Chapter 4 The Business Environment. Copyright © 2003, Addison-Wesley Profit, ROI, and Risk Profit =...
-
Upload
lillian-lawrence -
Category
Documents
-
view
223 -
download
1
Transcript of Chapter 4 The Business Environment. Copyright © 2003, Addison-Wesley Profit, ROI, and Risk Profit =...
Copyright © 2003, Addison-Wesley
Profit, ROI, and Risk
Profit = revenue – cost Enhance profit by:
Increasing revenue Reducing cost
Ultimate source of investment funds Source of return on investment
Business investment is risky Higher rate of return required
Copyright © 2003, Addison-Wesley
Figure 4.1 The business planning hierarchy.
Corporatestrategy
Marketingstrategy
Informationtechnology
strategy
Human resourcesstrategy
Product strategyE-commerce
strategy
Objective: define long-term direction
Copyright © 2003, Addison-Wesley
A Startup Business Plan
A.k.a., path to profitability Contents
Product Market Competitors Customers Risks Financials
Copyright © 2003, Addison-Wesley
Figure 4.2 Elements of a business plan.
Business description
Sales and marketing
Finance
The market
The product
Management team
Industry overview, mission statement, the company's products orservices, company's position in the market, pricing strategies,competitive advantage.
Current status of product or service, production or service deliveryprocess, design/development budget, labor requirements, operatingexpenses, capital requirements, cost of goods.
Target customers, market size, target market, competitors, estimatedsales.
Plans for identifying potential customers and converting them toactual customers, distribution channels, advertising and promotionplan.
Risk assessment, cash flow, balance sheet, income statement,funding needs, return on investment, payback, net present value.
Owners and controlling stockholders, management structure, boardof directors, management support services.
Copyright © 2003, Addison-Wesley
Competitive Advantage
Competitive Advantage:
An advantage that a firm has over its competitors, allowing it to generate greater sales or margins and/or retain more customers than its competition.
The more sustainable the competitive advantage, the more difficult it is for competitors to neutralize the advantage. There are two main types of competitive advantages: comparative advantage and differential advantage. Comparative advantage, or cost advantage, is a firm's ability to produce a good or service at a lower cost than its competitors, which gives the firm the ability sell its goods or services at a lower price than its competition or to generate a larger margin on sales. A differential advantage is created when a firm's products or services differ from its competitors and are seen as better than a competitor's products by customers.
Copyright © 2003, Addison-Wesley
Competitive Advantage
Something that Your company can do Your customers want (or value) Your competitor cannot or will not match
Sources of competitive advantage Unique product Price Quality Cost controls and efficiency
Copyright © 2003, Addison-Wesley
Competitive Advantage
Big Bang Disruptors:
Tom Tom Garmin Magellan
Block Buster West Coast Video
Copyright © 2003, Addison-Wesley
Figure 4.3 The value chain.
Conflicting objectives Local process efficiency Organization-wide efficiency
Inboundlogistics
Productionprocesses
Outboundlogistics
Sales andmarketing
Customerservice
Information technology infrastructure
Upstream Downstream
Copyright © 2003, Addison-Wesley
Conflicting Objectives
Process objectives can conflict Sales wants full warehouse Minimize inventory carrying cost You can have it fast, you can have it
cheap, or you can have it right. Pick any two.
Need for trade-offs to balance
Copyright © 2003, Addison-Wesley
Figure 4.4 The supply chain.
Conflicting objectives again Company vs. company
Upstream Downstream
Copyright © 2003, Addison-Wesley
E-Commerce Business Environment
Low cost of entry Global reach Huge potential markets Intense competition
Copyright © 2003, Addison-Wesley
Figure 4.5 The three categories form an integrated structure.
B2C(Customer focus)
Intra-business(Value chain focus)
B2B(Supply chain focus)
Integration is the future of e-commerce.
Copyright © 2003, Addison-Wesley
Figure 4.6 The three categories are applications that communicate with each other via the infrastructure.
Another way to view integration
B2C
The World Wide Web
The Internet
The global data communication network
Intra-business
B2B
Copyright © 2003, Addison-Wesley
Figure 4.7 A B2C transaction and a supply
chain purchasing transaction are similar.
Supply chain links value chains
Categories somewhat arbitrary
Categories are a model
Purchasing(B2B)
Sales(B2C)
Corporate sales(B2B)
...
Acme's Value Chain
The Soup-to-Nuts value chain
Retail customer
Customer's value chain
Copyright © 2003, Addison-Wesley
Digital Products
Potential killer applications/services Software Recorded music Digital books Information services
Diminishing returns does not apply E-commerce is a digital technology
Copyright © 2003, Addison-Wesley
The law of diminishing returns applies to physical products.
Unitcost
Quantity
At some point, unit cost increases with volume.
Copyright © 2003, Addison-Wesley
Digital products do not experience diminishing returns.
High startup cost First copy
Low incremental cost After breakeven
Pure profit
Unitcost
Quantity
Copyright © 2003, Addison-Wesley
Intermediaries
An intermediary is a middleman Disintermediation
Eliminating the middleman Sometimes claimed as e-commerce
benefit Reintermediation
New middlemen replace the old ones An e-commerce reality
Copyright © 2003, Addison-Wesley
Figure 4.8 Intermediaries.
Party A Intermediary Party B
Infrastructure hardware and software providersConnectivity providersBandwidth providersWebsite service providersWeb information system service providersSecurity service providersInformation service providers
Intermediaries provide services that lie off the value chain.
