 Webmaster
Web Page
Design
Marketing
Finance
Accounting
Information
Technology
P
P
P
Copyright Guy Harley 2004
Building
System
Infrastructure
Business
Process
Reengineering
P
P
EC Project Team
P
P
P
P
Security
and Control
P
P
P
Evaluating Outsourcing
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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
Copyright Guy Harley 2004
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
Copyright Guy Harley 2004
Web Hosting
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
Copyright Guy Harley 2004
Web Hosting
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
Copyright Guy Harley 2004
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
Copyright Guy Harley 2004
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
Copyright Guy Harley 2004
Web Content Design Considerations
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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
Copyright Guy Harley 2004
Web Application Features
 Electronic shopping mall
 Unique URL
 Electronic commerce/
financial transactions
 Shopping cart software
 Online catalogs
 Direct order procedures
 Dynamic databases
 Static databases
 Multimedia
 Telephony
 Chat rooms
Copyright Guy Harley 2004
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Audio
Video
FTP
Forms
VRML
Statistics
Customer tracking
E-mail response and
forwarding
 Java applications
 Animation
 Security
User Profile
Home
User Logs
On
Home
Page
Catalogue
Legacy Systems
Copyright Guy Harley 2004
Purchase
Order
Order &
Information
Transaction
Processing
Legacy Integration
Payment
Options
Bank
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
 Address the Internet features that must be
monitored for developing policy on access
and use
 Disclosure of information through the Internet
Copyright Guy Harley 2004
Strategy Reassessment
 Webs grow in unexpected ways
 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
Copyright Guy Harley 2004
Assessing Project Effort and Outcome
Did unanticipated problems occur?
What were the goals?
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?
Copyright Guy Harley 2004
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?
Copyright Guy Harley 2004
Revisit Each Phase of EC Project
 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?
Copyright Guy Harley 2004
Management Issues
 Considering the strategic value of EC
 Conducting strategic planning
 Considering the risks
 Integration
 Pilot project
Copyright Guy Harley 2004