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E-Business Strategies
Bob SmithAssociate Professor/Extension Specialist
Dept. of Wood Science and Forest ProductsVirginia Tech
E-Commerce: Impacting the Way We do Business
October 1-2, 2001, Nashville TN
OutlineOutline
Why the InternetE-business Strategy ???Determining Competitive AdvantageImplementing Strategy
Why the Internet?
“When history is written, the creation of the Internet may be ranked alongside Johann Gutenberg’s printing press and Marconi’s radio as among the major advancements in human communication.”
Roanoke Times, March 1, 1997
What do these technologies have in common with the
Internet?Printing pressTelephoneAutomobileAirplaneTelevision
Over-night deliveryFacsimile machineCellular phonePersonal computer
Printed Material
Mass reproductionUnknown audienceWider geographical areaOne-way communication
Telephone
Immediate communicationInteractive two-way
communicationCustomer prospectingWider geographical area
Planes, Trains & Automobiles
Personal communicationWider geographical baseTwo-way communicationPerception of above-
average service
Television
Wide, mass audienceOne-way communication60 second sound biteFirst visual electronic
medium
Over-night Delivery
Provide immediate serviceCreate perception of customer careJIT management systems
Federal ExpressFederal Express
FAX - iT
Immediate transfer of written information
Above average serviceOne-way promotionCloser to the customer
Cellular Phone
MobilityInstant access to
customersAbove average service24 hour contact
Personal Computer
Faster serviceCustomer informationData basesInstant communication
What do they have in Common?
Wider distribution of information Uniform information Assist in marketing function of
company Many were interactive Allow for impression of above
average service They all have become standards
in the industry
InternetInternet
DefinitionsDefinitions
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.
The infrastructure for EC is a networked computing environment in business, home, and government.
E-Business describes the broadest definition of EC. It includes customer service and intrabusiness tasks. It is frequently used interchangeably with EC.
Electronic Commerce, 2000
What is an Intranet?What is an Intranet?
When internet technology is used to create a private network within a company an intranet is formed.
Allows for immediate transfer of technology between locations.
Provides information such as product pricing, inventory lists, production schedules, and data bases for remote employees.
What is an Extranet?What is an Extranet?
An extranet is formed when the company allows outsiders into the intranet pages.
Customers can order on line.
Reduces paperwork Minimizes errors Provides better customer
services Shortens delivery times Support distributors
What’s NeededDesignated computerSoftware to communicate with InternetA connection into a network that accesses the
Internet
OrOr* Hire a commercial service and* Hire a commercial service andhave a connection to the networkhave a connection to the network
Cost
$1500 computer$300 SoftwareHome page design - $100/hr - ?Commercial Internet access - >$100/month
Current UsersCurrent UsersAverage age is 4045% female45% married1/3 computer field, 1/4
educational & 20% professional
>40% have made purchase over $100
Source:Source:
www.gvu.gatech.edu/user_surveys/survey-1999www.gvu.gatech.edu/user_surveys/survey-1999
What’s Being Sold Computer software Computer hardware Books Music Gifts Travel Clothes >$100 billion sold in 1999
What’s Being Sold?What’s Being Sold?
Source: Forester Research Inc. 1998Source: Forester Research Inc. 1998
Travel26%
Gifts6%
Books/Music7%
Other26%
Computer Products35%
Technology Update(It took this many years to reach 50
million users)
Technology Update(It took this many years to reach 50
million users)
Radio - 38 yearsTelevision - 13 yearsInternet - 4 years
Why an E-Commerce Strategy
The Benefits ofElectronic Commerce
The Benefits ofElectronic Commerce
Expands the marketplace to national and international markets
Decreases the cost of creating, processing, distributing, storing and retrieving paper-based information
Allows reduced inventories and overhead by facilitating “pull” type supply chain management
The pull type processing allows for customization of products and services which provides competitive advantage to its implementers
Benefits to Organizations
Electronic Commerce, 2000
Benefits to Organizations Benefits to Organizations
Reduces the time between the outlay of capital and the receipt of products and services
Supports business processes reengineering (BPR) efforts
Lowers telecommunications cost - the Internet is much cheaper than value-added networks (VANs)
Electronic Commerce, 2000
Benefits to CustomersBenefits to Customers
Enables customers to shop or do other transactions 24 hours a day, all year round from almost any location
Provides customers with more choicesProvides customers with less expensive products
and services by allowing them to shop in many places and conduct quick comparisons
Allows quick delivery of products and services in some cases, especially with digitized products
Electronic Commerce, 2000
Benefits to CustomersBenefits to Customers
Customers can receive relevant and detailed information in seconds, rather than in days or weeks
Makes it possible to participate in virtual auctionsAllows customers to interact with other customers in
electronic communities and exchange ideas as well as compare experiences
Electronic commerce facilitates competition, which results in substantial discounts.
