Chapter 14 E-Commerce Strategy and Global EC

1. Chapter 14E-Commerce Strategy and Global EC Jason Chou-Hong Chen, Ph.D. Professor of MIS Graduate School of Business, Gonzaga University Spokane, WA 99223 USA chen@jepson.gonzaga.edu

2. Learning Objectives • Describe the strategic planning process. • Describe the purpose and content of a business plan. • Understand how e-commerce impacts the strategic planning process. • Understand how to formulate, justify, and prioritize EC applications. • Describe strategy implementation and assessment, including the use of metrics. • Evaluate the issues involved in global EC. • Analyze the impact of EC on small and medium-sized businesses.

3. 14.1 Organizational Strategy: Concepts and Overview • Strategy:A broad-based formula for how a business is going to compete, what its goals should be, and what plans and policies will be needed to carry out those goals • Strategy is also about making tough decisions about what not to do

4. develop guide Strategy create Tactic Planning is everything ... Vision Customers, market, competition Products, Services N

5. Focusing Marketing Strategy and Evaluating Market Opportunities Opportunities to be turned Into marketing strategies and plans Evaluating Opportunities Focusing marketing Strategy S.W.O.T Analysis Develop product market Screening criteria Defining generic markets and product-markets Targeting and Segmentation Positioning and Differentiation Company mission, objectives, resources Competitor analysis Trends in external environment: Technological, Economic, Political & Legal Cultural & Social

6. Organizational Strategy(cont.) • Profitability and economic value is determined by establishing a unique value proposition • Strategy is focused on questions about: • organizational fit • trade-offs • profitability • value

7. Organizational Strategy: Concepts and Overview • Strategy and the Web Environment • e-commerce strategy (e-strategy) The formulation and execution of a vision of how a new or existing company intends to do business electronically

8. Organizational Strategy: Concepts and Overview • Strategy and the Web Environment • strategic information systems planning (SISP) A process for developing a strategy and plans for aligning information systems (including e-commerce applications) with the business strategies of an organization

9. Organizational Strategy Exhibit 14.1 The Strategic planning Process Strategy Initiation (section 14.4) Strategy Assessment (section 14.7) Strategy Formulation (section 14.5) Strategy Implementation (section 14.6)

10. Systems Development Life Cycle (SDLC) Systems Investigation Product: Feasibility Study Understand the Business Problem or Opportunity Systems Analysis Product: Functional Requirements Develop an Information System Solution Systems Design Product: System Specifications Systems Implementation Product: Operational System Implement the Information System Solution Systems Maintenance Product: Improved System

11. Strategic planning process • Strategy initiation:The initial phase of strategic planning in which the organization examines itself and its environment • Value proposition:The benefit that a company’s products or services provide to customers; the consumer need that is being fulfilled

12. structure/ culture competition Business landscape Internal/ External Consistent fulfill Analysis (Porter, SWOT) future positioning … Finance Management Process H/R Technology Corporate strategy • Positioning on product/market • Differentiation/choice of competitive advantage Business strategy • Competitive posture • Industry characteristics， • Market growth， • Demand characteristics， • Barrier of entry，etc. Functional strategy Essentials for a Successful Enterprise Value propositions 1. Business model 2. Core competencies Strategic intent Strategy Positioning 3. Execution IT Role? N

13. Strategic planning process (cont.) • Outcomes from strategy initiation phase • Company analysis (including value proposition) • Core competencies • Forecasts • Competitor (industry) analysis

14. Strategic planning process (cont.) • Strategy formulation:The development of strategies to exploit opportunities and manage threats in the business environment in light of corporate strengths and weaknesses • Specific activities and outcomes from strategy formulation phase: • Business opportunities • Cost-benefit analysis • Risk analysis, assessment, and management

15. Strategic planning process (cont.) • Strategy implementation:The development of detailed, short-term plans for carrying out the projects agreed on in strategy formulation • Specific activities and outcomes from strategy implementation phase: • Business planning • Resource allocation • Project management

