1. 5. E-BUSINESS STRATEGY

2. Slide 5.2 Dave Chaffey, E-Business and E-Commerce Management, 4 th Edition, © Marketing Insights Limited 2009 LEARNING OUTCOMES Follow an appropriate strategy process model for e-business Produce and select e-business strategies Outline alternative strategic approaches to achieve e-business goals.

3. Slide 5.3 Dave Chaffey, E-Business and E-Commerce Management, 4 th Edition, © Marketing Insights Limited 2009 MANAGEMENT ISSUES How does e-business strategy differ from traditional business strategy? How should we integrate e-business strategy with existing business and IS strategy? How should we evaluate our investment priorities and returns from e- business?

4. Slide 5.4 Dave Chaffey, E-Business and E-Commerce Management, 4 th Edition, © Marketing Insights Limited 2009 MICHAEL PORTER ON THE INTERNET The key question is not whether to deploy Internet technology – companies have no choice if they want to stay competitive – but how to deploy it Porter, M. (2001) Strategy and the Internet, Harvard Business Review, March 2001, 62–78.

5. Slide 5.5 Dave Chaffey, E-Business and E-Commerce Management, 4 th Edition, © Marketing Insights Limited 2009 DEFINITIONS OF STRATEGY What is strategy? A plan of action designed to achieve a particular goal. -wikipedia  ‘Defines how we will meet our objectives’  ‘Sets allocation of resources to meet goals’  ‘Selects preferred strategic option to compete within a market’  ‘Provides a long-term plan for the development of the organization’

6. Figure 5.1 Different forms of organizational strategy

7. Slide 5.7 Dave Chaffey, E-Business and E-Commerce Management, 4 th Edition, © Marketing Insights Limited 2009 SELL-SIDE E-COMMERCE STRATEGY (CHAPTERS 8 & 9) Sell-side e-commerce is a channel strategy Objectives for online contribution percentage should drive our strategy Our e-commerce strategy defines how we should  Hit our channel leads and sales targets  Acquisition, Conversion, Retention, Service, Profitability  Communicate benefits of using this channel  Prioritize products available through channel  Prioritize audiences targeted through channel  Select partners for this channel Channel strategy thrives on differentials BUT, need to manage channel integration

8. Slide 5.8 Dave Chaffey, E-Business and E-Commerce Management, 4 th Edition, © Marketing Insights Limited 2009 BUY-SIDE E-COMMERCE STRATEGY (CHAPTERS 6 & 7) OR E-SUPPLY CHAIN MANAGEMENT STRATEGY Buy-side e-commerce strategy is about maximizing operational efficiencies while improving customer service quality Operational efficiency KPIs should drive our strategy Our buy-side e-commerce strategy defines how we should  Automate internal processes  Link internal resource management systems with external purchasing systems  Prioritize suppliers / partners collaborating using this channel  Prioritize applications for E-SCM – create a roadmap Involves selection of appropriate strategic partners

9. Slide 5.9 Dave Chaffey, E-Business and E-Commerce Management, 4 th Edition, © Marketing Insights Limited 2009 Figure 5.2 Relationship between e-business strategy and other strategies

10. Slide 5.10 Dave Chaffey, E-Business and E-Commerce Management, 4 th Edition, © Marketing Insights Limited 2009 WHAT HAPPENS WHERE THERE IS NO E-BUSINESS STRATEGY? Missed opportunities for additional sales on the sell-side and for more efficient purchasing on the buy-side Fall-behind competitors in delivering online services – may become difficult to catch-up, for example, Tesco, Dell Poor customer experience from poorly integrated channels

11. Figure 5.3 BA communicates its online value proposition (www.britishairways.com) Source: Based on Revolution (2005)

12. Figure 5.4 A generic strategy process model

13. Figure 5.5 Dynamic e-business strategy model Source: Adapted from Kalakota/Robinson, EBUSINESS 2.0 © 2001, 1999 Pearson Education, Inc. Reproduced by permission of Pearson Education, Inc.