Copyright © 2003, Addison-Wesley
Figure 4.9 Some intermediaries.
Connectivity providersTelephone service providersWireless service providersInternet service providersCable service providersCommon carriers
Web information system serviceprovidersApplication service providersSystem development consultingDevelopment softwareEnterprise portal softwarePlugins and gateways
Business service providersPayment systemsAdvertising servicesSupply chain managementManaged service providersCustomer relationship managementFinancial software and servicesBrokersAuction sites
Bandwidth providersBackbone providersNetwork Service Providers (NSP)Networp Access Points (NAP)Value Added Networks
Website service providersWebsite design and developmentManagement consultingWebsite hostingContent managementContent distributionWebsite usage measurementHTML editorsStorage systemsDatabase software
Infrastructure hardware and software providersDomain name registriesNetwork hardware and softwareRouters and switchesLoad balancersClient and server computersPeripheralsOperating system softwareCommunication hardwareCommunication softwareApplication softwareWeb browser and server softwareGroupware
Security service providersAnti-virus softwareFirewallsEncryption softwareIdentification and authenticationDisaster recovery servicesVirtual private networks
Information service providersPortals, destinations,marketplacesSearch enginesVirtual communitiesPrivacy servicesRating servicesShopping Bots
Copyright © 2003, Addison-Wesley
Negating Location
Geography no longer matters Global competition
Example—writing this textbook Participants
The authors (Florida and Ohio) The publisher (Boston) Production (New England) Printing and warehousing (Indiana)
Copyright © 2003, Addison-Wesley
Figure 4.10 A manuscript page.
Created by the authors Florida Ohio
MS Word
Copyright © 2003, Addison-Wesley
Figure 4.12 A copy edited page
Copy editor in Massachusetts
MS Word
Copyright © 2003, Addison-Wesley
Figure 4.13 A finished page.
Paging done in Massachusetts
Adobe Acrobat
All electronic communication
Copyright © 2003, Addison-Wesley
Figure 4.14 Bots.
Bot is an intelligent agent
Increases customer power
Source: www.botspot.com
Bot Category Allows you to:
Chatter bots Chat with the cyberworld
Commerce bots Perform e-commerce activities on the Web and the Internet
Fun bots Interact with virtual environments and virtual realities.
Game bots Monitor selected online games or act as a skilled opponent
Government bots Find information on government Web sites
Knowledge bots Utilize various artificial intelligence (AI) agents
News bots Create custom newspapers or manage a clipping service
Search bots Use an intelligent agent to search the Web
Shopping bots Comparison shop, often by price
Software bots Obtain software fixes, diagnose problems, and create bots
Stock bots Monitor stock prices
Update bots Obtain update alerts when selected Web content changes
Copyright © 2003, Addison-Wesley
Figure 4.15 The competitive advantage model.
Stimulus for action
First major move
Customer acceptance
Competitor catch up moves First mover expansion moves
Commoditization
The two yellow boxes represent activities that happen simultaneously.
Copyright © 2003, Addison-Wesley
Figure 4.16 Time for technologies to reach 50 million users.
Technology First use 50M Elapsed users years
Radio 1922 1963 38Broadcast television 1950 1963 13Cable TV 1976 1986 10Commercial Internet 1994 1999 5
Based on Morgan Stanley Dean Witter, The Global Internet Primer,Volume I, June 2000, page 12.
Note the acceleration!
Copyright © 2003, Addison-Wesley
Figure 4.17 The accelerating pace of innovation.
Textbook 1980—36 months 2000—21 months Lose 40% of
competitive advantage
Rapid obsolescence Time to market is key Delay means lost
opportunity
Readiness Intensity Impact
Level ofactivity
Time
Copyright © 2003, Addison-Wesley
Selected Technology Milestones Over the Past Forty YearsSource Gartner
Copyright © 2003, Addison-Wesley
Evolving E-Commerce Business Strategies
Danger—everything becomes a commodity Frictionless e-commerce No competitive advantage for anyone
Brand name matters more than ever Brand name reduces perceived risk Bricks-and-clicks strategy
Reduced cycle time is a key objective Reduce time to market React quickly to change
Copyright © 2003, Addison-Wesley
Figure 4.18 The 20 top technology-related brand names in the US.
This list is from 2001
How would it change today?
Rank Brand Name Rank Brand Name 1 Napster 11 Microsoft Office 2 Disney 12 Intel 3 Windows 13 WebTV 4 Microsoft 14 Sony 5 Replay TV 15 WebMD 6 TiVo 16 Yahoo! 7 MP3 17 Norton 8 eBay 18 Adobe 9 Pixar 19 Palm Pilot 10 Pentium 20 Blue Mountain
Source: "Marks of Distinction, the Tech Brands that GrabInternet Users Worldwide," Wired, July 2001, page 76.
Copyright © 2003, Addison-Wesley
2013 The 10 top technology companies
1. Apple, Inc., United States – $156.5 billion2. Samsung Electronics, South Korea – $149 billion3. Hewlett Packard, United States – $120.35 billion4. Foxconn, Taiwan – $117.51 billion5. IBM, United States – $106.91 billion6. Panasonic, Japan – $99.65 billion7. Toshiba, Japan – $74.39 billion8. Microsoft, United States – $73.72 billion9. Sony, Japan – $67.4 billion10. Dell, United States – $62.07 billion
http://www.therichest.com/business/the-top-ten-tech-companies-in-the-world/