COMP7880: E-Business Strategies
Internal and External Analysis
Dickson K.W. Chiu
PhD, SMIEEE, SMACM, Life MHKCS
Jelassi & Enders: Chapter 3-4
1
Focus of this course


NOT how to implement EC / EB functions
BUT to

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ANALYZE the business requirements in the
perspective of strategic management
FORMULATE suitable business models & strategies
CHOOSE suitable IT options (especially Webbased ones) to implement the strategies
Study tips - whenever mentioning something
to be done, think: How IT helps?
COMP7880-I/E-2
Our Roadmap
Mobile e-commerce strategy
E-business strategy
Strategy
Strategy formulation
implementation
12
Strategic
analysis
3
External
analysis
9
5
Internal
organisation
Strategy
options
Opportunities/
threats
Strengths/
weaknesses
4
Internal
analysis
6
Sustaining
competitive
advantage
8
7
Exploring
new market
spaces
Creating and
capturing
value
10
13
Interaction with
suppliers
Implementation
11
Interaction with
users/customers
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E-business strategy formulation
SWOT Analysis
Key environmental/
industry developments
Opportunities
Strengths
Firm
characteristics
Weaknesses
Internal
Analysis
External
Analysis
Threats
• Do we have
the strengths to
seize possible
opportunities?
• Do we have
the strengths to
fend off possible
threats?
• Which opportunities
do we miss because
of our deficits?
• To which threats do
our weaknesses
expose us to?
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Business Example –
SME Computer Assembly
End-User
Begin
Quotation
Evaluation
Check
Parts Info
Prepare
Quotation
Check &
Receive
System
Purchase
Order
Payment
Authorization
End
Info
Pa
rts
Up
dat
ed
uiry
t
o
Inf
Service
Preparation
Service Preparation
Order
Missing
Parts
Begin
Deliver &
Install
End
Sub-process
Assemble
System
Install
Software
System
Testing
End
th
wi t
r
de en
O r a ym
p
Parts Vendor
live
De
Parts
Quotation
en
r
tra
nfo
aI
En q
ym
Ex
de
Or
ly
xtr
Prepare
Extra Info
System Integrator
Begin
Pa
pp
tE
Begin
es
iry
qu
Re
E
u
nq
Quotation
Su
Quotation
Enquiry
Deliver
Parts
ry
End
Simplified main business process of the company.
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External Analysis
Examine your opportunities & threats
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What is External Analysis?
External Analysis
Scan and evaluate various external environmental
sectors impacting performance
Opportunities
Positive external environmental trends that
improve the organization’s performance
Threats
Negative external environmental trends that
hinder the organization's performance
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Organizations as Open Systems
Environment
Resources:
Physical
Capital
Human
Information
Processes
Organization Functions:
Production-Operations
Marketing
Financial-Accounting
Human Resource Mgt.
Research and Development
Information Systems
Managerial Activities:
Planning
Organization
Leading
Controlling
Outputs
Goods
Services
Performance
Measures:
Financial
Productivity
Achieve Goal
Environment
Environment
Organization
Inputs
Organization
Environment
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External Analysis: Impacted by
industry and macro-environment
General
Environment
Technological
Specific Environment
Industry-Competitors
Substitute
Products
Political-Legal
Organization
Bargaining
Power of Bargaining
Suppliers Power of
Buyers
Economic
Current
Rivalry
Potential
Entrants
Demographic
Sociocultural
Source: Adapted from H. Hungenberg (2006), p. 90.
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General Environment - Economic
Economic
All the macroeconomic data, current statistics, trends, and changes
•
Interest rates
•
Monetary exchange rates
•
Budget deficit-surplus
•
Trade deficit-surplus
•
Inflation rates
•
GNP or GDP
•
Consumer income, spending, and debt levels
•
Unemployment levels
•
Workforce productivity
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General Environment - Demographics
Demographics
Current statistical data and trends in population characteristics
•
Gender
•
Age
•
Income levels
•
Ethnic makeup
•
Education
•
Family composition
•
Geographic location
•
Birth rates
•
Employment status
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General Environment - Sociocultural
Sociocultural
• Country's culture
• Society's
•
•
•
•
•
•
Traditions
Values
Attitudes
Beliefs
Tastes
Patterns of behavior
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General Environment – Political-Legal
Political-Legal
• Federal, state, and local
• Laws
• Regulations
• Judicial decisions
• Political forces
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General Environment - Technical
Technical
Improvements, advancements, and innovations
that create opportunities and threats
• Communications
• Computing
• Transportation
• Manufacturing
• Robotics
• Biotechnology
• Medicine and medical
• Telecommunications
• Consumer electronics
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Porter’s 5 force model
Potential entrants
Threat of
new entrants
Industry competition
Suppliers
Bargaining power
of buyers
Rivalry among
existing firms
Bargaining power
of suppliers
Buyers
Threat of
substitutes
Substitutes
One assumption of Porter’s five forces model is that some industries are inherently more
attractive than others; i.e., the profit potential for companies in that industry is higher.
As this figure indicates, the interaction and strength of five forces influences profitability.
Source: Adapted from M. Porter (1998), p. 4.
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Internet’s impact on the 5 forces
Barriers to
entry
Bargaining power
of suppliers
(+/–) Procurement using the Internet
tends to raise bargaining power
over suppliers, though it can also
give suppliers access to more
customers.
(–) The Internet provides a channel
for suppliers to reach end users,
reducing the leverage of intervening
companies.
(–) Internet procurement and digital
markets tend to give all companies
equal access to suppliers, and
gravitate procurement to standardised
products that reduce differentiation.
(–) Reduced barriers to entry and the
proliferation of competitors downstream
shifts power to suppliers.
Rivalry among
existing competitors
(–) Reduces differences among
competitors as offerings are
difficult to keep proprietary.
(–) Migrates competition to price.
(–) Widens the geographic market,
increasing the number of competitors.
(–) Lowers variable cost relative to fixed
cost, increasing pressure for price
discounting.
Source: Reprinted from M. Porter (2001)
Threat of substitute
products or services
(–) Reduces barriers to entry such as
the need for a sales force, access
to channels and physical assets.
(–) Internet applications are difficult to
keep proprietary from new entrants.
(–) A flood of new entrants has come
into many new industries.
Bargaining power of
channels and end users
(+) Eliminates
powerful
channels or
improves
bargaining
power over
traditional
channels.
(–) Shifts
bargaining
power to
consumers.
(–) Reduces
switching
costs.
(+) By making the overall industry
more efficient, the Internet can
expand the size of the market.
(–) The proliferation of Internet approaches
creates new substitution threats.
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Complementing Porter’s model:
Co-opetition value network framework
Supplier
Competitors
Firm
Complementors
Buyer
Source: Adapted from A. Brandenburger and B. Nalebuff (1998), p. 17
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Responsibilities for External Analysis at Different
Managerial Levels