14. Slide 5.14 Dave Chaffey, E-Business and E-Commerce Management, 4 th Edition, © Marketing Insights Limited 2009 STRATEGIC ANALYSIS Collection and review of information about the external environment and internal resources  Immediate competition  Wider environment  Internal resources

15. Figure 5.6 Elements of strategic situation analysis for the e-business

16. Slide 5.16 Dave Chaffey, E-Business and E-Commerce Management, 4 th Edition, © Marketing Insights Limited 2009 STAGE MODELS OF E-BUSINESS DEVELOPMENT Earlier in chapter 1 a stage model was presented, which could be helpful in assessing the business’s position and resources

18. Figure 1.13 A simple stage model for buy-side and sell-side e-commerce

19. Slide 5.19 Dave Chaffey, E-Business and E-Commerce Management, 4 th Edition, © Marketing Insights Limited 2009 PORTFOLIO ANALYSIS Portfolio analysis is helpful for assessing current e-business capability and future e-business strategies The next slide show an example for B2B case

20. Slide 5.20 Dave Chaffey, E-Business and E-Commerce Management, 4 th Edition, © Marketing Insights Limited 2009 Figure 5.7 Summary applications of a portfolio analysis for an example B2B company

21. Slide 5.21 Dave Chaffey, E-Business and E-Commerce Management, 4 th Edition, © Marketing Insights Limited 2009 SWOT ANALYSIS Strengths, weaknesses, opportunities, and Threats analysis is a useful tool for analyzing the current situation and for formulating strategies Next slide shows an example of e-business SWOT analysis

22. Slide 5.22 Dave Chaffey, E-Business and E-Commerce Management, 4 th Edition, © Marketing Insights Limited 2009 Figure 5.8 SWOT analysis

23. Slide 5.23 Dave Chaffey, E-Business and E-Commerce Management, 4 th Edition, © Marketing Insights Limited 2009 BALANCE INTERNAL AND EXTERNAL A e-Business strategy must be based on the balance between internal capability and external forces Next slide presents different options based on such a balance

24. Slide 5.24 Dave Chaffey, E-Business and E-Commerce Management, 4 th Edition, © Marketing Insights Limited 2009 Figure 5.9 Matrix for evaluation of external capability against internal capability Source: Perrott (2005)

25. Slide 5.25 Dave Chaffey, E-Business and E-Commerce Management, 4 th Edition, © Marketing Insights Limited 2009 COMPETITIVE ENVIRONMENT ANALYSIS PORTER’S FIVE FORCES Source: adapted with the permission of The Free Press, a Division of Simon & Schuster, Inc., from COMPETITIVE STRATEGY: Techniques for Analyzing Industries and Competitors by Michael E. Porter. Copyright © 1980, 1998 by The Free Press. All rights reserved

26. Slide 5.26 Dave Chaffey, E-Business and E-Commerce Management, 4 th Edition, © Marketing Insights Limited 2009 ACTIVITY – IMPACT OF INTERNET For one of the industries below, assess how the Internet has changed the competitive forces, for example, has it increased or decreased power of suppliers and customers? Industries:  Banking  Supermarkets  Retail  Travel  Oil industry  Rail industry

27. Slide 5.27 Dave Chaffey, E-Business and E-Commerce Management, 4 th Edition, © Marketing Insights Limited 2009 Figure 5.11 Elements of strategic objective setting for the e-business

28. Slide 5.28 Dave Chaffey, E-Business and E-Commerce Management, 4 th Edition, © Marketing Insights Limited 2009 HOW CAN E-BUSINESS CREATE VALUE Following methods were proposed  Adding values—better quality products and services  Reducing cost—making the business process more efficient  Managing risks—improve information flow and availability  Creating new reality—create new way that products and or services

