Electronic Business Strategy
Dr Sherif Kamel
The American University in Cairo
Copyright © 2003 Sherif Kamel
Copyright © 2003 Thomson Learning/South Western
Copyright © 2002 Marketspace LLC
Outline















Business strategy and the classical framework.
Past developments in the field of business strategy.
The impact of the networked economy on strategy.
Case of eBay
7 dimensions to an eCommerce strategy.
Bonds of an eCommerce strategy.
4 positional eStrategic directions.
From the old to the new world
Internet as a business solution.
Principles of the digital economy.
Strategy elements.
New form of organizations “Born-on-the-Net”.
Doing business the traditional way “Move-to-the-Net”.
Infomediaries.
Models of eCommerce.
Copyright © 2002 Mohammed, Fisher, Jaworski and Cahill
Copyright © 2002 Marketspace LLC
Defining the Concept of Strategy
Strategy is a plan for how a company will compete in the marketplace.
Strategy formulation involves five basic decisions:
Choosing the
market arena
Locating a
defendable position
Seeking differentiation
in activities or methods
Identifying and
making tradeoffs
Designing
interlocking activities
Which customers will we serve?
What products and services will we offer?
Where will we operate?
What benefits do our customers seek?
Do we have the resources, skills and assets to deliver the target
benefits better than our competition?
Is our value proposition different from our top competitor’s?
Can customers recognize the difference?
Do our resource allocations reflect our differentiation?
Do all of our strategic decisions fit together?
Do we create value by providing mutually reinforcing services?
Copyright © 2002 Mohammed, Fisher, Jaworski and Cahill
Copyright © 2002 Marketspace LLC
The Mission Statement
Strategic management begins with a mission statement.
A mission statement sets the company’s direction.
 It provides a clear sense of purpose for the organization’s employees.
 It provides a clear sense of the business that the firm is in.
 It expresses both the company’s current business strategy and the future
strategic direction of the firm.
We help people trade practically anything on earth.
We will continue to enhance the online trading experiences of all —
collectors, hobbyists, dealers, small businesses, unique-item seekers,
bargain hunters, opportunistic sellers and browsers.
Example: “eBay’s mission statement”
Copyright © 2002 Mohammed, Fisher, Jaworski and Cahill
Copyright © 2002 Marketspace LLC
Creating Competitive Advantages
Companies must continuously build competitive advantages.

Competitive advantages are:
– Relative to competitors
– Not mutually exclusive
– Changing over time

Implications of the competitive
advantage framework:
– Distinctive competencies don’t
always translate into value for
customers.
– The public may not perceive
the firm’s superior value.
– Competitive advantages don’t
always translate into superior
performance outcomes.
– Sometimes outcomes are
competitive advantages.
eMarketing Strategy


Positioning and target-market selection
Marketing tactics (4Ps)
Distinctive
Competencies


Superior skills
Superior
resources
Competitive
Advantages


Superior
customer value
Low-cost
producer
Investment to Create and
Sustain Advantage
Performance
Outcomes




Satisfaction
Loyalty
Market share
Profitability
Source: Adapted from G.S. Day and R. Wensley, “Assessing Advantage: A Framework for Diagnosing Competitive
Superiority,” Journal of Marketing 52 (1988): 1-20.
Copyright © 2002 Mohammed, Fisher, Jaworski and Cahill
Copyright © 2002 Marketspace LLC
The Effects of the Networked Economy on Strategy Formulation
How the networked economy influences strategy formulation:

Centricity of Technology




Fast,
Unpredictable
Competition
Strategy
Formulation
Customer
Gains Control

Opportunities for organizational
efficiencies in back office
Face-to-screen interactions
replace
face-to-face meetings in front
office
When and how to interact with firm
How much information to share
How much price comparison
sought
How much personalization needed


Instant competitive response
Competition based on demand
rather than supply
Rapidly Reconfigured
Company Resources

Partnerships and combinations of
companies competing
Copyright © 2002 Mohammed, Fisher, Jaworski and Cahill
Copyright © 2002 Marketspace LLC
The Networked Economy’s Impact on Porter’s Five Forces
Risk of Entry by
Potential Competitors




