Chapter 5

E-Business Strategy
E-Commerce and E-Business

Electronic Commerce (EC)

Electronic Commerce (EC) is where business
transactions take place via telecommunications
networks, especially the Internet.
Electronic commerce describes the buying and
selling of products, services, and information via
computer networks including the Internet.

Electronic Commerce (EC)

The infrastructure for EC is a networked
computing environment in business, home, and
government.

Electronic Commerce (EC)

E-Business describes the broadest definition of
EC. It includes customer service and intra-business
tasks. It is frequently used interchangeably with
EC.

What is an Intranet?
When internet technology Allows for immediate
transfer of technology
is used to create a private
between locations.
network within a
company an intranet is
formed.
Provides information
such as product
pricing, inventory lists,
production schedules,
and data bases for
remote employees.

What is an Extranet?
An extranet is formed when Customers can order
on line.
the company allows
outsiders into the intranet Reduces paperwork
Minimizes errors
pages.
Provides better
customer services
Shortens delivery
times
Support distributors

Why an E-Commerce Strategy

Electronic Markets
A market is a network of interactions and
relationships where information, products,
services, and payments are exchanged.
The market handles all the necessary transactions.

Why an E-Commerce Strategy

Electronic Markets
An electronic market is a place where shoppers and
sellers meet electronically.

Why an E-Commerce Strategy

Electronic Markets
In electronic markets, sellers and buyers negotiate,
submit bids, agree on an order, and finish the
execution on- or off-line.

Electronic Commerce is Interdisciplinary

Marketing
Computer sciences
Consumer behavior
and psychology
Finance
Economic
Production/Logistic

Electronic Commerce is Interdisciplinary

Management
information systems
Accounting and
auditing
Management
Business law and
ethics

Competition in Electronic Commerce

Impacts on
competition

Lower buyers search cost

Speedy comparisons
Differentiation
Lower price
Customer service
Digital products lack normal
wear and tear

Competition in Electronic Commerce

Perfect competition
Enable many buyers and sellers to enter the
market at little or no cost (no barriers to entry)
Not allowing any buyers and sellers to
individually influence the market
Make certain products homogeneous (no
product differentiation)
Supply buyers and sellers with perfect
information about the products and the market
participants and conditions

What is Strategy
Strategy is the roadmap to
success.
Strategy answers the
question what business are
you in?
Strategy determines how
you compete within the
market you are in.
Strategy focuses the
company in a unified
direction.

Competitive Advantage Can Be Achieved By:

Concentrating on particular market segments
Offering products which differ from the competition
(product differentiation)
Using alternative distribution channels and
manufacturing processes
Employing selective pricing and fundamentally
different cost structures

Generic Strategies
Porter gives us a little more help in
strategy formulation by providing three
generic strategies which, if successfully
implemented, can allow a firm to stake
out a defended position in the
marketplace.
These strategies are:

Overall cost leadership

Differentiation
Focus

1. Overall Cost Leadership

Efficient scale facilities
Vigorous cost reductions
Cost control
Overhead control
Avoid marginal
accounts
Minimize R&D
Minimize service
Minimize
advertising

2. Differentiation
Key idea: Create something about your product
that is perceived industry wide as being unique

Gucci Men's Fashion Show Fall Winter 2009/10 Full Show

2. Differentiation

Bases for Differentiation:

Quality
Delivery
Credit and Terms
Service
Training

Reputation / Brand
Image
Tech. Information
The Actual Product
Price

Definitions
Differentiation can provide insulation against
competitors because of brand loyalty by
customers and a resulting lower sensitivity to
price

3. Focus
Key Idea:
Focus on a particular buyer group, segment
of the product line, or geographic market

Definitions
This strategy is built around serving a particular target
market very well.
The premise is that a firm is able to serve its narrow
strategic target more effectively or efficiently than
competitors who are competing more broadly
By effectively implementing this strategy a firm can
achieve differentiation by better meeting the market
needs or lower costs through specialization, or both

Focus your message

Pick your theme to say something special/unique
about your firm, and stick to it.

Unique product
Speedy Delivery
Super Service
Stay Committed!

Generic Strategies Summary

Company and Competitive Analysis

Monitoring, evaluating, disseminating of
information from the external and internal
environments
SWOT Analysis

Strengths
Weaknesses
Opportunities
Threats

SWOT
Strengths those factors of the company that
provide for its success.
A good reputation, quality products or low cost
producer.
Weaknesses those factors that are a
disadvantage for the company.
A high cost producer, a high employee turnover, or
much competition.

SWOT
Opportunities those factors that are outside the
companys control, but are areas in which they
could capitalize.
A changing demographic profile, e-business allowing
for wider distribution of products.
Threats those items outside the control of the
company and that may hinder it.
Items such as new laws, a recession or increased
competition.

Company and Competitive Analysis

INTERNAL
EXTERNAL FACTORS
FACTORS

Strengths (S)

Weaknesses (W)

Opportunities (O)

SO Strategies
Generate strategies
here that use
strengths to take
advantages of
opportunities

WO Strategies
Generate strategies
here that take
advantage of
opportunities by
overcoming
weaknesses

Threats (T)

ST Strategies
Generate strategies
here that use
strengths to avoid
threats

WT Strategies
Generate strategies
here that minimize
weaknesses and
avoid threats

Strategic Questions
The Company

What is your uniqueness?

Where are you vulnerable?
Why are you losing existing customers?
Where is the greatest value created in the
company?
What are the most common objections you
hear from customers?

Strategic Questions
The competition
Who are the top 3
competitors?
What are their
strengths?
Where are they
vulnerable?
Where can you
attack?
How do you compare
on price, service,
quality, etc?

The market
What are 3 important
trends?
How is the industry
changing?
How many market
segments do you
serve?
Where is the greatest
growth potential?
Which of your
customers are doing
well and why?

Competitive Strategies
Defensive strategies
takes place in the firms own current market
position as a defense against possible attack
by a rival
Lower the probability of attack
Divert attacks to less threatening avenues
Lessen the intensity of an attack
Make competitive advantage more sustainable

The Advantage for Small Businesses

Inexpensive source of information
Inexpensive way of advertising
Inexpensive way of conducting market research
Inexpensive way to build (or rent) a storefront
Lower transaction cost
Niche market, specialty products are the best
Image and public recognition can be
accumulated fast
Inexpensive way of providing catalogs
Inexpensive way to reach worldwide customers

The Risks and Disadvantages for Small Businesses

Lack of expertise in legal issues, advertisement
Lack of resources to fully exploit the Web

Success Factors for Small Businesses

Niche products
Small volume
Capital investment must be small
Inventory should be minimal or non-existent
Electronic payments schema exist
Payment methods must be flexible

Success Factors for Small Businesses

Logistical services must be quick and reliable
The Web site should be submitted to directory-based
search engine services like Yahoo in a correct way
Join an online service or mall and do banner exchange
Design a Web site that is functional and provides all
needed services to consumers

Summary
Successful firms will integrate the E-business
into their companys strategy.
Used properly, E-business will be one more
method of increasing income and profits.
It is just a matter of time before it will be as
common as the fax, cell-phone and digital
camera.