Electronic Commerce, 2000
Benefits to SocietyBenefits to Society
Enables more individuals to work at home, and to do less traveling for shopping, resulting in less traffic on the roads, and lower air pollution
Allows some merchandise to be sold at lower prices benefiting the poor ones
Enables people in Third World countries and rural areas to enjoy products and services which otherwise are not available to them
Facilitates delivery of public services at a reduced cost, increases effectiveness, and/or improves quality
Electronic Commerce, 2000
Why?Why?
Works 24 hours a dayOffers 2 way communicationUnlimited accessInteractive advertisingSupports current business efforts
A market is a network of interactions and relationships where information, products, services, and payments are exchanged. The market handles all the necessary transactions.
An electronic market is a place where shoppers and sellers meet electronically.
In electronic markets, sellers and buyers negotiate, submit bids, agree on an order, and finish the execution on- or off-line.
Electronic Markets
Electronic Commerce, 2000
MarketingComputer sciencesConsumer behavior and
psychologyFinanceEconomicProduction/Logistic
Management information systems
Accounting and auditing
ManagementBusiness law and
ethics
Electronic Commerce is Interdisciplinary
Electronic Commerce is Interdisciplinary
Electronic Commerce, 2000
Major Business PressuresMarket and
economic pressures
Strong competition
Global economy
Regional trade agreements (e.g. NAFTA)
Extremely low labor cost in some countries
Frequent and significant changes in markets
Increased power of consumers
Societal and
environmental pressures
Changing nature of workforce
Government deregulation of banking and other services
Shrinking government budgets subsides
Increased importance of ethical and legal issues
Increased social responsibility of organizations
Rapid political changes
Technological pressures Rapid technological obsolescence
Increase innovations and new technologies
Information overload
Rapid decline in technology cost vs. performance ratio
Electronic Commerce, 2000
Competition in Electronic Commerce
Competition in Electronic Commerce
Impacts on competitionLower buyers’ search costSpeedy comparisonsDifferentiationLower priceCustomer serviceDigital products lack normal wear and tear
Electronic Commerce, 2000
Competition in Electronic Commerce
Competition in Electronic Commerce
Perfect competitionEnable 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 marketMake certain products homogeneous (no product
differentiation)Supply buyers and sellers with perfect information about the
products and the market participants and conditions
Electronic Commerce, 2000
Competition in Electronic Commerce
Competition in Electronic Commerce
Observations regarding competitivenessThere will be many new entrantsThe bargaining power of buyers is likely to increaseThere will be more substitute products and servicesThe bargaining power of suppliers may decreaseThe number of industry competitors in one location will
increase
Electronic Commerce, 2000
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.
The goal is to develop a sustainable competitive advantage. There are generally two forms of competition, Operating effectiveness (production) or Competitive position (marketing)
The goal is to develop a sustainable competitive advantage. There are generally two forms of competition, Operating effectiveness (production) or Competitive position (marketing)
Competitive Advantage Can Be Achieved By:Competitive Advantage Can Be Achieved By:Concentrating on particular market segments
(niche markets)Offering products which differ from the
competition (product differentiation)Using alternative distribution channels and
manufacturing processesEmploying 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:
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
DifferentiationFocus
Overall Cost Leadership
Efficient scale facilities
Vigorous cost reductions
Overall Cost Leadership
Efficient scale facilities
Vigorous cost reductions
Cost controlOverhead controlAvoid marginal accountsMinimize R&DMinimize serviceMinimize advertising
Differentiation
Key idea: Create something about your product that is perceived industry wide as being unique
Bases for Differentiation:
Differentiation
Key idea: Create something about your product that is perceived industry wide as being unique
Bases for Differentiation:QualityDeliveryCredit and TermsServiceTraining
Reputation / Brand ImageTech. InformationThe Actual ProductPriceEtc.
