1. Chapter 5
E-business strategy

2. 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. 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. 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. Definitions of Strategy
What is strategy?
A plan of action designed to achieve a particular goal.
‘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. The imperative for e-business strategy
Think about the implications if e-business strategy is not clearly defined. The following may result:
Missed opportunities from lack of evaluation of opportunities or insufficient resourcing of e-business initiatives. These will result in more savvy competitors gaining a competitive advantage;
Inappropriate direction of e-business strategy (poorly defined objectives, for example, with the wrong emphasis on buy-side or process support)

7. Limited integration of e-business at a technical level resulting in silos (separate organizational team with distinct responsibilities which does not work in an integrated manner with other teams) of information in different systems.
Resource wastage through duplication of e-business development in different functions and limited sharing of best practice. For instance, each business unit or region may develop a separate web site with different suppliers without achieving economies of scale.

8. Figure 5.1 Different forms of organizational strategy

9. To help avoid typical problems of implementing e-business in traditional organization, organizations will want e-business strategy to be based on corporate objectives such as which markets to target and targets for revenue generation from electronic channels.
It is logical that e-business strategy should support corporate strategy objectives and it should also support functional marketing and supply chain management strategies.
However, these corporate objectives should be based on new opportunities and threats related to electronic network adoption.

10. 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

11. 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 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

12. Figure 5.2 Relationship between e-business strategy and other strategies

13. 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, Dell
Poor customer experience from poorly integrated channels

14. Figure 5. 3 BA communicates its online value proposition (www
Figure 5.3 BA communicates its online value proposition ( Source: Based on Revolution (2005)

15. Figure 5.4 A generic strategy process model

16. 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.

17. Strategic Analysis
Collection and review of information about the external environment and internal resources
Immediate competition
Wider environment
Internal resources

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

19. 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

20. Figure 1.13 A simple stage model for buy-side and sell-side e-commerce20

21. 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. Figure 5.8 SWOT analysis

23. 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. Figure 5.9 Matrix for evaluation of external capability against internal capability
Source: Perrott (2005)

25. 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. 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. Figure 5.11 Elements of strategic objective setting for the e-business

28. 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. Figure 5. 12 An evaluation tool relating information to business value
Figure 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. Figure 5.16 Elements of strategy definition for the e-business

31. Strategy Definition
Various models were suggested for defining e-business strategies

32. 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

33. 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.

34. Implementation Success Factors
Content—effective presentation
Convenience—usability
Control—manageable and under control
Interaction
Community
Price sensitivity
Brand image
Commitment
Partnership
Process Improvement
Integration

35. 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

36. 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