Rivalry Among
Established
Competitors
Bargaining Power
of Suppliers




The Internet provides direct
connection to customers; however, it
minimizes suppliers’ bargaining power
Suppliers can access end-users
through the Internet, minimizing the
need for middlemen
Differentiation becomes more difficult
as access to suppliers is equalized
via digital markets and Internet
purchases
Fewer barriers to entry result in
increased buyer competition, thus
boosting supplier bargaining power
Source: Adapted from Michael E. Porter, Competitive
Strategy (Free Press, 1980).
Wherever technology enables a task to be easily undertaken, barriers to entry go down
New market entrants can acquire technology applications easily
Large capital pool has attracted new entrants to many industries
High technology costs and expertise increase barriers to entry
Bargaining Power
of Buyers




The Internet minimizes ability to product differentiate;
less differentiation means more competition over price
Low barriers to entry open markets to heavier
competition
Variable costs decrease as a percentage of fixed
costs, leaving price discounting as a primary method
of competition


Reduces bargaining power of
channels
Consumers have more
information and ability to
search for better deals
Decreases switching costs
Threat of Substitute
Products


Especially for Internet-related technology or services, substitute products can easily be offered
The Internet has introduced new business methodologies, thus creating additional substitution threats
Copyright © 2002 Mohammed, Fisher, Jaworski and Cahill
Copyright © 2002 Marketspace LLC
Porter claims that….
“Internet technology provides better opportunities for companies to establish
distinctive strategic positioning than did previous generations of information
technology”.
Copyright © 2002 Mohammed, Fisher, Jaworski and Cahill
Copyright © 2002 Marketspace LLC
The Offering — Interactivity and Individualization
Measuring responsiveness to increasing customer control
High
Game sites
Napster
Hotmail
Myteam.com
eBay
First-generation websites
Most content sites
(magazines)
myCNN.com*
Amazon.com
Interactivity
User’s ability to
conduct two-way
dialogue on a
website
Low
High
Low
Individualization
Customization activities initiated by user or firm
* This website merged with My Netscape (my.netscape.com).
Copyright © 2002 Mohammed, Fisher, Jaworski and Cahill
Copyright © 2002 Marketspace LLC
7 Dimensions to an eCommerce Strategy
Leadership
Service
Technology
Infrastructure
Market
Brand
Organizational
Learning
Copyright © 2002 Mohammed, Fisher, Jaworski and Cahill
Copyright © 2002 Marketspace LLC
7 Dimensions to an eCommerce Strategy
Based on a survey of 40 American and European organizations with revenues
ranging between 1 million and 100 billion US dollars and labeled as global
eCommerce leaders, the difference between those that have successful
eCommerce strategy and those do not is a function of achieving a balance
among the following 7 factors….
 4 positional factors
– Technology
– Service
– Market
– Brand
 3 bonding factors
– Leadership
– Infrastructure
– Organizational learning
Copyright © 2002 Mohammed, Fisher, Jaworski and Cahill
Copyright © 2002 Marketspace LLC
The Strategy
 The 7 dimensions model could be perfect for all forms of organizations in the
traditional industrial and service sectors.
 It also applies to born-on-the-net organizations where they always to adapt
these different components to keep up with the changes taking place in both
the marketplace and marketspace.
 It is important to note that the model is particularly applicable due to its
flexibility when it comes to a traditional organization formulating its eStrategy
processes.
Copyright © 2002 Mohammed, Fisher, Jaworski and Cahill
Copyright © 2002 Marketspace LLC
The Bonds of an eCommerce Strategy
The foundations of a strong eCommerce strategy lie in the preparation if the
ground before the functional issues are addressed and 3 of these are…
 Leadership
 Infrastructure
 Organizational learning
There is a clear and strong interaction between these three different elements.
Following are some examples and cases that reflect the importance and role
of eCommerce Strategy bonds.
Copyright © 2002 Mohammed, Fisher, Jaworski and Cahill
Copyright © 2002 Marketspace LLC
Leadership Model Cases
The drivers of change and creators of organizational strategic vision are CEOs
and senior executives “champion”.
Case: Motorola Corporation “Model for a meld between leadershiptechnology”.
 Launched an initiative in 1994 attempting to use advanced communication
technology to better reach their partners.
 Creation of Motorola Online Channel Access “MOCA” – the target was
capitalizing on communication technology.
Case: IBM’s Louis Gerstner repositioned and transformed IBM based on
eCommerce concepts.
Case: Ford’s Jacques Nasser made eCommerce an integral part of Ford’s
strategy.
Copyright © 2002 Mohammed, Fisher, Jaworski and Cahill
Copyright © 2002 Marketspace LLC
Lessons to be learned
