1 Get rich through internet – using E- commence website as an example

1

Get rich through internet – using E-commence website as an

example

NOT how to implement EC / EB functions

BUT to ANALYZE the business requirements in the

perspective of strategic management FORMULATE suitable business models &

strategies CHOOSE suitable IT options (especially Web-

based ones) to implement the strategies

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Strategyoptions

Externalanalysis

Internalanalysis

Sustaining competitive advantage

Internal organisation

Implementation

Exploring new

market spaces

Interaction with suppliers

Interaction with

users/customers

Creating and

capturing value

Strategic analysis

Strategy implementation

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E-business strategyMobile e-commerce strategy12

Opportunities/ threats

Strengths/weaknesses

Our Roadmap

Strategy formulation

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Firmcharac-teristics

Key environmental/industry developments

Opportunities Threats

Strengths

Weaknesses

• Do we havethe strengths to seize possibleopportunities?

• Do we havethe strengths tofend off possible threats?

• To which threats do our weaknesses expose us to?

• Which opportunitiesdo we miss becauseof our deficits?

E-business strategy formulationSWOT Analysis

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External Analysis

InternalAnalysis

External Analysis

Examine your opportunities & threats

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What is External Analysis?

External AnalysisScan and evaluate various external environmental sectors impacting performance

OpportunitiesPositive external environmental trends that

improve the organization’s performance

ThreatsNegative external environmental trends that

hinder the organization's performance

External Analysis: Impacted by industry and macro-environment

Source: Adapted from H. Hungenberg (2006), p. 90.

Organization

Specific EnvironmentIndustry-Competitors

SubstituteProducts

BargainingPower of Suppliers

BargainingPower of Buyers

PotentialEntrants

Current Rivalry

General Environment

Technological

Political-Legal

Sociocultural

Demographic

Economic

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General Environment - Economic

EconomicAll the macroeconomic data, current statistics, trends, and

changes•

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Interest rates

Monetary exchange rates

Budget deficit-surplus

Trade deficit-surplus

Inflation rates

GNP or GDP

Consumer income, spending, and debt levels

Unemployment levels

Workforce productivity

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General Environment - Demographics

DemographicsCurrent statistical data and trends in population

characteristics•

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Gender

Age

Income levels

Ethnic makeup

Education

Family composition

Geographic location

Birth rates

Employment status

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General Environment - Sociocultural

Sociocultural

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Country's culture

Society's• Traditions

• Values

• Attitudes

• Beliefs

• Tastes

• Patterns of behavior

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General Environment – Political-Legal

Political-Legal

• Federal, state, and local• Laws

• Regulations

• Judicial decisions

• Political forces

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General Environment - Technical

TechnicalImprovements, advancements, and innovations

that create opportunities and threats•

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Communications

Computing

Transportation

Manufacturing

Robotics

Biotechnology

Medicine and medical

Telecommunications

Consumer electronics

Industry competition

Potential entrants

Suppliers Buyers

Substitutes

Threat ofnew entrants

Bargaining powerof suppliers

Threat ofsubstitutes

Bargaining powerof buyers

Rivalry amongexisting firms

Porter’s 5 force model

Source: Adapted from M. Porter (1998), p. 4.

One assumption of Porter’s five forces model is that some industries are inherently more attractive than others; i.e., the profit potential for companies in that industry is higher. As this figure indicates, the interaction and strength of five forces influences profitability.

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Competitors

Supplier

Buyer

ComplementorsFirm

Source: Adapted from A. Brandenburger and B. Nalebuff (1998), p. 17

Complementing Porter’s model:Co-opetition value network framework

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Internal Analysis

Examine your strength & weakness

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What is an Internal Analysis?

Looks at the organization’s Vision Mission Strategic objectives

Identifies and evaluates resources, capabilities, and core competencies

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Hierarchy of Goals

Company Vision

Massively inspiring Overarching Long-term Driven by and evokes

passion Fundamental statement of

the organization’s Values, Aspiration, Goals

E.g., Disneyland: “To be the Happiest place on earth”

Company visionCompany vision

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Hierarchy of Goals


Mission Statements Purpose of the company Basis of competition and

competitive advantages More specific than vision Focused on the means by

which the firm will compete

E.g., FedEx: “To produce superior financial returns for our shareholders as we serve our customers with the highest quality transportation, logistics, and e-commerce.”

Mission statementsMission statements

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Hierarchy of Goals


Mission statementsMission statements

Strategic Objectives Operationalize the mission

statement Provide guidance on how the

organization can fulfill or move toward the “higher goals”

More specific, a more well-defined time frame, measurable (yardstick for rewards and incentives), consistent with vision and mission, realistic (challenging but doable), timely

E.g., P&G: “Increase sales growth 6% to 8% in each of the next five years”

Strategic objectivesStrategic objectives

Capabilities

The ability todeploy resourcesby co-ordinating them through

• Structures• Processes• Systems

Strategic importance• Valuable• Unique• Hard to imitate/

substitute • Valuable across different

products/markets

Buildresources

Utilizeresources

e-Business competencies

Resources

Intangibleresources

Tangibleresources

(Equipment,location, ...)

(Technology, know-how, brand, ...)


