1. E-Commerce Strategy and Global EC

2. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall strategy A broad-based formula for how a business is going to accomplish its mission, what its goals should be, and what plans and policies will be needed to carry out those goals 13-1

3. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall STRATEGY AND THE WEB ENVIRONMENT – Porter’s Competitive Forces Model and Strategies The five major forces in an industry that affect the degree of competition and, ultimately, the degree of profitability are: 1. Threat of entry of new competitors 2. Bargaining power of suppliers 3. Bargaining power of customers or buyers 4. Threat of substitute products or services 5. Rivalry among existing firms in the industry 13-2

4. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 13-3

5. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall – The Impact of the Internet – e-commerce strategy (e-strategy) The formulation and execution of a vision of how a new or existing company intends to do business electronically – Strategic Planning for IT and EC strategic information systems planning (SISP) A process for developing a strategy and plans for aligning information systems (including e-commerce applications) with the organization’s business strategies 13-4

6. 1. Make sure you have a market. Who is going to buy your products online? The best place to start is your current customer base. Will going online make life easier for them? Are you going to save them time and money by allowing them to purchase online? You probably have a basic web site already; are you getting requests for online buying from potential customers? It is never truly possible to judge in advance whether a market exists, but there should be at least some indication of a demand for an online presence. 2. Use a clicks-and-mortar strategy if possible. The clicks-and-mortar approach is the most effective and economic. This combines offline resources, such as store brands, channels with an online e-commerce presence. The other option - a pure play dot-com - is now rare. Consumers are looking for brands that they know and trust. They also like the fact that a business has a physical presence, a place where they can go if something goes wrong. Pure play dot-coms found that they had to spend a lot of money on marketing just to maintain awareness. 3. Integrate the shopping experience. Consumers look to the web primarily for information; they may use the web site initially to find out about the product, then buy by phone or in person. However, repeat purchasers more familiar with the web are more likely to buy online. They will be able to do this more easily if their personal details and purchase history can be stored for subsequent purchases.

7. 4. Plan how you will deal with content, pricing, stock management, fulfillment, support, payment, returns, support and security. These are the basics of any business, but there can be added complications online. You need to address the following: Content: This must be updated frequently. Pricing: If you are selling direct for the first time, you may have problems with your distributors and retailers, who will not want you to underprice them. If you are selling brands by other manufacturers, there may be problems involved in selling in foreign marketplaces. Are you going to offer prices in a range of currencies? If so, which? Stock Management: Are you going to use the same stock base to sell online and through your physical distribution channels? If so, you need an integrated stock management system. Fulfillment: Precise information on order status is essential. Each order should have a tracking number so that the customer can get information on the status of the order right up to the point of delivery. If you haven't sold by mail order before, you will have to plan for packaging and fulfillment. This can be a major cost, and needs careful management. If, for cost or other reasons, you decide not to fulfill to certain countries, you must make that very clear on the web site.

8. Payment: How will people pay? What credit cards will you accept? Returns: What is your return policy? Studies indicate that returns can be a major cost for e-commerce. Support: How will you support the products you sell online? You must plan for a support section on your web site to answer basic questions from customers. Will you also offer telephone and e-mail support? Security: Security will be a central issue in an e-commerce strategy. Fraud and hacking of computer systems are ever-growing problems. 5. Develop an easy-to-use purchase process. An alarming number of consumers abandon their attempts to buy online. One of the reasons given is a badly designed purchase process. Your purchase process must be reliable and very easy to use. It is a good idea to tell the customer upfront how many steps there are in the purchase process, and to keep that information prominently displayed at the top of the web page. An example of the purchase steps is as follows: "Shopping cart - Account - Shipping - Payment - Verify - Confirm."

9. 6. Consider localization issues. If you want to sell seriously to foreign marketplaces, you will have to localize the web site. Studies indicate that, without localization, sales will be minimal. More worryingly, returns are very high because of misunderstanding by people who are purchasing in a foreign language. 7. Consider customer relationship management and personalization. The Internet offers many opportunities for a better understanding of customer's behavior and for developing a closer relationship with them. Customer relationship management and personalization systems allow for the collection and application of comprehensive information to create a more customized environment for the consumer. While the potential for such systems is substantial, they are complex and difficult to implement, and, if not professionally managed, can lead to the abuse of consumer privacy. 8. Make sure that you buy the right software. There is no need to do all the work internally, as there is now a wide range of quality software for e-commerce. 9. Make sure you have a team in place. An e-commerce web site needs day-to-day maintenance. Technical problems must be fixed, new content must be published and old content removed, and the web site must be constantly marketed. 10. If you don't market, they won't come. Opening up an e-commerce web site is rather like setting up shop at the North Pole: nobody knows you are there. It is not enough just to register with search engines; you will need an aggressive marketing campaign to make your target market aware of what you have to offer. The ideal situation is a seamless integration with marketing strategy of the offline business.