29. Slide 5.29 Dave Chaffey, E-Business and E-Commerce Management, 4 th Edition, © Marketing Insights Limited 2009 Figure 5.12 An evaluation tool relating information to business value. An organization’s use of information on each axis can be assessed from 1 to 10 Source: Marchand et al. (2002)

30. Slide 5.30 Dave Chaffey, E-Business and E-Commerce Management, 4 th Edition, © Marketing Insights Limited 2009 E-BUSINESS AND COMPETITIVE ADVANTAGE Read Case Study 5.1 on pages 286-287 Discuss questions on p.287

31. Slide 5.31 Dave Chaffey, E-Business and E-Commerce Management, 4 th Edition, © Marketing Insights Limited 2009 SMART OBJECTIVES The 2nd phase of strategy development process will produce objectives. The objectives should be SMART  Specific  Measurable—both efficient and effective  Actionable  Relevant  Time-Related Example—ref. p. 289, table 5.6

32. Slide 5.32 Dave Chaffey, E-Business and E-Commerce Management, 4 th Edition, © Marketing Insights Limited 2009 Figure 5.13 Arena Flowers (www.arenaflowers.com)

33. Slide 5.33 Dave Chaffey, E-Business and E-Commerce Management, 4 th Edition, © Marketing Insights Limited 2009 SMART OBJECTIVES Online Revenue Contribution--% of company revenue directly generated through online transactions B2B should consider indirect revenue Conversion Modeling for B2C  Using various conversion rates to measure the effectiveness of e-marketing  Ref. p. 291 Box 5.5

34. Slide 5.34 Dave Chaffey, E-Business and E-Commerce Management, 4 th Edition, © Marketing Insights Limited 2009 Figure 5.14 An example of conversion modelling for an online retailer

35. Slide 5.35 Dave Chaffey, E-Business and E-Commerce Management, 4 th Edition, © Marketing Insights Limited 2009 CASE STUDY Read page 292-293 Case study 5.2 Answer the questions on page 293 Activity 5.2, pages 293

36. Slide 5.36 Dave Chaffey, E-Business and E-Commerce Management, 4 th Edition, © Marketing Insights Limited 2009 Figure 5.15 Grid of product suitability against market adoption for transactional e-commerce (online purchases)

37. Slide 5.37 Dave Chaffey, E-Business and E-Commerce Management, 4 th Edition, © Marketing Insights Limited 2009 SCORECARD FOR OBJECTIVE SETTING Scorecard is a comprehensive framework for setting and monitoring business performance. Metrics includes  Customer issues  Internal efficiency  Financial, and  Innovation Example—p. 295, table 5.8

38. Slide 5.38 Dave Chaffey, E-Business and E-Commerce Management, 4 th Edition, © Marketing Insights Limited 2009 Figure 5.16 Elements of strategy definition for the e-business

39. Slide 5.39 Dave Chaffey, E-Business and E-Commerce Management, 4 th Edition, © Marketing Insights Limited 2009 STRATEGY DEFINITION Various models were suggested for defining e-business strategies Ref. pp.296-297 The next slide shows a strategy selection model based on portfolio analysis proposed by EConsultancy

40. Slide 5.40 Dave Chaffey, E-Business and E-Commerce Management, 4 th Edition, © Marketing Insights Limited 2009 Figure 5.17 Matrix for evaluating e-business strategy alternatives Source: Econsultancy (2008a)

41. Slide 5.41 Dave Chaffey, E-Business and E-Commerce Management, 4 th Edition, © Marketing Insights Limited 2009 D. 1 CHANNEL PRIORITY “Getting the right mix of bricks and clicks” The next slide shows various options

42. Slide 5.42 Dave Chaffey, E-Business and E-Commerce Management, 4 th Edition, © Marketing Insights Limited 2009 Figure 5.18 Strategic options for a company in relation to the importance of the Internet as a channel