Distinctive e-business competencies: unique resources and capabilities

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Strategyoptions

Externalanalysis

Internalanalysis



Implementation

Exploring new

market spaces


Interaction with

users/customers

Creating and

capturing value

Strategic analysis


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Our Roadmap


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Differentiation & Price Strategies

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Customer

Company Competitors

Price/benefit

Price/benefit

Cost Cost

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The strategic triangle –Main drivers of competitive advantage

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Goal of the companyBusiness strategy

Provide somethingunique that is valuableto buyers

Provide a productwith lowest price

Become the costleader in the industry

Differentiation

Cost leadership

(Cost/price leadership)

Unique productwith pricepremium

Performanceadvantage

Priceadvantage

Similar product

with lowerprice

Competitiveadvantage


2 generic approaches of competitive advantage

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Achieving cost leadership position

Economies of scale

Economies of scope

Factor costs

Learning effects

While economies of scale can be realized by increasing the production of one product type, economies of scope result from expanding the variety of products sold using the same assets.

Learning effects can lower costs as a firm improves its efficiency over time, thereby reducing slack and wasteful activities.

Factor costs represent a crucial cost driver, especially for retailing companies that act as intermediaries. The ability to bargain down input prices, for instance, through bulk purchasing can be an effective lever for lowering costs.

The basic concept of economies of scale is that as a firm increases its product output, it decreases its unit production cost.

Sources of

differentiation

Tangible sources

Speed of delivery

Convenience

Customisation

Intangible

sourcesReputation

Brand

Product range

Quality

Tangible and intangible sources of differentiation

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Whole market

Market segment (niche)

Cost/pricePerformance

Newgame

Oldgame

Which competitiveadvantage do we aim for?

Where do we want to achieve the competitive advantage?

How do we want to achieve the competitive advantage?

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Strategic gameboard for formulating consistent business strategies

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E-business models

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What is a Business Model?

Six key questions How do we create value? For whom do we create value? What is our source of competence/

advantage? How do we differentiate ourselves? How do we make money (revenue

model)? What are our time, scope, and size

ambitions?

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Typical Business Models in EC

Online direct marketing

Electronic tendering systems (e.g., reverse auction)

Name your own price Affiliate marketing Virtual marketing Group purchasing Online auctions Product and service

customization

Electronic marketplaces and exchanges

Value-chain integrators Value-chain service

providers Information brokers Bartering Deep discounting Membership Supply chain improvers

Typical revenue models

Tangible goods Web catalog revenue model Taking mail order catalog model to the Web

Digital Content Revenue Models Advertising-Supported Revenue Models Subscription Revenue Models Advertising-Subscription Mixed Revenue

Models Agency and Services

Fee-for-Transaction Models Fee-for-Service Models

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Revenue Strategy Issues Channel conflict (or cannibalization)

Sales activities on a company’s Web site interfere with existing sales outlets (e.g., Levi Strauss)

Channel cooperation Giving customers access to the company’s products through a

coordinated presence in all distribution channels (e.g., Staples, Eddie Bauer)

Strategic alliance: when two or more companies join forces to undertake an activity over a long period of time

Account aggregation services Channel distribution managers (i.e., fulfillment

managers): firms that take over the responsibility for a particular product line within a retail context

Strategyoptions

Externalanalysis

Internalanalysis



Implementation

Exploring new

market spaces


Interaction with

users/customers

Creating and

capturing value

Strategic analysis


3

4

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6 7

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10

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Our Roadmap


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Dimensions of benefit

Convenience Selection range

Value curve of Amazon.com

Value curve of traditional bookstores

Speed Face-to-face

interaction

High

Low

Perf

orm

an

ce

Price

Value curve provides insights into new market spaces

Source: Adapted from C. Kim and R. Mauborgne, (1999).

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Value innovations focus on customers rather than competitors

Characteristics of conventional and value innovation logic

Conventional logic Value innovation logic

Assumption

Strategicfocus

Customers

Resources

Offerings

An industry's value curvesfollow one basic shape.

Build a competitive advantageand beat the competition.

Retain and expand customerbase through segmentation andcustomization. Focus on thedifferences.

Utilize existing assets andcapabilities.

Offer the products and servicesof your industry.

New value curves can be shapedthat solve traditional trade-offs.

Pursue a quantum leap in customervalue. Competition is no benchmark.

Target the mass of buyers. Letsome existing customers willinglygo. Focus on key commonalities in what customers value.

Ask what we would do if we werestarting anew?

Offer the total customer solutionexceeding industry boundaries.

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Value innovation shifts from head-to-head competition to creating new market

Six path framework to create value innovations

Head-to-head competition Creating new market space

Focuses on rivals in its industry

Focuses on competitive posi-tion within strategic group

Focuses on better serving theown buyer group

Focuses on maximising valueof the industry's products/services

Focuses on improving thegiven appeal

Focuses on adapting to trendsas they occur

Looks across substitute industries

Looks across strategic groupswithin its industry

Redefines the buyer group

Looks across complementaryofferings beyond the boundsof its industry

Rethinks the functional/emo-tional orientation

Adopts the results of futuretrends today

Industry

Strategicgroup

Buyer group

Product scope

Appeal

Time/trends

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Documents

1 Get rich through internet – using E- commence website as an example