Electronic Marketing

Electronic Marketing Chapter 17The Edge of Business-to-Business Activities 2004 Joel Reedy and Shauna Schullo

The Short History of E-Business • The Internet was created only 30 years ago • Electronic mail was introduced in 1972 • In the mid-eighties, desktop operating systems (PCs) surfaced and the modern day Internet began to take shape • In 1990, the first World Wide Web software was developed by Tim Berners-Lee • In the early ‘90s commercial dial-up services were introduced 2004 Joel Reedy and Shauna Schullo

The Short History of E-Business • In 1992, the real e-business economy began • By 1993, over 100 countries had an online presence • Within the year, commercial users outnumbered academic users for the first time • By the mid-nineties, e-commerce became attractive to business • In 1997, virtually every major company, organization, government and news service had a presence on the Web 2004 Joel Reedy and Shauna Schullo

The Short History of E-Business • Vertical companies such as Amazon.com took the next step and actually started performing business on the Web • Some would call the first wave of e-business “brochureware” • In the next wave, supply chain issues started to be addressed 2004 Joel Reedy and Shauna Schullo

How are B2B Firms Taking to the Web? • Common objectives, performance metrics, and work cultures are changing • A transition to e-business has a much better environment for success • E-business is driving nearly 30% of all business partners and value chain interactions among large organizations • Exponential growth is expected as the e-business model extends to all areas of the marketplace 2004 Joel Reedy and Shauna Schullo

How are B2B Firms Taking to the Web? • E-business grew at a steady pace of less than 25% annually among pioneers • The number of organizations using e-business is nearly doubling each year • Compared to the growth of e-commerce, e-business is being implemented at a far faster rate • B2B will encompass about $5 trillion in economic activity in 2005 • Only half the companies surveyed by META Group perceived e-business to have a significant impact on their industries to date 2004 Joel Reedy and Shauna Schullo

What Might E-B2B Bring the American Economy? • Experts forecast that in the e-commerce sector e-business-to-business will dominate e-business-to-consumer revenues by approximately 90% in the year 2003 • The total world wide value of goods and services purchased by business through e-commerce solutions will reach 5.8 trillion by 2006, with e-marketplaces capturing the largest share of the market 2004 Joel Reedy and Shauna Schullo

Conversion from Traditional Business Practices to an E-Business Proposition • The notion that e-business is the same as e-commerce is not holding true • Both feature online communications and performance • E-business is the business portion of e-commerce • It is growing more complex to organize • Its confusing terminologies and unfounded expectations are hindering proper e-business and e-marketing implementation 2004 Joel Reedy and Shauna Schullo

Conversion from Traditional Business Practices to an E-Business Proposition • E-commerce • Deals with using the Internet, digital communications, and IT applications to enable the buying/selling process • E-business • Involves the continuous optimization of an organization’s value proposition and value-chain positions through the adoption of digital technology and the use of the Internet as the primary communications medium 2004 Joel Reedy and Shauna Schullo

Conversion from Traditional Business Practices to an E-Business Proposition There are two approaches to making the transition to e-business • Take an evolutionary approach • Use new technology to enhance your current business model • Take a transformational approach • Reconfigure your business and value propositions with the technology to reconfigure and reinvent your business 2004 Joel Reedy and Shauna Schullo

Conversion from Traditional Business Practices to an E-Business Proposition • Tetra Pak made several consequential decisions in embracing a e-business model. • Focus on an evolutionary introduction to e-business • Focus on specific areas where e-business should be introduced • It is crucial for top management to be involved at every stage • Customer satisfaction is the core goal being pursued by the evolution of e-business. It can be divided into four parts: • Accessibility • Interaction • Online transactions • Collaboration with customers 2004 Joel Reedy and Shauna Schullo

E-Business Continues to Grow in Size • Estimates of e-business sales totals in the present and future abound • Many e-businesses established for four or five years are still losing money • Only in the fourth quarter of 2001 did Amazon.com finally post a profitable quarter since opening in July 1995 • Estimates from e-commerce consulting firms are divergent on visions of the future 2004 Joel Reedy and Shauna Schullo