10. http://www.ecommerce-strategy-online.com/

11. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 13-10

12. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall THE STRATEGIC PLANNING PROCESS – strategy initiation The initial phase of strategic planning in which the organization examines itself and its environment Specific outcomes from this phase include: – Company analysis and value proposition » value proposition The benefit that a company’s products or services provide to a company and its customers – Core competencies – Forecasts – Competitor (industry) analysis 13-11

13. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall – 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 this phase include: – Business opportunities – Cost–benefit analysis – Risk analysis, assessment, and management – Business plan 13-12

14. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall – strategy implementation The development of detailed, short-term plans for carrying out the projects agreed on in strategy formulation Specific activities and outcomes from this phase include: – Project planning – Resource allocation – Project management 13-13

15. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall – strategy assessment The continuous evaluation of progress toward the organization’s strategic goals, resulting in corrective action and, if necessary, strategy reformulation 13-14

16. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 13-15

17. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall STRATEGIC PLANNING TOOLS – SWOT analysis A methodology that surveys external opportunities and threats and relates them to internal strengths and weaknesses – competitor analysis grid A strategic planning tool that highlights points of differentiation between competitors and the target firm 13-16

18. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall – 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 – balanced scorecard (BSC) A management tool that assesses organizational progress toward strategic goals by measuring performance in a number of different areas 13-17

19. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall business plan A written document that identifies a company’s goals and outlines how the company intends to achieve the goals and at what cost business case A business plan for a new initiative or large, new project inside an existing organization 13-18

20. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 13-19

21. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 13-20

22. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 13-21

23. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall REPRESENTATIVE 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? STRATEGY IN THE WEB 2.0 ENVIRONMENT AND IN SOCIAL NETWORKING 13-22

24. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall SELECTING EC OPPORTUNITIES DETERMINING AN APPROPRIATE EC APPLICATION PORTFOLIO MIX – The BCG Model and an Internet Portfolio Map 13-23

25. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 13-24

26. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 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 13-25

27. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall ISSUES IN STRATEGY FORMULATION – How to Handle Channel Conflict – How to Handle Conflict Between the Offline and Online Businesses 13-26

28. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Pricing Strategy – Price comparison is easier – Buyers sometimes set the price – Online and offline goods are priced differently – Differentiated pricing can be a pricing strategy versioning Selling the same good, but with different selection and delivery characteristics 13-27

29. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall E-STRATEGY IMPLEMENTATION PROCESS – 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 time – Start with a Pilot Project – Allocate Resources – Manage the Project 13-28

30. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall STRATEGY IMPLEMENTATION ISSUES – Application Development – Outsource: What? When? To Whom? outsourcing The use of an external vendor to provide all or part of the products and services that could be provided internally – Partners’ Strategy 13-29

31. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall – 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 13-30

32. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall – Redesigning Business Processes and BPR business process reengineering (BPR) A methodology for conducting a comprehensive redesign of an enterprise’s processes – business process management (BPM) Method for business restructuring that combines workflow systems and redesign methods; covers three process categories—people-to-people, systems-to-systems, and systems-to-people interactions 13-31

33. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall THE OBJECTIVES OF ASSESSMENT – Measure the extent to which the EC strategy and ensuing projects are delivering what they were supposed to deliver – Determine if the EC strategy and projects are still viable in the current environment – Reassess the initial strategy in order to learn from mistakes and improve future planning – Identify failing projects as soon as possible and determine why they failed to avoid the same problems on subsequent projects 13-32

34. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall MEASURING RESULTS AND USING METRICS – EC Metrics metric A specific, measurable standard against which actual performance is compared – corporate (business) performance management (CPM, BPM) Advanced performance measuring and analysis approach that embraces planning and strategy 13-33

35. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall Strategic planning in CPM includes the following eight steps: 1.Conduct a current situation analysis 2.Determine the planning horizon 3.Conduct an environment scan 4.Identify critical success factors 5.Complete a gap analysis (performance vs. goals) 6.Create a strategic vision 7.Develop a business strategy 8.Identify strategic objectives and goals 13-34

36. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall – strategy map A tool that delineates the relationships among the key organizational objectives for all four balanced scorecard (BSC) perspectives – Web analytics The analysis of clickstream data to understand visitor behavior on a Web site 13-35

37. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall BENEFITS AND EXTENT OF OPERATIONS – The ability to do business at any time, from anywhere, and at a reasonable cost BARRIERS TO GLOBAL EC – Cultural Issues – Culture and Language Translation – Administrative Issues – Geographic Issues and Localization – Economic Issues 13-36

38. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall BREAKING DOWN THE BARRIERS TO GLOBAL EC – Be strategic – Know your audience – Localize – Think globally, act consistently – Value the human touch – Clarify, document, explain – Offer services that reduce barriers 13-37

39. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 13-38

40. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 1.What is the strategic value of EC to the organization? 2.What is the scope of e-business planning? 3.How to relate the EC activities with business objectives and metrics? 4.Should the dot-com activities be spun off as a separate company? 13-39

41. Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall 5.How should the e-business scope evolve? 6.What are the benefits and risks of EC? 7.Why do we need an EC planning process? 8.How can EC go global? 9.How to manage the EC project? 13-40