16. Strategic planning process (cont.) • Strategy assessment:The continuous evaluation of progress toward the organization’s strategic goals, resulting in corrective action and, if necessary, strategy reformulation Specific measures called metrics are used to assess the progress of the strategy

17. Opportunities Strengths Weaknesses Threats Strategic planning tools 1. SWOT analysis: A methodology that surveys external opportunities and threats and relates them to internal strengths and weaknesses

18. Strategic planning tools (cont.) • 2. Competitor analysis grid:A strategic planning tool that highlights points of differentiation between competitors and the target firm • 3. Scenario planning:A strategic planning methodology that generates plausible alternative futures to help decision makers identify actions that can be taken today to ensure success in the future

19. Strategic planning tools (cont.) • 4. Balanced scorecard:An adaptive tool that assesses organizational progress toward strategic goals by measuring performance in a number of different areas • 5. (extra) Return on investment (ROI):A ratio of required costs and perceived benefits of a project or an application

20. A Marketing Strategy – showing the 4 P’s of a Marketing Mix Product Place Price Promotion C

21. Product Place Price Promotion C Overview of Marketing Strategy Planning Process Narrowing down to focused strategy with quantitative and qualitative screening criteria Customers Needs and other Segmenting Dimensions S. W. O. T. Segmentation & Targeting Company Objectives & Resources Segmentation & Positioning Competitors Current & Prospective External Market Environment Technologies Political and Legal Cultural and Social Economic

22. 14.2 Business Planning in E-Commerce • business plan A written document that identifies the company’s goals and outlines how the company intends to achieve those goals

23. Business Planning in E-Commerce • Outline of a business plan • Executive Summary • Business Description • Operations Plan • Financial Plan • Marketing Plan • Competitor Analysis

24. Business Planning in E-Commerce • Business Plan Fundamentals • Purposes for business plan • To acquire funding • To acquire nonfinancial resources • To obtain a realistic approach to the business • business case A business plan for a new initiative or large, new project inside an existing organization

25. 14.3 E-Commerce Strategy:Concepts and Overview

26. Business Strategy • Business Decisions • Objectives and Direction • Change IT Planning: The Relationship Between Business, IS,and IT Strategies IT Impact and potential Where is the business going and why Direction for business Supports business IS Strategy What is required • Business Based • Demand Orientated • Application Focused Infrastructure And services Needs and priorities How it can be delivered IT Strategy • Activity Based • Supply Orientated • Technology Focused

27. BREAK • Application Case 14.1: Strategic Planning at InternetNZ (p.644)

28. 14.4 E-Strategy Initiation • Issues in E-Strategy Initiation • Be a First Mover or a Follower? • Born-on-the-Net or Move-to-the-Net? • Determining Scope • Have a Separate Online Company? • Have a Separate Online Brand?

29. Attitude Toward Using Behavioral Intention to Use Actual System Use External Variables Perceived Ease of Use Technology Acceptance Model Perceived Usefulness N

30. The new technology adoption curve Impact Readiness Intensification Level of Activity Time

31. First major move Customer acceptance Competitor catch-up moves First-mover expansion moves Keen’s Six-Stage Competitive Advantage Model Stimulus for action Commoditization N

32. Advantages Disadvantages When to Perform Activities • First Movers • Build brand recognition • Control scarce resources • Establish networks • Early Economies-of-Scale • Newer technology • Higher development costs • Reverse engineering by competitors

33. align Innovation Winners vs. Losers • What separates winners from losers in creating (ultimate) strategic competitive advantage is neither bleeding-edge technology nor “timing for market entry.” • It is from “value innovation” utility Value Innovation Firm price cost

34. 14.5 E-Strategy Formulation • Selecting EC Opportunities • Incorrect approaches to EC strategy selection: • Indiscriminately funding many projects and hoping for a few winners • Betting it all in a single, high-stakes initiative • “Trend-surfing” • Productive approaches to EC strategy selection • Problem-driven strategy • Technology-driven strategy • Market-driven strategy • E-business maturity model

35. E-Strategy Formulation • Determining an Appropriate EC Application Portfolio Mix • The BCG model • An Internet portfolio map for selecting applications