Lower Level Managers/Supervisors
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Middle Managers
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Observe and interact
Collect and consolidate
Coordinate
Share with organizational units
Gatherer and disseminator
Monitor general environmental sectors
Make needed strategic changes
Upper Management

Evaluate opportunities and threats
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Benefits of Doing An External Analysis

Proactive managers anticipate change and plan
accordingly

Provide information for

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Planning
Decision making
Strategy formulation
Acquire and control needed resources
Cope effectively with increasingly dynamic environment
Make a difference with higher performance
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Challenges of Doing an External Analysis



Rapid environmental changes are difficult to
keep up with => IT helps 
Amount of time that analysis can consume
=> IT helps 
Forecasts and trend analysis are not actual
fact 
Discussion: How IT Helps?
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Internal Analysis
Examine your strength & weakness
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What is an Internal Analysis?

Looks at the organization’s

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Vision
Mission
Strategic objectives
Identifies and evaluates resources,
capabilities, and core competencies
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Company Vision
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Massively inspiring
Overarching
Long-term
Driven by and evokes passion
Fundamental statement of the
organization’s


Company vision
Values, Aspiration, Goals
E.g., Disneyland: “To be the
Happiest place on earth”
Hierarchy of Goals
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Mission Statements

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Purpose of the company
Basis of competition and
competitive advantages
More specific than vision
Focused on the means by
which the firm will compete
E.g., FedEx: “To produce
superior financial returns
for our shareholders as we
serve our customers with
the highest quality
transportation, logistics,
and e-commerce.”
Company vision
Mission statements
Hierarchy of Goals
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Strategic Objectives
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Operationalize the mission
statement
Provide guidance on how the
organization can fulfill or move
toward the “higher goals”
More specific, a more well-defined
time frame, measurable (yardstick
for rewards and incentives),
consistent with vision and mission,
realistic (challenging but doable),
timely
E.g., P&G: “Increase sales growth
6% to 8% in each of the next five
years”
Company vision
Mission statements
Strategic objectives
Hierarchy of Goals
COMP7880-I/E-25
Distinctive e-business competencies:
unique resources and capabilities
Resources
Tangible
resources
(Equipment,
location, ...)
Intangible
resources
Capabilities
The ability to
deploy resources
by co-ordinating
them through
• Structures
• Processes
• Systems
(Technology, knowhow, brand, ...)
Build
resources
Source: Adapted from H. Hungenberg (2006), p. 143.
Strategic importance
• Valuable
• Unique
• Hard to imitate/
substitute
• Valuable across different
products/markets
e-Business
competencies
Utilize
resources
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The Role of Strengths and Weaknesses
Strengths: Resources that an organization
possesses and capabilities that an organization has
developed. Both can be exploited and developed
into a sustainable competitive advantage
Weaknesses: Resources and capabilities that are
lacking or deficient. Prevent an organization
from developing a sustainable competitive
advantage
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How to do an internal analysis –
Capabilities Assessment Profile
Complex Analysis of Capabilities


Not as easily identifiable as organizational functions
Hard for competitors to imitate
Two-phased Capability Assessment

