COM333 – IS3
E-business Strategies
• Internet
– reduces the marginal costs of information,
communication, and distribution almost to
zero.
– Internet business models offer significant
advantages to suppliers and customers on at
least one (often more than one) of these
areas.
• Information: there were an estimated eight
hundred million pages on the world wide web in
mid-1999.
• Communication: the internet enables customers
to talk back in new ways, to make demands of
suppliers
• Distribution: the internet makes the distribution
of information all but cost-free.
– programming software
– digital music formats such as MP3
• Effects of Internet on business models.
– Everything speeds up.
– The ratio of a company’s time spent on
customer (both in B2B and B2C) increased
dramatically.
– As a result of reduced search costs and
cheap communication the consumer have far
more control in markets than they have had
before
• Strategic systems development: ebusiness models
– Consider the Internet as a channel for
interaction with customers and other
businesses
– Look at the areas of the business in which
Internet and traditional business approaches
merge or diverge.
– Integrate the Internet operations with current
functional areas
• Internet as Channel for interaction
– Use the Internet channel for information provision
only
– Use the Internet channel primarily for export markets
– Subsume the Internet channel as another channel in
the existing business
– View the Internet channel as another channel
– Set up the Internet channel as a separate business
– Develop a mixed system using a number of parallel
channels with clear objectives for the contribution
from the different channels and the nature of their
interaction
– Switch fully to the Internet channel, taking out retail
outlets.
• Look for areas where internet and traditional
business approaches Merge or diverge
• company can set up an Internet spin-off
operation that is entirely separate
• This is viable when
– They are willing to exploit new business models and
need to free themselves of the constraints of the
current operation
– The spin-off is not constrained by current technology
and earlier legacy operations
– They give the spin-off freedom to form alliances, raise
capital, and attract new talent.
• Integrate Internet operations
– They can’t separate digital and physical
operations without confusing customers
– Senior management is committed to
redefining the entire business value
proposition
– The entire organisation can be mobilised to
migrate to an e-business channel
• Types of business model for business-to-customer (B2C) operation
– e-shops: a single firm selling their products or services online
• (www.amazon.com)
– e-malls: a range of businesses share a website for the provision of eservices
• kelkoo - http://www.kelkoo.co.uk/
• yahoo shopping - http://shopping.yahoo.co.uk/
– third-party marketplace: a third party provides Internet marketing and
transaction services for other firms
– e-procurement: electronic tendering of goods and services
– Value chain integrators: offer a range of services across the value chain
– Value chain service providers: specialise in a particular function within the
value chain, such as electronic payments, inventory management and
logistics
• www.ups.com
– Information brokerage: companies that provide information to consumers to
help make buying decisions, or to businesses to help business operations
• www.which.com
– Trust and other services: authenticate the services and products of other
companies provided on the Web.
• www.truste.com
Beynon-Davies (2004)
• Strategic systems development: The five forces
– J. M. Porter (Porter & Millar, 1985) proposed that
there were five forces acting to create competition.
These were
•
•
•
•
•
The power of customers
The power of suppliers
The threat of new entrants
The threat of new products and services, and
Jostling for power among existing players in the market.
– The aim of strategic Internet-based systems
development therefore needs to be to examine ways
in which Internet-based information systems can be
used to reduce or deflect any of these five threats
• Strategic systems development: ebusiness strategies
– agora
– aggregation
– alliance
• The new media writer Don Tapscott adds
two further models
– Value chain
– Distribution networks.
• Agora
– the Ancient Greek word for marketplace
– An electronic market driven by dynamic
pricing and liquidity of goods.
– Time is a critical factor
– Information is a key factor
– Examples
• lastminute.com. (B2C)
• PC supplier network RosettaNet (B2B)
• Aggregation
– Electronic mega-store offering convenient
access to a wide selection of goods, together
with delivery
– Aggregators have little impact on the nature of
the good being bought
– The success of the model often depends on
effective delivery
– Information is the critical factor
– Examples
• Amazon (www.amazon.com) – B2C
• Alliance
– Loose affiliation of individuals around one standard or
service offer
– Value is created by connecting together sympathetic
individuals or organisations.
– Alliance create intellectual value by sharing
knowledge in accordance with a set of agreed rules
– Economic value comes from being a member of the
alliance.
– Communication is the critical factor
– Examples
• The operating system Linux
• Digital music MP3
• Visa
• Distributive networks
– The exchange of information among creators, users
and customers
– Business has used the internet to make transparent
to its customers information that they could previously
only have obtained through employees
– This reduces service costs at one level
– Increases the complexity of calls which are received
– The value derives from the distribution of previously
available information to a wider group of people
– Examples
• Federal Express
• United Parcel Service
• Value chain
– Constructed by a manufacturer or supplier who uses
management of information systems to construct
personalised or specific products for customers
– The value comes from
• The communication with customers and the supplier network
• The management of the information systems between
suppliers
– Examples
• Dell
• Cisco
– The aim of strategic Internet-based systems
development needs to be
• To examine ways in which Internet-based
information systems can be used to reduce or
eliminate the barriers between the different
activities, thus reducing overall cost and increasing
overall profit margin.