E-Business Continues to Grow in Size • Some observations and predictions: • B2B is growing at aggressive rates through 2004 • 42% of B2B e-commerce sites are profitable among those online 2 or more years • 92% market through traditional channels, 8% are Internet only • 98% of all large companies will sell goods over the Internet in 2000 • 1/3 of U.S. companies made purchases online in 1998, 2/3 in 2000 • $16 billion was spent in B2B auctions 2004 Joel Reedy and Shauna Schullo

E-Business Continues to Grow in Size • Managers must try to harness and control online expansion of e-commerce • Growth can be a company’s best friend or worst nightmare • B2B operations are a buzz among venture capitalists • E-business opportunities are shaped by the needs of the online market and the imagination of e-marketers 2004 Joel Reedy and Shauna Schullo

E-Business Continues to Grow in Size • Success in e-commerce requires sharing information in real-time • Companies must integrate dissimilar information systems across organizational boundaries • Until technology exists to make this transition seamless, standardization will play a role in the infrastructure of e-commerce 2004 Joel Reedy and Shauna Schullo

For What Size Company is an E-Business Strategy Appropriate? • The e-business entity for an existing organization is limited only by the imagination of the marketing manager and marketing assistance • A thorough analysis of the systems of product inputs and outputs will determine at what level e-business systems can be integrated into the overall action 2004 Joel Reedy and Shauna Schullo

For What Size Company is an E-Business Strategy Appropriate? • 66% of small business owners are using the Internet as a tool to help them run their business (OPEN Small Business Network) • The economic recession has affected 4 out of 5 small businesses • 40% surveyed are less profitable and 40% report flat profits • 96% still plan to maintain or increase Internet expenditures in 2003 • After launching a Web site, 41% report an increase in sales volume 2004 Joel Reedy and Shauna Schullo

For What Size Company is an E-Business Strategy Appropriate? Small Businesses continued… • 55% say their Web sites have generated a profit or paid for themselves • 26% say they will create Web sites in 2003 • 54% will add a list of products or services to their Web site in 2003 • 53% plan to change the design of their Web site 2004 Joel Reedy and Shauna Schullo

What is the Basic Definition of E-Business? • E-commerce is the broad term for doing business transactions online • It is necessary to rethink, restructure, and re-deploy marketing resources, which is difficult for new or nonusers of e-business strategies and tools • As businesses incorporate Internet technology into their core business processes, they start to achieve a new and real plateau of business value 2004 Joel Reedy and Shauna Schullo

What is the Basic Definition of E-Business? • Companies employ a multi-purposeful Web that can resolve existing operation problems such as: • Introducing new methods of distribution online • Integrating innovative MIS-types of customer purchasing and fulfillment abilities • The indispensable capacity for instant communication between partnering clients and suppliers • Proficiency for connecting back-end data systems • Perform commerce transactions instantly and accurately 2004 Joel Reedy and Shauna Schullo

What is the Basic Definition of E-Business? • Rethinking the model of the company’s supply chain and adopting a partnering approach is necessary to move to e-business • Activities of the supply chain have been placed in 3 categories • Upstream activities • Internal operations • Downstream activities 2004 Joel Reedy and Shauna Schullo

Application of E-Business to Services • E-business strategy can be equally beneficial to the upstream and downstream activities of a service’s supply chain management and implementation • For example: • Portals and Banks • Hosting on virtual store fronts • Cataloging wares in searchable databases (i.e.. Yahoo! Store and iMall) • Most portals and small business sites are offering e-business services as a loss-leader with the objective of building their user base 2004 Joel Reedy and Shauna Schullo

Procurement and Payment Without Paper • Development is accelerating in allowing the supply chain to operate successfully with electronic records, producing great savings in data storage and in paperless transactions using digital money • The process of selection, ordering, shipping, and payment, to name a few, are being migrated into Web-based systems to: • Create forms for inventory selection • Order placement and balancing • Issuing advance shipping notices • And more 2004 Joel Reedy and Shauna Schullo

Procurement and Payment Without Paper • Operating cost savings are substantial • At present the Web procurement market is responding to two basic needs: • Robust database links • ASP outsourcing that can relieve new adopters of burdens of implementing complex solutions 2004 Joel Reedy and Shauna Schullo

Procurement and Payment Without Paper • Key purchasers or Influencers of Web procurement solutions report: • 75% are currently buying, or plan to within 12 months, office products and services through their Web-based procurement system • 52% indicated their organization currently buys, or plans to buy within 12 months, corporate travel-related products • 60% rated Web-based product searching features as somewhat or extremely important in the selection of Web procurement implementation • 57% rated “industry tailored” procurement as a somewhat or extremely important factor in their choice of procurement solutions 2004 Joel Reedy and Shauna Schullo