Executives should expand their vision for their organizations and develop
creative strategies that can be effectively executed.
Failure to transition or demonstrate leadership will inevitably lead to a
subsequent change in leadership.
Executives should…
 Keep an open mind with regard to all new technologies.
 Stay attached to new technologies coming over the net.
 Encourage continuous research and analysis of the marketspace.
 Always be ready to make the necessary changes in corporate strategy
with no limits.
Copyright © 2002 Mohammed, Fisher, Jaworski and Cahill
Copyright © 2002 Marketspace LLC
Infrastructure Model Cases
If the need to develop eCommerce is developed and approved by the
organization, the next thing to do is developing the required infrastructure
[range could be from a single Internet file server to an information-intense
online transaction processing company such as UPS www.ups.com.
Infrastructure issues need to be considered at a number of organizational
levels such as:
 Strategic
 Organizational
 Physical
Copyright © 2002 Mohammed, Fisher, Jaworski and Cahill
Copyright © 2002 Marketspace LLC
Infrastructure Levels
Strategic Level
 Impact technology will have on the market and the organization.
 Aim is to align future business planning initiatives with the new technology
challenges.
Organizational Level
 The challenge is to align work practices, process flow and structure of the
organization to execute the strategic goals effectively and efficiently.
Physical Level
 Where execution takes place using hardware and software elements
complemented with the telecommunications infrastructure.
Copyright © 2002 Mohammed, Fisher, Jaworski and Cahill
Copyright © 2002 Marketspace LLC
Lessons to be learned
Create a flexible infrastructure that can act as the “shock absorber” of change.
Factors influencing the infrastructure come from strategic, organizational and
physical levels.
Infrastructure creation requires open level of communication at and across all
levels in the organization.
Creation of a technology infrastructure that is scalable, secure and robust.
Maintain awareness of developments and innovations and willingness to
change, upgrade and adapt.
The Techno-CEO is the successful leadership model of the future.
Copyright © 2002 Mohammed, Fisher, Jaworski and Cahill
Copyright © 2002 Marketspace LLC
Organizational Learning Model Cases
The ability of an organization to react, understand and deploy eCommerce
solutions is dependent on its ability to effectively leverage its organizational
learning.
Organizational learning is not an isolated process, it is part of the leadership
required in the organization that relate to creating and enabling brand,
technology, market and service positions.
Organizational learning and the dissemination of the knowledge acquired
across the different organizational levels is a key success factor.
Learning leads to improving work flows, practices and managing customer
relationships in a away leading to locking customers to products and
organizations.
 Case: IBM website attracts over 1.5 million hits a day and leadership is
keen to get customers and retailers feedback daily.
– Contribution to brand building
– IBM’s website is being adjusted and improved mainly based on
customers and retailers feedback and evaluation.
Copyright © 2002 Mohammed, Fisher, Jaworski and Cahill
Copyright © 2002 Marketspace LLC
Organizational Learning Model Cases (Cont’d)
IBM, in that sense, is aligning its eCommerce strategy with its organizational
strategy as a whole.
Need to clearly understand the driving forces in the marketspace and when
and how they change – to be able to respond ahead of the competition.
 Case: Ford internalized its process control.
 Case: American Airlines internalized its passenger yield management
system.
– Both organizational took a leading position in their respective fields and
in the industry.
Copyright © 2002 Mohammed, Fisher, Jaworski and Cahill
Copyright © 2002 Marketspace LLC
Lessons to be learned
Creating an environment that stimulates and fosters organizational learning
which is important to introduce technology and also for the organizational longterm survival.
Organizational learning should have a focus driven from the strategic
objectives of the organization as a whole.
Organizational learning creates an environment of positive change and
continuous process refinement.
Copyright © 2002 Mohammed, Fisher, Jaworski and Cahill
Copyright © 2002 Marketspace LLC
4 Positional eStrategic Directions
Technology
Leadership
Brand
Leadership
Integrated eCommerce Strategy
Service
Leadership
Market
Leadership
Copyright © 2002 Mohammed, Fisher, Jaworski and Cahill
Copyright © 2002 Marketspace LLC
4 Positional eStrategic Directions
In creating an eCommerce strategy, it is necessary to align and integrate the 4
main areas of positional strategic focus:
 Technology
 Brand
 Service
 Market
This is an important task that has to be considered as of the initial steps of
strategy formulation.
