E-business

MANAGEMENT AND STRATEGY

Contents
Introductions E-business technology E-business markets and models E-business economics E-marketing Management of e-business

Contents (cont.)
E-business strategy : Formulation E-business strategy : Implementation E-business strategy : Evaluation The internet : law, privacy and security E-business in the future
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Introduction
Defining e-business The development of the new economy Types of e-business and related industries The growth of e-business Use of the internet Key people
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Defining e-business
E-business can be defined as the use of the internet to network and empower business processes, electronic commerce, organizational communication and collaboration within a compay and with its customers, suppliers, and other stakeholders E-business utilise the internet, intranets, extranets and other networks to support their commercial processes
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 E-commerce is the buying and selling, marketing and servicing of products and services via computer networks E-business and e-commerce are often used synonymously Chaffey (2004) e-commerce can best be conceived as a subser of e-business
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The relationship between ebusiness and e-commerce

Buying and selling electronically Electronic distribution Online customer service Electronic marketing Secure transactions Automation of processes Electronic collaboration

Sell-side e-commerce Buy side e-commerce

The development of the new economy

Don Tapscott (1997) : Digital Economy: Promise And Peril In The Age Of Networked Intellegency, memaparkan bagaimana perekonomian bergeser menuju pada perekonomian baru yang disebut sebagai digital economy Perekonomian baru (digital economy) adalah perekonomian yang didasarkan pada ilmu pengetahuan, sehingga disebut juga dengan knowledge economy
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 This terms are used to define the distinct contributions to the economy through use of the internet, digital technology, or information and communications technology (ITC). Called new economy based on entrepreneurship in knowledge creation and sharing, innovation and creativity, and utilising information technology for developing and selling new products and services.
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 The new economy has been boosted by the development of the infrastructure that supports the internet, ICT and digital technology The internet has opened up the possibility of exchanging information, products and services around the globe without any restrains of time or distance. This has given rise to the concept of the boundaryless organization
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Digital Convergence
Content Interactive Multimedia Computing Experience Communications

Hal penting dalam perubahan teknologi terhadap tata kehidupan manusia adalah dapat disatukannya tiga kegiatan pokok yaitu computing, communication dan content dalam satu sistem yaitu multimedia.

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An Internet Framework (Hanson, 2000)

Digital

Networked
Individuals

Marketing

Internet Marketing

Technology

Economics

The Web is fundamentally about individuals using a network to access digital products
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Key differences between the old and new economy

Isues
Economy factors Market Competition Structure Value driver Business Factor Organisation Production Growth driver Technology driver Competitive advantage Relationships Hierarchy Mass Stable National

Old economy

New economy
Dynamic and complex International and global Service Human capital Network or virtual Flexible, customised Innovation and knowledge Digital and electronic Innovation, speed, quality Collaborative Dynamic, segmented Multiple and flexible Lifelong learning Collaborative Insecure, opportunistic 13

Manufacturing Physical capital

Capital and labour Machines Low cost/high production Independent Stable Specialised Trade orientated Confrontational Stable

Consumer factors
Tastes Skills Educational needs Workplace relations Nature of employment

How Business Practices are Changing

Table 2-1: Old Economy vs. New Economy (Kotler, 2004)
Old Economy
Organize by product units Focus on profitable transactions Look primarily at financial scorecard Focus on shareholders Marketing does the marketing Build brands through advertising Focus on customer acquisition No customer satisfaction measurement Overpromise, underdeliver

New Economy
Organize by customer segments Focus on customer lifetime value Look also at marketing scorecard Focus on stakeholders Everyone does the marketing Build brands through behavior Focus on customer retention and growth Measure customer satisfaction and retention rate Underpromise, overdeliver

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Procter & Gambles Reflect.com site allows customers to design their own beauty products

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Types of e-business and related industries Radically transformed by development of the internet and related technologies.
B2B B2C C2C

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The growth of e-business

Firm
Ease of access Ease of use Access to wider market Marketing economies Improved logistics Automated processes Network externalities Improved costomer knowledge Lower costs Increased efficiency

Consumers
Ease of access Ease of use Access to market information Lower prices Personalisation Customisation Network externalities One-to-one customer service Access to internet community empowerment
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Potential economies of scale Convenience

Use of the Internet

%
Check e-mail
Product information Surfing/browsing Look up facts Plan travel Buy online Local information News Instant messaging Download music