The Advantages of Electronic Transfer Infrastructure • Speed of information exchange • More control over information • Greatly reduced handling • Emerging digital currency and process standards for transactions 2004 Joel Reedy and Shauna Schullo

The Disadvantages of Electronic Transfer Infrastructure • The cost of technology integration • Lack of clear and immediate financial returns for purchasing managers • Existing wholesale and retail relationships 2004 Joel Reedy and Shauna Schullo

The Practice of Partnering • Marketers in both startup and existing businesses wanting to expand exposure on the Web should give serious thought to seeking the advice of e-consultants that can produce proof of strategic and structured counsel to firms in the early stages of Web operations development • Complementary business partners can bring fresh ideas and other competencies to make the e-business operate more smoothly 2004 Joel Reedy and Shauna Schullo

The Practice of Partnering • Two major questions: • How can you leverage the new medium to better market yourself and take advantage of the new windows of opportunity? • How do you seamlessly integrate online initiatives with existing business processes and technology infrastructure? 2004 Joel Reedy and Shauna Schullo

The Practice of Partnering • Partner with a firm that embraces a strategic, structured and pragmatic approach to uncovering and capitalizing on e-business opportunities • No one firm will have all the expertise needed • Identify and set priorities for the processes best suited for an online world, and measure the results against strategic objectives • Look for demonstrated business process expertise • Select a partner with proven project management methodologies and technical skills 2004 Joel Reedy and Shauna Schullo

The Practice of Partnering • Market e-initiatives carefully by spending time on the planning and rollout phase of the project to ensure all stakeholders are on board from day one • Success requires looking for partners who understand marketing from the business process viewpoint • Consider ROI • The electronic marketplace has created a whole new series of incremental measurements; use them 2004 Joel Reedy and Shauna Schullo

The Advantages of E-Business • Improved efficiency of communications • Improved company performance • Reduced cost of doing business 2004 Joel Reedy and Shauna Schullo

The Disadvantages of E-Business • The uncertainty of secure transactions • The fear of the unknown business model • The uncertainty of the monetary outlay 2004 Joel Reedy and Shauna Schullo

The Principal Benefits of E-Business: Expediting Paperless, Cashless Commerce • The speed and accuracy of electronic communications coupled with the ability to settle financial transactions online make e-business an attractive, labor saving business system • E-business’ greatest opportunities are to be found in the control of back-office and supply chain systems • E-business improves performance by connecting disparate value chains that encourage new relationships 2004 Joel Reedy and Shauna Schullo

The Principal Benefits of E-Business: Expediting Paperless, Cashless Commerce • E-business provides information instantaneously, helping executives identify their best profit centers, modify existing business processes and create new ones • E-business permits organizations to create strategic alliances and partnerships, and to outsource functions and processes that can be carried out more efficiently by others 2004 Joel Reedy and Shauna Schullo

The Principal Benefits of E-Business: Expediting Paperless, Cashless Commerce • So how do e-business systems work? • Input forms are Web-enabled so that companies not using EDI protocols can still complete the forms to initiate transactions among buyers or suppliers • They can include business forms for • Tracking orders • Creating and changing original orders • Hosting Web-based catalogs • For closed loop, secure paperless electronic funds transfer to produce timely debit or credit transactions with related invoice and adjustment information 2004 Joel Reedy and Shauna Schullo

The Principal Benefits of E-Business: Expediting Paperless, Cashless Commerce • So how do e-business systems work? • The second portion includes online payment systems that can • Accept credit cards and arrangements • Interface with Automated Teller Machines • Process business operations such as payroll disbursements and EDI services 2004 Joel Reedy and Shauna Schullo

Shifting to Brand Management by Building a Modular E-business • With the strategy and tactics electronic business systems now have available, the logical conclusion is a shift to modular business • A company could concentrate solely on managing its brand, outsourcing all physical aspects of the business to others • As these activities are moved to specialist third parties, the core management activities will change • The truth of e-business is that it changes businesses and merges industries • It destroys industries and appears unstoppable 2004 Joel Reedy and Shauna Schullo

Electronic Marketing