COMP7880: E-Business Strategies
Internal organization of e-business activities
Dickson K.W. Chiu
PhD, SMIEEE, SMACM, Life MHKCS
Jelassi & Enders: Chapter 9
1
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
COMP7880-IO-2
PC industry (1990s) became
increasingly fragmented
IBMIntegrated
value
chain
(1985)
Unbundled
value
chain
(1999)
Micro processors,
integrated
circuits, memory
chips
Intel
Motorola
AMD Cyrix
PCs
Compaq
Dell
IBM
Operating
systems
Windows
Apple
UNIX
Mac OS
Linux
Source: Adapted from D. Heuskel (1999), p. 53.
OS/2
Application
software
Microsoft
Office
Marketing,
sales and
distribution
Retail
Megastores
Netscape
Online
Adobe
Post order
Direct
sales
Variety of options for making a
product or service.
Market
transactions
entail the purchase from an external provider on
an individual one-by-one contractual basis.
Long-term
contracts
entail the purchase from an external provider on a
contractual basis, spanning over an extended
period of time.
Alliances
entail the close co-operation of two separate
firms that join up in the production of a certain
product or service.
Parent/
subsidiary
Internal
production
entail the setting up of a distinct firm that
operates separately from, yet under the auspices
of, the parent company.
entails a process that is managed completely
internally, without any outsourcing to external
providers.
Reasons favoring ‘make’ or ‘buy’
decisions
Reasons favouring
‘make’ decisions
Reasons favouring
‘buy’ decisions
Strong linkage between
activities
High economies of scale
Confidentiality of
information
High transaction costs
High capital requirements
Specialized know-how
Higher efficiency of the open
markets
Think: how does IT impacts?
Clicks-and-mortar spectrum spans from
integration to separation of activities
Clicks-and-mortar spectrum
Independent
business/
spin-off
(e.g. BOL.de)
Strategic
alliance
(e.g. Amazon.com
and Borders)
Separation
• greater focus
• more flexibility
• access to venture
capital for funding
Source: Adapted from R. Gulati and J. Garino (2000).
Joint
venture
(e.g. KB Toys
and BrainPlay.com)
In-house
division
(e.g,Tesco.com)
Integration
• established brand
• shared information
• purchasing leverage
• cross-promotion
• distribution efficiencies
• shared customer
services
Separation vs integration
Separate organization
Integrated organization
• Greater focus
• Established and trusted brand
• More flexibility and faster
decisions
• Shared information
• Entrepreneurial culture
• Access to venture capital
Source: R. Gulati and J. Garino (2000), pp. 107-114
• Cross-promotion
• Purchasing leverage
• Distribution efficiencies
• Shared customer service
Think: how does IT impacts?
Traditional corporation can be
unbundled into 3 distinct businesses
Customer
relationship
management
Identify, attract, and
build relationships with
customers
Product
innovation
Conceive attractive new
products and services
and commercialise them
Source: Adapted from J. Hagel and M. Singer (1999).
Infrastructure
management
Build and manage
facilities for highvolume, repetitive
operational tasks
Different imperatives regarding
economics, culture, and competition
Businesses
I
m
p
e
r
a
t
i
v
e
s
Economics
Culture
Competition
Product
innovation
Customer
relationship
management
Infrastructure
management
Early market
entry allows for
a premium price
and a large
market share;
speed is the key
High cost of
customer
acquisition makes it
imperative to gain
large shares of
wallet; economies
of scope are the
key
High fixed costs
make large
volumes essential
to achieving low
unit costs;
economies of
scale are the key
Employee
centered;
coddling the
creative ‘stars’
Highly service
oriented;
‘customer
comes first’
Cost focused;
stress on
standardization,
predictability,
efficiency
Battle for talent;
low barriers to
entry; many
small players
thrive
Battle for scope;
rapid consolidation;
a few big players
dominate
Battle for scale;
rapid
consolidation; a
few big players
dominate
Source: Adapted from J. Hagel and M. Singer (1999).
Channel conflict matrix analyses how
to resolve different channel conflicts
Relative importance of threatened channel
High
Low
1
Risk of conflict between
different channels
High
Address
channel conflict
M
a
i
l
2
Accept the
decline of
threatened
channel
o
r
d
e
r
Traditional retailer
3
Low
Reassure
members of
threatened
channel
Conf
lict
O
t
h
e
r
s
Internet
4
Ignore
Source: Adapted from C. Bucklin, P. Thomas-Graham and E. Webster, ‘Channel conflict: when is it dangerous?’, McKinsey Quarterly, 1997, No. 3, pp. 36–43.
For your project & exercise
Repeat the methodology in this chapter
for your project case study
COMP7880-IO-11