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Phase I: Identify distinctive capabilities
Phase II: Develop and leverage these distinctive capabilities
COMP7880-I/E-28
Identifying Distinctive
Organizational Capabilities
Prepare current product-market profile.
Step 1
Identify sources of competitive
advantage and disadvantage in
the main product-market segments.
Step 2
Describe all the organizational
capabilities and competencies.
Step 3
Step 4
Step 5
Sort the core capabilities and
competencies according to
strategic importance.
Identify and agree on
the key capabilities
and competencies.
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Criteria to Judge Organizational Strengths
and Weaknesses
Past Performance Trends
Comparison Against Competitors
Are organizational
resources and capabilities
strengths or weaknesses?
Specific Goals or Targets
Personal Opinions of Strategic
Decision Makers or Consultants
COMP7880-I/E-30
Core competence approach cuts
across different functional areas
Inbound
logistics
Operations
Outbound
Logistics
Marketing /
Sales
After-sales
services
Demand and supply processes
Service processes
New product development processes
Etc.
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Criteria used when including specific
activities in a company analysis
Display different
economics
For instance, the development activity of a new software
program displays very large economies of scale since the
software can be replicated at a negligible cost.
Provide high
differentiation
potential
These are activities that can greatly increase tangible
and intangible consumer benefits, such as product and
service quality, convenience and reputation.
Present sizeable
costs
These are activities that add significantly to the overall
cost structure of the firm.
Source: See M. Porter (1998).
COMP7880-I/E-32
Value chain analysis:
distinct value-adding activities
Support
activities
Primary
activities
Firm infrastructure
Human resource management
Technology development
Procurement
Inbound Operations Outbound
logistics
logistics
Source: Adapted from M. Porter (1998)
Marketing Afterand sales sales
services
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How the Internet impacts all activities in
value chain (Support Activities)
Firm Infrastructure
• Web-based, distributed financial and ERP systems
• On-line investor relations (e.g. information dissemination, broadcast conference calls)
Human resource management
• Self-service personnel and benefits administration
• Web-based training
• Internet-based sharing and dissemination of company information
Technology development
• Collaborative product design across locations and among multiple value-system participants
• Knowledge directories accessible from all parts of the organisation
• Real-time access by R&D to online sales and service information
Procurement
• Internet-enabled demand planning
• Other linkage of purchase, inventory, and forecasting systems with suppliers
• Direct and indirect procurement via marketplaces, auctions and buyer-seller matching
Web-distributed supply chain management
Source: Reprinted from M. Porter (2001)
COMP7880-I/E-34
How the Internet impacts all activities in
value chain (Primary Activities)
Inbound logistics
• Real-time integrated
scheduling, shipping,
warehouse
management, demand
management &
planning, and
advanced planning &
scheduling across the
company and its
suppliers
• Dissemination through
out the company of
real-time inbound and
in-progress inventory
data
Operations
• Integrated information exchange,
scheduling and
decision making in
in-house plants
and components
suppliers
Outbound logistics
• Real-time transaction of
orders
• Automated customerspecific agreements
and contract terms
• Customer and channel
access to product
development and
delivery status
• Collaborative
integration with
customer forecasting
systems
• Integrated channel
management
Marketing and sales
• Online sales channels
including web sites and
marketplaces
• Real-time inside and
outside access to
customer information,
product catalogues,
dynamic pricing,
inventory availability,
online submission of
quotes, and order entry
• Online product
configurators
