Week 2: Electronic Commerce Business Strategy for Competitive Advantage V.F. Kleist, Ph.D.

Why have an electronic commerce strategy?

Electronic Commerce Business Strategy for Competitive Advantage  Review of Last week, What is Electronic Commerce, business models for success (Rappa)  Notes from text Chapter 2, (Amor)  Forces that drive use of Electronic Commerce  Changes that Electronic Commerce might yield for a business, + and –  Impacts of Electronic Commerce on Firm  Electronic Commerce Strategy and Implementation (Turban, et al, 2000)

Business issues of EC (Turban, et al, 2002, Chpt. 1)  New way of doing business  Different if selling to customer v. corporations  Has economic impact on competition  New role of intermediaries  Using EC in supply chain management  Can improve customer service  Can use EDI via the internet  Can change methods of marketing

Electronic Markets (Turban, et al. Chpt. 1)  New vehicle for business  Not a building, but a network location where business interactions occur  Where shoppers and sellers meet  Requires transfer of payments  Participants are brokers, buyers, sellers  Participants may never even meet  Means of interconnection varies between parties, can change by event or transaction  Trace flow of how an electronic market works.

Wal Mart example of IOS (Turban, et al. Chpt. 1)  World’s largest retailer, $100 B in sales  Coordinates production, marketing, finance via computer networks  Provides each supplier a monthly profit and loss statement on their products  Uses Collaborative Forecasting and Replenishment Ecommerce Model (CFAR)

Preparing the Online Business, Chpt. 2, Amor  Preparing the Online Business  Competitor Analysis on the Internet  The Fourth Channel  Paradigms in the New Economy  Return on Investment  Driving Business Process Reengineering  Designing, Developing and Deploying the System

Benefits to Electronic Commerce (Greenstein and Feinman 2000, p. 3, direct quote)  Internet and web-based electronic commerce is more affordable than traditional EDI  Internet and web-based electronic commerce allows more business partners to be reached than with traditional EDI  Internet and web-based electronic commerce can reach a more geographically dispersed customer base  Procurement processing costs can be lowered  reductions in inventories  lower cycle times  better customer service  lower sales and marketing costs

Reasons to Move to EC (Amor, 2002)  Expand market reach  Visibility  Responsiveness  New Services  Strengthen business relationships  Cost- Reduction  Channel Conflicts

EC Benefits to Organizations (Turban, et al. chpt. 1)  Expands markets  Decreases cost of paper based info  Reductions in inventories  Pull supply chain management  Customization of products  Reduces time between outlay of capital and receipt of products and services  Supports BPR  Reduces telecommunications costs  Improves image, improved customer service, newfound business partners

EC Benefits to Consumers (Turban, et al, Chpt. 1)  Shop 24 hours a day  More choices  More products  Less expensive products  Quick delivery  Electronic communities  Facilitates competition  Virtual auctions  Work at home  Lower prices  Access to public services

Negatives to EC (Turban, et al., 2002, Chpt. 1)  Lack of security, reliability, standards, protocols  Insufficient bandwidth  Software development tools still evolving  Difficult to integrate EC software with back office platform  Vendors need more hardware and software, and these products need to be supported  Cost to develop is high, hard to see payback  Lack of trust, privacy, security cause resistance  Legal issues unclear

Ecommerce Business Strategies

 How much business on web in next 12 months, two years?  Fully digital, web based business, or just fourth channel for your firm (e.g., face to face, telephone or mail)?  How fast is the company going to grow?  What are your expectations for return on investment? Cost reduction?

Planning for Ecommerce (Amor, 2002)  Find a champion  Plan for change  Define a pilot project  Estimate the costs  Measure productivity  Re-engineer business processes  Learn as you go  Prepare for resistance  Prepare for disaster  Create a dark site

Issues of Web Marketing (Amor, 2002)  Brands  Change  Conciseness  Dynamic Sites  Finances  Free Givaways  Global Village  Color schema  File size  Live Events  Niche Markets  Promotion  Syndication  Technology  Feedback  FAQ  Navigation Aids

Why is the web so compelling in a marketing sense? (Bruner 1998, Chapter 2)  Interactive  Personal  Infocentric  Instantaneous  Measurable  Flexible  Interlinked  Economical  Resources

Enterprise.com: Market Leadership in the Information Age (Papows 1998)  The Network Centric Era and the Changing Workplace  The Web: Forger of the New IT Economics  The Web/Virtual Office Based Era  The Market Facing Enterprise  Knowledge Management: The Sustainable Competitive Advantage  Converging and Transforming Industries  The Great American Economic Surprise  The Race For Global Leadership

New Rules for the New Economy (Kelly, 1998)  Embrace the swarm  Increasing returns  Plentitude, not scarcity  Follow the free  Feed the web first  Let go at the top  From places to spaces  No harmony. All flux  Relationship tech  Opportunities before efficiencies

Outlook for the Future (based on Amor)  Consumer devices  Privacy and Security  Next Generation Internet  Brokers  Total automation of business  Social impacts  Electronic commerce vs..coms

Discussion:  How can electronic commerce reduce inventory costs?  How can electronic commerce reduce production cycle time?  How can electronic commerce enhance customer service?  How can electronic commerce help a firm reach its customers in a very low-cost fashion?  Does Internet access make employees more or less productive?  Give an example of electronic commerce in the supplier’s value chain.

Internet Building Blocks (PriceWaterhouseCoopers, 2001 Technology Forecast)  Applications Programming Interfaces  Server side programming languages and environments  Web Server Products  Improving Web server performance  Client side technologies  Schemas, frameworks and vocabularies  Internet related products and services