ELECTRONIC COMMERCE STRATEGY AND IMPLEMENTATION

Dr. Wisnu S. Dewobroto. MSc (wisnu.s@gmail.com)

THE NEED FOR STRATEGY

Ò We distinguish several cases of EC Strategy :É Click and Mortar companies that use several EC

Application. Ex : IBM, Qantas AirwaysÉ Click and mortar companies that use only one or

two EC applicationÉ Click and mortar companies that use one EC

application that fundamentally changes all their business

É Pure Play EC

ESSENTIALS OF A BUSINESS STRATEGY

Ò Strategy : a broad based formula for how a business is going to compete, what its goals should be, and what plans and policies will be needed to carry out those goals.

Ò Level of strategy :É Corporate strategyÉ IT strategyÉ EC StrategyÉ EC Functional strategy

Ò Types of strategyÉ Strategic planningÉ Strategic ResponseÉ Strategic Innovation

THE ELEMENTS OF A STRATEGY

Ò Strategy involves several elements or activities. Some of the most important ones are :É ForecastingÉ Resource AllocationÉ Core competencyÉ Strategy formulationÉ Environmental analysisÉ Company analysis

STRATEGIC PLANNING

Ò Strategic planning is a formal process designed to interpret the organizations environment for the purpose of identifying its adaptive challenges and guiding its responses so as to optimize longer term competitive advantage.

Ò There some major activities in strategic plans :É Strategy initiation. Here one prepares information about the

organizations vision, mission, purpose and the contribution of EC.É Strategy formulation. This includes all the activities necessary to

formulate a strategy, notably, identification of EC application etc. É Strategy Implementation. Here the organizations resource are

analyzed and a plan is developed for attaining the goals of strategy

É Strategy assessment. Periodically the progress toward the strategy’s goal is assessed.

STRATEGY INITIATION

Ò The first step in any strategy creation is to review of the organizations business and IT vision and mission.

Ò Sample of EC mission statement :É eBay : We help people trade practically anything on

earth. eBay was founded with the belief that people are basically good. We believe each of our customers, whether a buyer or a seller, is an individual who deserve to be treated with respect..

É …………….É …………..

INDUSTRY, COMPANY AND COMPETITIVE ANALYSISÒ Strategy initiation usually begin with an industry and competitive analysis.

É The purpose of this step is to analyze the position of the company in its industry and with respect to the competition.

Ò Industry assessment :É What industry is the EC initiative is related to?É Who are the customers?É What are the current practices of selling and buying?É Who are the major competitor?É What e strategies are used and by whom?É How is value added throughout the value chain?É What are the major opportunities and threats?É Are there any metrics or best practices in place?É What are existing and potential partnership for EC?É Who are the major EC vendors in the Industy?

Ò Company Assessment : investigation to business strategy, performance, customers etc.É SWOT AnalysisÉ Competitive intelligence on the INTERNET

ISSUES IN STRATEGY INITIATION

Ò To be a first mover or follower?É Advantages to be a first mover :

Ð Chance to capture large market shareÐ Establishing a brand nameÐ Establishing exclusive strategic alliances

É DisadvantagesÐ The cost of developing the EC initiative is usually highÐ The chance of failure is highÐ The system may be obsolete as compared to the second wave

of arrivalsÐ No Support services are available at the beginning

ISSUES IN STRATEGY INITIATION (2)

Ò What do you need an EC for?É Enhancing the sell channel by advertisement and salesÉ Enhancing the buyÉ Enhancing the customer service channelÉ Facilitating value chain integrationÉ Providing for new products and servicesÉ Going into highly specialized marketsÉ Going into mass customization

Ò Going Global? Should you have a separate online company or not?É The advantages or creating a separate company are :

Ð Reducing or eliminating internal conflictsÐ Providing more freedom for online company deciding pricing, advertising etcÐ You may create a new brand quickly

É The disadvantages of creating an independent division are :Ð It may be very costly and riskyÐ Collaboration with the off line business may be difficultÐ You lose the expertise of the business function

STRATEGIC FORMULATION

Ò Critical success factors for EC :É Specific products or services tradedÉ Top management supportÉ Project team reflection various functional areasÉ Technical infrastructureÉ Customer AcceptanceÉ User friendly web interfaceÉ Integration with corporate legacy systemÉ Security and control of the EC systemÉ Competition and market situationÉ Pilot project and corporate knowledgeÉ Promotion and internal communicationÉ Cost of the EC projectÉ Level of trust between buyers and sellers.

STRATEGIC FORMULATION (2)

Ò Discovering EC opportunities and deciding on a portfolio. Finding appropriate EC opportunities may not be an easy task. There are dozens of possible initiatives, and companies must decide on which ones to adopt and in what order.

Ò Cost benefit and risk analysis. Executive need to be sure that EC initiatives can truly enhance their company’s ability to generate revenues and reduce cost, thereby increasing competitiveness and profits.

ISSUES IN STRATEGY FORMULATIONÒ EC Strategy in small business: Formulating strategies in small businesses is usually

much less sophisticated than it is in large corporation. Ò How to handle the channel conflicts :

É Let the established old economy type dealers handle e business fulfillment, as the auto industyis doing, even for customized cars. The ordering can be done online, or directions to dealers can be provided

É Sell some products only online, other product are advertised online, but sold off lineÉ Help your intermediaries (building portal but do not sell online )É Sell online and offline.

Ò How to handle the conflict between the off line and online business in a click and mortar situationÉ Corporate culture, ability of top management to introduce the change properly, and the use of

innovative process that support collaboration will all determine the degree of collaboration. Ò Price Strategy.

É Setting prices lower that the offline business may lead to internal conflict, whereas same level will hurt competitiveness. Dewan et al (2000), have developed quantitative economic models for making pricing decision.

Ò Where to competeÉ The web opens several new alternatives for competition

STRATEGY IMPLEMENTATION AND PROJECT MANAGEMENT

Ò Creating a web team and assigning functional skills to subprojects.

Ò Pilot projectÒ Planning for resourcesÒ Project management.

ISSUES IN STRATEGY IMPLEMENTATION

Ò Evaluating outsourcingÒ Partners strategyÒ How to coordinate B2B and B2C

STRATEGY AND PROJECT ASSESMENT

Ò The last phase of e strategyÉ Need for assesment

Ð Find out if the EC project delivers what it was supposed to deliverÐ Determine if the EC project is still viable in an ever changing

environmentÐ Reassess the initial strategy in order to learn from mistakes and

improve future planningÐ Identify failing projects as soon as possible and determine the

reasons for failures to avoid the same problems on subsequent system.

É Measuring result. Ð Each company measure success or failure by different sets of

standard. É Finalization and adjustment

EC FAILURES AND LESSONS LEARNED

Ò EC initiatives and EC companies are likely to fail.

Ò The reasons why they fail vary and depend on the circumstances.

Ò In this step we will look at some failures and attempt to identify the common reasons.

Ò Then i887we will try to derive lessons for avoiding such failures