43. Slide 5.43 Dave Chaffey, E-Business and E-Commerce Management, 4 th Edition, © Marketing Insights Limited 2009 D. 1 CHANNEL PRIORITY Right-Channeling  Integrate different channels to reach the right person at the right time using the right channel with a relevant offer, product or message Right-channeling example  Ref. pp. 299-300, table 5.9

44. Slide 5.44 Dave Chaffey, E-Business and E-Commerce Management, 4 th Edition, © Marketing Insights Limited 2009 D.2 MARKET AND PRODUCT DEVELOPMENT A key strategic considering is which market to target and using what products The next slide shows a matrix with different options to grow market and product development

45. Slide 5.45 Dave Chaffey, E-Business and E-Commerce Management, 4 th Edition, © Marketing Insights Limited 2009 Figure 5.19 Using the Internet to support different growth strategies

46. Slide 5.46 Dave Chaffey, E-Business and E-Commerce Management, 4 th Edition, © Marketing Insights Limited 2009 D.3 POSITIONING AND DIFFERENTIATION Once the market is identified, we need to define the best position of our e-commerce services relative to competitors. Research suggests that customer brand perception is determined by this formula Value = (product quality * service quality)/ (price * fulfillment time) Strategies can be developed around this formula

47. Slide 5.47 Dave Chaffey, E-Business and E-Commerce Management, 4 th Edition, © Marketing Insights Limited 2009 D.3 POSITIONING AND DIFFERENTIATION Commonly used Criteria that customers use to benchmark e-tailor performance is presented in table 5.10 on p. 304

48. Slide 5.48 Dave Chaffey, E-Business and E-Commerce Management, 4 th Edition, © Marketing Insights Limited 2009 ACTIVITY Read Activity 5.3 on pages 305-306 Discuss the questions 1 and 2 on page 305

49. Slide 5.49 Dave Chaffey, E-Business and E-Commerce Management, 4 th Edition, © Marketing Insights Limited 2009 D.4 BUSINESS, SERVICE AND REVENUE MODEL Review business model (ch2) This decision is closely related or similar to D3. However, here it emphasizes new models, e.g., Amazon “Only the paranoid will survive” (Andy Grove) Also need to notice that many companies are successful by sticking to a single business model not far from their original vision

50. Slide 5.50 Dave Chaffey, E-Business and E-Commerce Management, 4 th Edition, © Marketing Insights Limited 2009 D.5 MARKETPLACE RESTRUCTURING Companies should also look at the new opportunities created by Internet in this regard  Disintermediation  Re-intermediation  Counter-mediation Mini Case Study 5.4 3M on pp. 308-309 What did 3M do in taking advantages of market restructuring?

51. Slide 5.51 Dave Chaffey, E-Business and E-Commerce Management, 4 th Edition, © Marketing Insights Limited 2009 D.6 SCM CAPABILITIES This might be considered together with decision 5 but could be examined on its own  How to interact more closely with suppliers?  What to be covered in this e-relationship?  Participate in marketplace to reduce cost?

52. Slide 5.52 Dave Chaffey, E-Business and E-Commerce Management, 4 th Edition, © Marketing Insights Limited 2009 D.7 INTERNAL KM CAPABILITIES What is knowledge?  Patterns, rules, and contexts that provide a framework for creating, evaluating, and using information.  Can be tacit (undocumented) or explicit (documented) knowledge What is knowledge management?  Set of processes to create, store, transfer, and apply knowledge

53. Slide 5.53 Dave Chaffey, E-Business and E-Commerce Management, 4 th Edition, © Marketing Insights Limited 2009 D.8 ORGANIZATIONAL RESOURCES AND CAPABILITIES What changes does the organization need to make? Available options  In-house division (integration)  Joint venture (mixed)  Strategic partnership (mixed)  Spin-off (separation)

54. Slide 5.54 Dave Chaffey, E-Business and E-Commerce Management, 4 th Edition, © Marketing Insights Limited 2009 D.8 ORGANIZATIONAL RESOURCES AND CAPABILITIES Questions & Discussion  What are the pros and cons for in-house option?  When the separation option would be a good choice?