%
Play games
Bank online Look for jobs School material Download videos Listen to radio Chat Genealogy Distance learning Read blogs

92
87 83 78 77 74 66 61 56 51

48
45 42 40 33 33 26 21 21 17

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Key People
Tim Berners Lee Marc andreeson Bill gates Michael Dell Jerry Yang Pierre Omidyar Jeff Bezos
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Key Business Decisions

Product What type of product should be produced? Production How should the product be produced? Promotion How should the product be promoted? Financing How should the company obtain funds to finance the cost of producing the product? 20

Business Decisions

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Key Stakeholders
Owners
Entrepreneurs Co-owners Stockholders

Creditors Employees
Managers

Suppliers Customers
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Interaction among Owners, Employees, Customers, Suppliers, and Creditors

Exhibit 1.1

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Creating a Business Idea

Identify a competitive advantage. Differentiate the product or service from competitors. Determine necessary resources. Assess feasibility of the idea.

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e-business e-business
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business online

Success Stories
Dominos Pizza Managhans bought bankrupt pizza parlor Started with little funding Now generates sales of $1 billion per year Jeremys Micro Batch Ice Cream Applied microbrewery concept to ice cream Makes ice cream in small batches, sold in limited editions Glow Dog, Inc. Sells light-reflective clothing for pets After two years, average annual sales of $1 million 26

Lessons to Remember
Successful businesses do not require a great invention.
Many focus on making life more convenient for customers.

Some business ideas will fail but entrepreneurs can learn from failures and make revisions.

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Impact of Technology
Technology defined
Knowledge or tools used to produce products and services

Information technology
Represents over 1/3 of the growth in U.S. output Reduces cost of producing products Workers in technology industries earn more than workers in other industries. 28

Impact of Technology
E-business or e-commerce
Use electronic communications to produce or sell products and services
Sales to individual customers B2B e-business: transactions between a business and its suppliers Generates $301 billion in revenue and creates 1.2 million jobs each year

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Successful EBusinesses
Started out small Created to sell a product or service that was not offered by competitors Transformed how traditional firms conducted business
Improved communication with customers Improved information flow Improved efficiency Complemented traditional business operations
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E-Business Examples
Amazon
Online seller of books, music and other products Low overhead costs allow price discounting

Yahoo!
Internet search engine and the most visited site on the Web Offers variety of services - free email, web page hosting, custom-designed start-up pages Generates revenue by selling advertising

eBay
Online auction service
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Key Functions of Business

Management
Means by which employees and other resources are used by the firm

Marketing
Means by which products and services are developed, priced, distributed, and promoted to customers

Finance
Means by which firms obtain and use funds for their business operations
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Key Functions of Business

Accounting
Summary and analysis of the firms financial condition Used to make various business decisions

Information systems
Information technology, people, and procedures that provide appropriate information to make effective decisions
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How Business Decisions Affect a Firms Earnings

34 Exhibit 1.4

Common Business Decisions

Management Decisions
What equipment is needed?
How many employees should be hired? How can employees be motivated to perform well?

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Common Business Decisions

Marketing Decisions
What price should be charged? Should the product be changed to be more appealing to customers? Should the firm use advertising or some other strategy to promote its product?
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Common Business Decisions

Finance Decisions
Should financial support come from the sale of stock or from borrowing money or some combination? Should the firm attempt to obtain borrowed funds for a short-term or long-term period?
Should the firm invest funds in a new business project?
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Which is more important for developing an e-presence: the agility of a pure click company, or the well defined and readily identifiable resources of a traditional brick and mortar company?
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A Business Plan
Detailed description of the proposed business
Description of the product or service Types of customers the business would attract Competition Facilities needed for production

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Developing a Business Plan

Assess the Business Environment
Economic environment Industry environment Global environment

Develop Management Plan

Organizational Structure Production Human Resources
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Developing a Business Plan

Marketing Plan
Target Market Product Characteristics Pricing Distribution Promotion

Financial Plan
Financing Feasibility
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Online Resources
Advice and basic information
Yahoos Small Business site American Express Small Business Administration

Financing Options
Quicken Small Business Garage.com The Elevator

Business Planning Software

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Assessing a Business Plan

Potential revenue Potential demand for product or service Potential expenses Profit potential

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Expected Monthly Expenses of CHC

44 Exhibit 1.6

Expected Performance of CHC in the First Year

45 Exhibit 1.7