The process should also cater for the inevitable and continuous changes that
will occur.
Copyright © 2002 Mohammed, Fisher, Jaworski and Cahill
Copyright © 2002 Marketspace LLC
Technology Leadership
eCommerce strategies that are focused on leadership could be found
throughout all industry sectors.
Technology leadership needs early adoption to take a leading position.
 Examples include:
– UPS
– Nortel
– SUN Microsystems
– Motorola
– Dow Jones
Technology can offer organizations better tools to monitor customers needs
which represents an added-value based strategy.
Copyright © 2002 Mohammed, Fisher, Jaworski and Cahill
Copyright © 2002 Marketspace LLC
Brand Leadership
The Internet has a huge ability to influence, change, and reinforce corporate
branding.
The development of an eCommerce branding strategy means something
different to a new entity than it will to an established organization.
 Example: Amazon.com could be looked at as the leading brand on the
Internet.
 Branding in that context could be looked at as providing added value
beyond low cost including convenience and quality service.
The Internet helps in creating added-value through mass customization.
 The key to mass customization is getting closer to the customer and
providing the product on demand at a low cost while maintaining sufficient
margins for the supplier.
 Case: BMW – continuous changes and improvement in the website with
massive “information provision” to potential customers.
Copyright © 2002 Mohammed, Fisher, Jaworski and Cahill
Copyright © 2002 Marketspace LLC
Service Leadership
Service in eStrategy means a number of elements beyond the actual purchase
order and that includes:
 Building relationships with customers
 Gathering customer information
 Identifying potential customers
 Maintaining relationships with existing ones “yielding 60% additional
revenues”.
Copyright © 2002 Mohammed, Fisher, Jaworski and Cahill
Copyright © 2002 Marketspace LLC
Market Leadership
Marketing can achieve new levels on the Internet.
A key factor is to respond to changing market conditions through products and
services offerings.
One of the leading strategies is to combine marketing, service and information
systems to focus on issues as a cross-functional team.
 Case: Royal Caribbean International
– One of the world’s largest cruise lines evolved as a technology
leadership focus in 1997, through a process of brand enhancement to
a more recent market focus achieving significant market growth
through online sales.
 Case: American Express
– First focused on brand reinforcement then they moved to a market
growth mode capitalizing on the Internet.
Copyright © 2002 Mohammed, Fisher, Jaworski and Cahill
Copyright © 2002 Marketspace LLC
Developing a Winning eStrategy
To develop a winning eCommerce strategy, the following has to be carefully
addressed:
 Ensure the project is backed by a senior executive.
 Develop a strategy before developing a web presence.
 Develop a strategy by focusing on technology, branding, marketing and
service.
 Develop an IT infrastructure capable of matching the strategic objectives.
 Identify and use knowledge in the organization.
 The strategy must add value for customers and it must change as the
requirements of those customers change.
Copyright © 2002 Mohammed, Fisher, Jaworski and Cahill
Copyright © 2002 Marketspace LLC
Internet as a Business Solution
Internet has dramatically changed the rule of doing business.
“Everyday it becomes clearer that the Net is taking its place alongside the
other great transformational technologies that first challenged and then
fundamentally changed the way things are done in the world”.
(Louis Gerstner, Chairman and CEO of IBM, 1999)
“The Internet is like a weapon sitting on a table and ready to be picked up by
either you or your competitions.
(Michael Dell, Chairman and CEO of Dell Corporation, 20001)
Copyright © 2002 Mohammed, Fisher, Jaworski and Cahill
Copyright © 2002 Marketspace LLC
Organizational eCommerce
The new form of organizations which was “born-on-the-Internet” in the
eCommerce marketspace.
Established organizations traditionally positioned in the offline marketspace
“moving to the Net”.
eConsortia which are organizations that are coming together in a new
organizational form aiming at leveraging the unique strengths associated with
each company and partner through the virtual structure on an online
organization.
Copyright © 2002 Mohammed, Fisher, Jaworski and Cahill
Copyright © 2002 Marketspace LLC
New Organizations: Born on the Net
How successful an organization will become will always be based on the
business concept including its vision and foundations.
Execution and implementation is also an integral component since strong and
constructive visions do not make successful organizations.
For organizations to succeed they need a winning strategy:
 Conceptual strategy
 Operational strategy
Copyright © 2002 Mohammed, Fisher, Jaworski and Cahill
Copyright © 2002 Marketspace LLC
The Networked World
Established Organizations
Total Market