36. E-Strategy Formulation Exhibit 14.6Internet Portfolio Map High Sell project Adopt project Viability of Project Reject project Redesign project Low Company Fit High

37. E-Strategy Formulation • Risk Analysis and Management • e-commerce (EC) risk The likelihood that a negative outcome will occur in the course of developing and operating an electronic commerce strategy • Security issues

38. E-Strategy Formulation • Issues in Strategy Formulation • How to handle channel conflict • How to handle conflict between the off-line and online businesses • Pricing strategy • Price comparison is easier • Buyers sometimes set the price • Online and off-line goods are priced differently • Differentiated pricing can be a pricing strategy • versioning Selling the same good, but with different selection and delivery characteristics

39. Key Factors that Influence Price Setting Pricing objectives Price of other products in the line Pricing flexibility Demand Discounts and allowances Price Setting Cost Legal environment Competition Geographic pricing terms Markup chain in channels

40. Strategy Planning for Price Target Market Product Place Promotion Price Price objectives Price flexibility Price levels over product life cycle Discounts and allowances -- to whom and when Geographic Term -- who pays transportation and how

41. 14.6 E-Strategy Implementation • Create a Web Team • project champion The person who ensures the EC project gets the time, attention, and resources required and defends the project from detractors at all times • Start with a Pilot Project • Allocate Resources • Manage the Project

42. 14.6 E-Strategy Implementation • Strategy Implementation Issues • Application development • Partners’ strategy • outsourcing The use of an external vendor to provide all or part of the products and services that could be provided internally

43. EC Strategy Implementation Issues (cont.) • Partners’ strategy Outsourcing: The use of a third-party vendor to provide all or part of the products and services that could be provided internally • Two drivers • focus • on core business • value • shareholder

44. When to Outsourcing? • Which IS activities are strategic to our company's business? • Will outsourcing save us at least 15 percent? • Does our firm have access to the needed technology and expertise? • If not, outsourcing may be the answer to acquiring these resources. • Does outsourcing increase our firm's flexibility? TM -44 Dr. Chen,Managing IT Reos. Thru Strategic Partnerships; A Portoflio Approach to IT Development

45. Going Offshore for IS Development • When the MIS organization uses contractor services, or even builds its own data center in a distant land, it is engaged in offshoring, which is short for outsourcing offshore. • The types of tasks that are outsourced are usually those that can be well-specified; however, nowdays, the functions sent offshore range from routine IT transactions to increasingly higher end, knowledge-based processes. • Countries such as India, the Philippines, etc, offer “offshoring”,an alternative to in-house systems development • It raises the issue of what to send offshore, and what to keep within your enterprise MIS organization.

46. Strategic Grid for Decisions on Outsourcing Strategic Importance Y N Y Competitive Advantage N

47. Strategic Grid for Decisions on Outsourcing Strategic Importance Y N Insourcing Leverage (K-How to partners) Y Competitive Advantage Strategic Alliance Outsourcing N

48. Summary: Factors driving outsourcing • Cost savings • Qualified IT staff are difficult to find and retain • By bringing in outside expertise, management needs to focus less on IS operations and more on the information itself. • Outsourcers are specialists, should understand how to manage IS staff more effectively. • Outsourcers may have larger IS resources that provide greater capacity on demand. • Outsourcing can help a company overcome inertia to consolidate data centers that could not be consolidated by an internal group, or following a merger or acquisition.

49. E-Strategy Implementation • Business alliances and virtual corporations virtual corporation (VC) • An organization composed of several business partners sharing costs and resources for the production or utilization of a product or service • co-opetition Two or more companies cooperate together on some activities for their mutual benefit, even while competing against each other in the marketplace

50. EC Strategy Implementation Issues (cont.) A Virtual Corporation (VC) is an Organization Composed of several Business Partners that Uses Information Technology to Link/Share People, Assets, Ideas, Costs, and Resources for the purpose of producing a product or service. Virtual Companies are Adaptable and Opportunity- Exploiting Organizations Providing World-Class Excellence in Their Competencies and Technologies.