E-commerce and corporate strategy: an executive perspective

1. E-commerce and corporate strategy: an executive perspective Ku-chung Chang, Joyce Jackson, Varun Grover Information & Management 2023 (2002) 1-13 Natalia Em 2004.9.22 POSMIS

2. Contents • Introduction • Background & propositions • Methodology • Results & discussions • Limitations • Implications for research

3. Introduction Objective: To what extent large successful companies adopted an EC posture that was integrated with there corporate strategy Incentives: 1. Most Internet players couldn’t find profitability by operating only as EC organization 2. Established companies that viewed EC as a stand-alone appendage to their business would be less likely to succeed. Methodology: Content analysis of CEO’s letter to the Shareholder

4. Background and propositions (1/3) • The perceived importance of EC EC Benefits But: Adopting e-commerce doesn’t ensure competitive advantage, because technologies are open and available to competitors E-commerce must be integrated with strategic orientation • Efficiency • Benefits • Internal • External Effective Benefits Proposition 1: There’s a positive relationship between a firm’s perception of the importance of e-commerce as reflected in corporate strategy and firm performance.

5. Background and propositions (2/3) • Market orientation [Naver & Slater, 1990] Customer Orientation Inter- functional coordination Competitor Orientation “The set of beliefs that puts the customer’s interest in the first place” The ability and will to identify, analyze and respond to competitors’ actions Proposition 2: Companies that are market oriented will outperform those that are non-market oriented in the e-commerce market space.

6. Background and propositions (3/3) • Balanced vs. skewed market orientation • Customer and competitor orientation are equally important and a company should keep a balanced mix of both • However, due to limited processing capability of humans, managers generally take an orientation geared towards either the customer or competitor Proposition 3: Companies pursuing a balanced orientation strategy would outperform those pursuing a skewed strategy in the e-commerce market place.

7. Methodology (1/3) • Sample • 9 industries potential to use EC (banking, non-banking financial, electronics, retailing, manufacturing, consumer products, fuel, food, metal & mining • 145 companies within each industry • 3 sub-groups (extremely large, large, medium) • Data collection • EC: Internet, B2B,B2C,EDI,EFT,on-line, e- strategy, etc. • Customer-oriented strategy: customer, customization, relationship, loyalty, service, etc • Competitor-related strategy: production differentiation, market niche, cost reduction, market share, etc.

8. Methodology (2/3) • Content analysis • words, concepts and semantic relationships EC Count> 0? Read 1st letter Obtain total word count in letter Obtain EC word count Obtain total word count in letter A Create a ratio of variables counts to total count Obtain a count of each of the variables Analyze isolated paragraphs based on the coding schemes Isolate EC related paragraphs Obtain total word count in letter Read next letter A

9. Methodology (3/3) • Financial performance Halo effect • well-performing firms can positively affect the perception of EC importance • Performance measurements • Company profit growth (CPG) • Gross Profit Margin (GPM) • Control variables • Industry type: market growth, market turbulence, competitive intensity, technological turbulence; • Firm size (total number of employees, total sales): very large, large and medium

10. Results and discussions • Prepositions 1 & 2 were supported • Preposition 3 was partially supported • in competitive environment firms may have increased productivity, but may be compelled to pass benefits, in terms of profitability, thus GPM may not be able to detect this redistribution effect

11. Limitations • The study adopts a cross-sectional research methodology • The study adopts a cross-sectional research methodology • CEO’s perception concerning the importance of e-commerce may be influenced by the firm’s past performance • The partial support of P3 suggests that high-level financial performance measures may not reveal the true value of e-commerce initiatives

12. Implications for research • CEO’s letter is a useful research tool for analyzing relationship between strategy and e-commerce, and organizational performance • Financial statistics (firm’s online revenues, online sales, etc.) for detailing specific instances of performance • Usage of lagged analysis over 2 or more year Conclusion:E-commerce coupled with a balanced marketing orientation is positively related to organizational performance