55. Slide 5.55 Dave Chaffey, E-Business and E-Commerce Management, 4 th Edition, © Marketing Insights Limited 2009 D.8 ORGANIZATIONAL RESOURCES AND CAPABILITIES Other changes to be examined  Strategy process and performance improvement  E-commerce infrastructure  Senior management support  Market integration  Online market focus An e-commerce capability maturity model  Ref. p. 311, Table 5.11

56. Slide 5.56 Dave Chaffey, E-Business and E-Commerce Management, 4 th Edition, © Marketing Insights Limited 2009 Figure 5.20 Elements of strategy implementation for the e-business Strategy Implementation

57. Slide 5.57 Dave Chaffey, E-Business and E-Commerce Management, 4 th Edition, © Marketing Insights Limited 2009 FAILED E-BUSINESS STRATEGIES Some reasons were articulated  Overestimate the speed that the marketplace adopts the dot.com innovation  Timing errors  Lack of creativity  Free services  Over ambition

58. Slide 5.58 Dave Chaffey, E-Business and E-Commerce Management, 4 th Edition, © Marketing Insights Limited 2009 FAILED E-BUSINESS STRATEGIES Usually there are more fundamental problems than surfaced Major problems occurred at the strategy development and implementation process  Situation Analysis—insufficient research on demand and completive forces  Object setting—no objectives or unrealistic  Strategy definition—poor business models  Implementation—problems with customer services and product quality, etc.

59. Slide 5.59 Dave Chaffey, E-Business and E-Commerce Management, 4 th Edition, © Marketing Insights Limited 2009 IMPLEMENTATION SUCCESS FACTORS FOR SMES Content—effective presentation Convenience—usability Control—manageable and under control Interaction Community Price sensitivity Brand image Commitment Partnership Process Improvement Integration

60. Slide 5.60 Dave Chaffey, E-Business and E-Commerce Management, 4 th Edition, © Marketing Insights Limited 2009 CASE STUDY Read the case study on pages 316-318 Answer the questions on page 318

61. Slide 5.61 Dave Chaffey, E-Business and E-Commerce Management, 4 th Edition, © Marketing Insights Limited 2009 IS STRATEGY AND E-BUSINESS STRATEGY These two are closely related. Business-alignment approach—top down. Start with business strategy and make IS strategy so that it aligns with business strategy Business-impact approach—bottom up. Examine new IS opportunities to see if they can bring positive impact to business strategy

62. Slide 5.62 Dave Chaffey, E-Business and E-Commerce Management, 4 th Edition, © Marketing Insights Limited 2009 THE PRODUCTIVITY PARADOX Research indicates that there is a week or poor correlation between IS investment and business performance It’s agreed that IT investment has a strong positive relationship with sales, assets and equity but not with net income. Investment on IT staff and user training does show positive relationship on income It’s strongly recommended that more attention should be paid to business process change when implementing e-business strategy

63. Slide 5.63 Dave Chaffey, E-Business and E-Commerce Management, 4 th Edition, © Marketing Insights Limited 2009 NEXT CLASS Read the Econsultancy interview on pages 606-608 of chapter 11 Answer the following questions What is Arena Flowers’ business model? How competitive is Arena Flowers on the market and Why? Is this a business of bricks & mortar, bricks & clicks, or pure play? Are they planning to change that soon and why? Do they do cross-selling? How successful and why? Is their site developed and maintained in-house or outsourced?

64. Slide 5.64 Dave Chaffey, E-Business and E-Commerce Management, 4 th Edition, © Marketing Insights Limited 2009 NEXT CLASS Econsultancy interview (Continues) Is their site developed and maintained in-house or outsourced? What’s the pros and cons of their approach? What else can we learn from this interview?