Differentiation can provide insulation against competitors because of brand loyalty by customers and a resulting lower sensitivity to price
Differentiation can provide insulation against competitors because of brand loyalty by customers and a resulting lower sensitivity to price
Focus
Key Idea: Focus on a particular buyer group, segment of the product line, or geographic market
Focus
Key Idea: Focus on a particular buyer group, segment of the product line, or geographic market
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
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.
Focus your message
Pick your theme to say something special/unique about your firm, and stick to it.
Unique productSpeedy DeliverySuper Service??Stay Committed!
Generic Strategies Summary
Generic Strategies Summary
For Successful Strategic Competition, Select Arenas That Are:
For Successful Strategic Competition, Select Arenas That Are:
Sheltered from changes in the business environment
Advantaged to provide protection from intense global competition
Electronic Commerce, 2000
Determining Competitive Advantage
Strategic PlanningStrategic Planning
Industry and competitive
analysis
Strategy formulation
Strategy reassessment
Implement-ationplan
Electronic Commerce, 2000
Company and Competitive AnalysisCompany and Competitive Analysis
Monitoring, evaluating, disseminating of information from the external and internal environments
SWOT Analysis
Strengths Weaknesses
OpportunitiesThreats
Electronic Commerce, 2000
SWOTSWOT
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.
Opportunities – those factors that are outside the company’s control, but are areas in which they could capitalize. A changing demographic profile, competition closing plants or 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.
Strengths (S) Weaknesses (W)INTERNAL FACTORS
Company Analysis
Production
Marketing
Electronic Commerce, 2000
Opportunities (O)
Threats (T)
EXTERNAL FACTORS
Competitive Analysis
Production Marketing
Electronic Commerce, 2000
Strengths (S) Weaknesses (W)
Opportunities (O)
Threats (T)
INTERNAL FACTORSEXTERNAL
FACTORSSO 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
ST Strategies Generate strategies
here that use strengths to avoid
threats
WT Strategies Generate strategies here that minimize
weaknesses and avoid threats
Company and Competitive Analysis
Electronic Commerce, 2000
Strategic QuestionsStrategic Questions
The CompanyWhat 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?
Electronic Commerce, 2000
Strategic QuestionsStrategic 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?
Electronic Commerce, 2000
Competitive StrategiesCompetitive Strategies Offensive strategy— usually takes place in an established competitor’s
market Frontal Assault— attacker must have superior resources and
willingness to persevere Flanking Maneuver— attack a part of the market where the
competitor is weak Bypass Attack— cut the market out from under an established
defender by offering a new type of product that makes the competitor’s product unnecessary
Encirclement— greater product variety and/or serves more markets Guerrilla Warfare— use of small, intermittent assaults on different
market segments held by the competitor
Electronic Commerce, 2000
Defensive strategies— takes place in the firm’s own current market position as a defense against possible attack by a rival
Lower the probability of attackDivert attacks to less threatening avenuesLessen the intensity of an attackMake competitive advantage more sustainable
Competitive StrategiesCompetitive Strategies
Electronic Commerce, 2000
Cooperative StrategiesCooperative Strategies
Collusion— active cooperation of firms within an industry to reduce output and increase prices in order to get around the normal economic law of supply and demand (illegal)
Strategic Alliance— partnership of two or more corporations or business units to achieve strategically significant objectives that are mutually beneficial
Joint Venture— a way to temporarily combine the different strengths of partners to achieve an outcome of value to both
Value-Chain Partnership— a strong and close alliance in which one company or unit forms a long-term arrangement with a key supplier or distributor for mutual advantage
Competitive Strategies
Electronic Commerce, 2000
Strategic SummaryStrategic Summary
Focus your efforts!Define your competitive advantage!Have a clear strategy!Do it!