• Customer-tailored
marketing via customer
profiling
After-sales service
• Online support of
customer service
representatives
• Customer selfservice via websites
and intelligent
service request
processing
• Real-time field
service, access to
customer account
review, work-order
update, etc.
Web-distributed supply chain management
Source: Reprinted from M. Porter (2001)
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Virtual vs physical value chain:
Developing new markets
Customer
identification
Purchasing
process
Logistics
Physical
value chain
Etc.
Gather
Organize
Data
Data
Data
Synthesize
Data
Select
Distribute
Customer
identification
information
Purchasing
information
Logistics
information
Etc.
Virtual
value chain
Decision Support / Knowledge
New customers
New products
New
markets
New services
Source: Adapted from A. Enders and T. Jelassi (2006), pp. 31–44.
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ICDT model: Using the Internet
in the virtual market space
The market space
Virtual
Information
space
Virtual
Communication
space
Traditional
marketplace
Virtual
Distribution
space
Virtual
Transaction
space
Source: Adapted from A. Angehrn (1997), pp. 38-47.
COMP7880-I/E-37
The value network of partners with
differing functions
Strategic core value chain partners
Inbound
logistics
Upstream
value chain partners
Manufacturing
Value chain integrators
Admin., e.g.
travel
Downstream
value chain partners
Suppliers
Fulfilment
Core value
chain activities
Buy-side
intermediaries
Sell-side
intermediaries
Value chain integrators
Finance
Human
resources
Admin., e.g.
travel
Non-strategic service partners
Source: Adapted from D. Chaffey (2007), p.282
COMP7880-I/E-38
Segmentation
Choose your favorable environment
COMP7880-I/E-39
e-business market review :
a segmentation scheme
Buyer/recipient
Consumer/peer/citizen
Consumer-toconsumer
(e.g. ebay)
Consumer/peer/citizen
Peer-to-peer
(e.g. Napster)
Citizen-to-citizen
(French presidential
election 2007)
Supplier/
provider Business
Government
Business
Government
Consumer-tobusiness
(e.g. Amazon.com)
Citizen
-to-government
(e.g. online tax return
forms)
Business-to-consumer
(e.g. Ducati.com)
Business-to-busines
(e.g. Covisint.com)
Business-togovernment
(e.g. online filing of
corporate tax returns)
Government-tocitizen
(e.g. information
about pension
statements of citizens)
Government-tobusiness (e.g.
information about
most recent legal
regulations)
Government-togovernment
(e.g. exchange of
diplomatic
information)
COMP7880-I/E-40
Segmentation method
Measurable
It should be possible to measure the size of a
defined segment in order to determine its
purchasing power and its peculiar
characteristics
Substantial
A segment should be large enough to
justify that it is addressed separately
Differentiable
The segments must be exclusive and react
differently to a variety of marketing
approaches
Actionable
It should be possible to develop sales and
marketing approaches to serve specific
segments.
Source: Kotler, (2005).
Segmentation variables are the basis
for strategic customer analysis
Segmentation type
Criteria to be considered
Geographic
segmentation
Demographic
segmentation
Psychographic
segmentation
Geographic regions (e.g. continents,
countries, states)
Age, gender, income, life style
Behavioural
segmentation
Purchasing frequency, usage patterns, etc.
Personality type and personal interests
(e.g. cash-rich, time-poor)
Source: Kotler (2005).
COMP7880-I/E-42
Target-market selection
Full market coverage
(e.g. Nordea Bank,
Amazon.com, Tesco.com)
M1 M2 M3
Product specialisation
(e.g. Spreadshirt
M1
Many
M2
M3
P1
P1
P2
P2
P3
P3
Selective specialisation,
(e.g. Bertelsmann)
M1
Number of
market segments
served
(scale)
P2
M1
P = Product
M = Market
M3
P1
Single segment
concentration
(e.g. Ducati, Porsche)
Few
M2
M2
P3
Market specialisation
(e.g. ING DIRECT)
M3
M1
P1
P1
P2
P2
P3
P3
Few
Number of different products
and services offered (scope)
M2
M3
Many
Source: Adapted from D. Abell (1977); “Strategy and Structure: Public Policy Implications” in Proceedings of Marketing and the Public Interest. Cambridge, Mass.: Marketing
Science Institute.
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