Chapter 9
EC Strategy and
Implementation Plan
© Prentice Hall, 2000
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Learning Objectives
Describe what a business strategy and
implementation plan are
Understand the process of formulating EC
strategies
Explain the issues involved in EC implementation
planning
Experience the role of intelligent agents in the
strategic perspective
Characterize how the strategic planning evolves
throughout the business cycle
Describe the key management issues in the
strategic planning
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IBM’s E-Business’s Strategy
Following four goals:
To lead IBM’s strategy to transform itself into ebusiness 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.
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IBM’s E-Business’s Strategy (cont.)
IBM focused on 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
e-care for employees— improving the effectiveness of
IBMers 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
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Strategic Planning for EC
Industry and
competitive
analysis
Strategy
formulation
Implementation
plan
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Strategy
reassessment
5
Industry and Competitive Analysis
Monitoring, evaluating, disseminating of
information from the external and internal
environments
SWOT Analysis
Strengths
Weaknesses
Opportunities
Threats
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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
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Strategy Formulation
Strategy formulation
Development of long-range plans
Organization’s mission
Purpose or reason for the organization’s existence
3 main reasons for establishing Web site
MARKETING, CUSTOMER SUPPORT, and SALES
Products with good fit for EC
Shipped easily or transmitted electronically
Targets knowledgeable buyers
Price falls within certain optimum ranges
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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
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EC Critical Success Factors (cont.)
A Value Analysis Approach
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
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EC Critical Success Factors (cont.)
Value Analysis Questions
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?
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?
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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?”
Gartner’s Model of Customer Interaction
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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
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EC Critical Success Factors (cont.)
Return on Investment and Risk Analysis
Classified generic IT values and risks falls into the
following five categories
Values
• Financial values— measurable to some degree
• Strategic values— competitive advantage in the market and
benefits generated by business procedures
• Stakeholder values— reflections of organizational redesign,
organizational learning, empowerment, information technology
architecture of a company, etc.
Risks
• Competitive strategy risk— external, due to joint venture,
alliances, or demographic changes among others
• Organizational risk and uncertainty— internal to company
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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
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,
and2000
wireless links increase sales productivity15
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2000
Hall,
Competitive Strategy
Offensive strategy— usually takes place in an
established competitor’s market
Frontal Assault— attacker must have superior resources
and willingness to persevere
Flanking Maneuver— 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
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Competitive Strategy (cont.)
Defensive strategies— takes place in the
firm’s own current market position as a
defense against possible attack by a rival
Lower the probability of attack
Divert attacks to less threatening avenues
Lessen the intensity of an attack
Make competitive advantage more
sustainable
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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
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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?
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?
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EC Strategy in Action (cont.)
The 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
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
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Competitive Intelligence on the Internet
Review competitor’s Web sites
Analyze related newsgroups
Examining publicly available financial
documents
You can give prizes
Use an information delivery service
Use research companies
Solicit opinions in a chat room
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Competitive Intelligence on the Internet (cont.)
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:
broadcast model
selective pull model
distributed push pull model
interactive push model
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Implementation 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
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Uncovering Specific EC
Opportunities and Application
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
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Uncovering Specific EC
Opportunities and Application (cont.)
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
Smart needs adviser— if you want …, 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
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Uncovering Specific EC
Opportunities and Application (cont.)
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
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Organization and Staffing
Define the roles and responsibilities of:
Senior management
Web champion
Webmaster
Web Page
Design
Gatekeepers
Web team
Building
System
Infrastructure
Business
Process
Reengineering
Security
and Control
Marketing
Finance
Accounting
Information
Technology
EC Project Team
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Evaluating Outsourcing
Factors to consider:
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
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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
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Web Hosting (cont.)
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
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Web Hosting (cont.)
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
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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
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Web Content Design (cont.)
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
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
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Web Content Design (cont.)
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
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Telephony
Audio
Video
FTP
Forms
Chat rooms
VRML
Statistics
Customer tracking
E-mail response and
forwarding
Java applications
Animation
Security
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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 to:
Address the Internet features that must be
monitored for developing policy on access and
use
Disclosure of information through the Internet
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Strategy Reassessment
Webs grow in unexpected ways —
e.g. Genentec and Lockheed Martin
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
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Questions to Address in Order to Assess
EC Project Effort and Outcome
What were the goals?
Did unanticipated problems occur?
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
distribution costs?
What costs did you hope to reduce?
Did other costs increase unexpectedly?
What were the sales objectives?
Were those goals realistic?
Were your expectations
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?
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Revisit Each Phase of EC Project

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







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?
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?
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Management Issues
Considering the strategic value of EC
Conducting strategic planning
Considering the risks
Integration
Pilot project
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