Implementing Strategy
Questions
ObjectivesBenefits to customersCurrent business
SavingsCompetitive advantagePresentation
QuestionsQuestions
What are you producing and selling?How are you unique?Why should the customer buy from you?How are you going to reach the customer?What’s success?
Objectives
Introduce new product or serviceAdvertising existing businessSupplement existing business programReach broader customer baseProvide better serviceInformation exchangeReduce transaction costs
Current Customers
BenefitsEasier access to
informationShipping schedulesDiscountsInvoicingInventories
Marketing Mix
Promotional ToolAds, publicity, sales tool
PricingProduct InformationDistribution
Savings
Support timeOrder entryPromotion responseE-mailShipping and invoicing
informationCustomer lists
$$
Home PageKISS
Keep it simple, stupid
1. Decide what information you want to share1. Decide what information you want to share
2. Grab their attention quickly2. Grab their attention quickly
3. Present information in simple, logical fashion3. Present information in simple, logical fashion
4. Do not put lots of graphics on first page4. Do not put lots of graphics on first page
5. Should be pleasant to the eye5. Should be pleasant to the eye
6. Each page should have company name, logo, e- 6. Each page should have company name, logo, e- mail address and toll-free phone numbermail address and toll-free phone number
Promoting Your E-businessPromoting Your E-business
Why Do You Need Promotion?
Why Do You Need Promotion?
Just because you build it, doesn’t mean they will come.
You are competing against not only your market area, but the entire world.
Your current and future customers need to be able to find you.
HOW?HOW?
List homepage address on all current advertising.
Put on all publicitynewslettersletterheadbusiness cardsbilling statementsfax cover sheets
Register with search engines.
Link to other sites and your association sites.
Advertise on the web.
Link to?Link to?
Your trade associationsSuppliersCustomersComplementary products
Advertising on the WebAdvertising on the Web
To build awarenessDevelop prospectsMeet customer needsGenerate ordersBuild customer relationsTest market
Good Internet Advertising Includes:
Good Internet Advertising Includes:
Clear message and identification on 1st page.Facilitates easy access to further information.The advertisement downloads quickly.Provides the right information.
Product description, payment options, and contact information.
Common Search EnginesCommon Search Engines
Submit it - www.submit-it.comYahoo - www.yahoo.comWebcrawler - www.webcrawler.comInfoseek - www.infoseek.go.comLycos - www.lycos.comGoogle - http://www.google.com/
The Advantage for Small Businesses
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
Electronic Commerce, 2000
The Advantage for Small Businesses
The Advantage for Small Businesses
Niche market, specialty products (cigars, wines, sauces) are the best
Image and public recognition can be accumulated fast
Inexpensive way of providing catalogs Inexpensive way to reach worldwide customers
Electronic Commerce, 2000
The Risks and Disadvantages for Small Businesses
The Risks and Disadvantages for Small Businesses
Disadvantage when a commodity is the product (for example, CDs)
No more personal contact which is a strong point of a small business
No advantage being in a local community
Electronic Commerce, 2000
The Risks and Disadvantages for Small Businesses
The Risks and Disadvantages for Small Businesses
Lack of expertise in legal issues, advertisement Lack of resources to fully exploit the Web Less risk tolerance than a large company
Electronic Commerce, 2000
Success Factors for Small Businesses
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
Electronic Commerce, 2000
Success Factors for Small Businesses
Success Factors for Small Businesses
Logistical services must be quick and reliableThe 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
Electronic Commerce, 2000
SummarySummary
Successful firms will integrate the E-business into their company’s 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.
ReferencesReferencesElectronic Commerce: A Managerial Perspective. 2000. By
Efraim Turban, Jae Lee, David King, and H. Michael Chung. Prentice Hall, Upper Saddle Rivern New Jersey. (slides are marketed).
E-Business Revolution. 2000. By Daniel Amor. Prentice Hall,Upper Saddle Rivern New Jersey.
Strategic Internet Marketing. 1996. Tom Vassos. MacMillan Computer Publishing, Indianapolis, IN.
E-Business Readiness. 2001. By James Craig and Dawn Jutla. Anderson-Wesley. Upper Saddle Rivern New Jersey.