Online
Organizations
eCommerce
Marketspace
Copyright © 2002 Mohammed, Fisher, Jaworski and Cahill
eConsortium
Copyright © 2002 Marketspace LLC
Strategy Elements
The Net Profit Provider.
The Web Business Pyramid.
The Web Applications Pyramid.
The Internet Business Segments.
Copyright © 2002 Mohammed, Fisher, Jaworski and Cahill
Copyright © 2002 Marketspace LLC
The Net Profit Retriever
Industry
Does the industry in which
the company competes have
economic leverage?
Strategy
Does the company offer its
customers a closed-loop
solution?
Management
Copyright © 2002 Mohammed, Fisher, Jaworski and Cahill
Can the company’s management
team adapt effectively to
rapid change?
Copyright © 2002 Marketspace LLC
The Web Business Pyramid
Level III
Powerware
Level II
Brandware
Level I
Lossware
Copyright © 2002 Mohammed, Fisher, Jaworski and Cahill
Copyright © 2002 Marketspace LLC
The Web Applications Pyramid
Level III
Integrated
Transactions
Level II
Front-End
Transactions
Level I
Online Brochures
Copyright © 2002 Mohammed, Fisher, Jaworski and Cahill
Copyright © 2002 Marketspace LLC
The Internet Business Segments
Level III
Powerware
Network Infrastructure
Web Consulting
Internet Venture Capital
Level II
Brandware
Internet Security
Web Portals
Electronic Commerce
Web Content
Level I
Lossware
Internet Service Providers
Web Commerce Tools
Copyright © 2002 Mohammed, Fisher, Jaworski and Cahill
Copyright © 2002 Marketspace LLC
Key Successful Factors for “Born-on-the-Net”
Technology
 Goal must be understood for that
organization within its industry and
market.
 Should you go technology leader or
rely on stable systems.
 Determine the relationship between
the company’s technology or
product strategy and the operational
aspects of that strategy.
 Technology should serve customers’
needs from a technology
perspective.
 Can technology create barriers to
entry? Can it lock in customers?
Copyright © 2002 Mohammed, Fisher, Jaworski and Cahill
Market
 Identify the target market and
whether it is open to new entrants.
 Determine market changes and
whether the organization will be able
to meet these changes.
 Be ready for competition especially
from larger and more equipped
organizations.
Copyright © 2002 Marketspace LLC
Key Successful Factors for “Born-on-the-Net” – (Cont’d)
Service
 An organization must know its
customers’ expectation regarding
service levels.
 Identify the value proposition and
continuously improve it.
 Identify and properly manage the
Internet service value chain.
Copyright © 2002 Mohammed, Fisher, Jaworski and Cahill
Brand
 Determine whether the organization
can create a strong brand.
 Identify the basics of its brand…
– Technology leadership?
– Service proposition?
– Market positioning?
Copyright © 2002 Marketspace LLC
Existing Organizations: Move to the Net
Technology is just like change needs to be dealt with constantly to always
remain competitive.
On the Internet, businesses do not operate in linear time as suggested by
Michael Porter in his 5 forces model of strategy; however the world of
eCommerce compresses time.
 Case: Barnes and Noble www.bn.com versus Amazon.com.
The society of the Internet has led customers to expect the move from
conceptualization of a trade to execution to occur in one step.
 Example: Product-onDemand
Time compression ads value and encourages customers to take decisions.
Copyright © 2002 Mohammed, Fisher, Jaworski and Cahill
Copyright © 2002 Marketspace LLC
Key Successful Factors for “Move-to-the-Net”
Technology
 Should understood what the total
technology implications are for that
organization - Internet, ERP, data
warehousing, etc…
 Identify whether processes are
aligned to an Internet environment.
 Should identify the knowledge level
of customers with respect to
technology use in the marketspace
to be able to build and effective and
flexile eCommerce strategy.
 Organizations must assess its
internal value chain and that of its
suppliers and build it to minimize
costs and maximize efficiencies.
Copyright © 2002 Mohammed, Fisher, Jaworski and Cahill
Market
 Understand what the implications of
eCommerce and technology are for
the marketspace with respect to..
– Branding
– Relationship management
 Whether the target market is the
same as its traditional bricks-andmortar marketspace or has it
moved.
 Understand how the market is going
to segment and grow in the future
due to the Internet.
 Identify the strengths brought to the
company due to their Internet-based
operations [product and market
knowledge].
Copyright © 2002 Marketspace LLC
Key Successful Factors for “Move-to-the-Net” – (Cont’d)
Service
 New service level expected from
customers should be identified.
 Identify what are the new value
proposition expected from the
customers.
 Continuous re-assessment of the
service value chain.
Copyright © 2002 Mohammed, Fisher, Jaworski and Cahill
Brand
 How to best leverage existing
brands?
 Determine whether a strong dotcom brand could be created?
 Will brand positioning change on the
net?
Copyright © 2002 Marketspace LLC