meljun cortes planning e commerce

Planning for Planning for Electronic Electronic CommerceCommerceElectronic Commerce

MELJUN CORTESMELJUN CORTES

Electronic Commerce, Sixth Edition 2

Objectives

In this chapter, you will learn about:

• Planning electronic commerce initiatives

• Strategies for developing electronic commerce Web sites

• Managing electronic commerce implementations

Electronic Commerce, Sixth Edition 3

Planning Electronic Commerce Initiatives

• Objectives of electronic commerce– Increasing sales in existing markets– Opening new markets– Serving existing customers better– Identifying new vendors

– Coordinating more efficiently with existing vendors

– Recruiting employees more effectively

Electronic Commerce, Sixth Edition 4

Linking Objectives to Business Strategies

• Downstream strategies

– Used to improve the value that the business provides to its customers

• Upstream strategies

– Focus on reducing costs or generating value

• Work with suppliers or inbound shipping and freight service providers

Electronic Commerce, Sixth Edition 5

Linking Objectives to Business Strategies (continued)

• Electronic commerce opportunities can inspire businesses to undertake activities such as– Building brands– Enhancing existing marketing programs

– Selling products and services

– Selling advertising– Developing a better understanding of customer

needs

Electronic Commerce, Sixth Edition 6

Measuring Benefits

• Tangible benefits of electronic commerce initiatives

– Increased sales

– Reduced costs

• Intangible benefits of electronic commerce initiatives

– Increased customer satisfaction

Electronic Commerce, Sixth Edition 7

Measuring the Benefits of Electronic Commerce Initiatives

Electronic Commerce, Sixth Edition 8

Managing Costs

• Total cost of ownership

– Includes costs of hardware, software, design work outsourced, and salaries

• Change management

– Process of helping employees cope with changes

• Opportunity costs

– Lost benefits from an action not taken

Electronic Commerce, Sixth Edition 9

Web Site Costs• International Data Corporation and Gartner,

Inc.

– Cost for large company to build and implement entry-level electronic commerce site is about $1 million

• 79 percent of cost is labor related

• 10 percent is the cost of software

• 11 percent is the cost of hardware

Electronic Commerce, Sixth Edition 10

Starting a Web Business: Three Price Tags

Electronic Commerce, Sixth Edition 11

Web Site Costs (continued)

• Experts agree that the annual cost to maintain and improve a site will be

– 50 and 200 percent of the initial cost

• McKinsey & Company study

– Full portal site cost estimate was $2.4 million to build and $4.3 million per year to maintain

– Companion site cost estimate was $150,000 to build and $270,000 per year to maintain

Electronic Commerce, Sixth Edition 12

Cost Estimates for Building and Operating Magazine Publisher Web

Sites

Electronic Commerce, Sixth Edition 13

Cost Estimates for Building and Operating Magazine Publisher Web

Sites (continued)

Electronic Commerce, Sixth Edition 14

Comparing Benefits to Costs

• Capital projects (capital investments)

– Major investments in equipment, personnel, and other assets

• Key part of creating a business plan for electronic commerce initiatives

– Identifying potential benefits

– Identifying costs required to generate benefits

– Evaluating whether benefits exceed costs

Electronic Commerce, Sixth Edition 15

Cost/Benefit Evaluation of Electronic Commerce Strategy

Elements

Electronic Commerce, Sixth Edition 16

Return on Investment (ROI)

• Techniques provide a quantitative expression of a comfortable benefit-to-cost margin

• Built-in biases that can lead managers to make poor decisions– ROI requires that all costs and benefits be stated

in dollars

– Focus is on benefits that can be predicted

– Tends to emphasize short-run benefits over long-run benefits

Electronic Commerce, Sixth Edition 17

Strategies for Developing Electronic Commerce Web Sites

• Typical early Web site

– Static brochure not updated frequently

– Seldom had any capabilities for helping the company’s customers

• Today’s Web site includes

– Transaction-processing tools

– Automated homes for business processes of all kinds

Electronic Commerce, Sixth Edition 18

Increasing Complexity of Web Site Functions

Electronic Commerce, Sixth Edition 19

Internal Development vs. Outsourcing

• Outsourcing– Hiring another company to provide outside support

for all or part of a project

• Internal team– Should include people with enough knowledge

about the Internet and its technologies– Should be creative thinkers

• Measuring achievements of internal team is very important

Electronic Commerce, Sixth Edition 20

Early Outsourcing

• Outsource initial site design and development to launch a project quickly

• Outsourcing team trains company’s information systems professionals in the new technology

• It is best to have a company’s own information systems people working closely with the outsourcing team

Electronic Commerce, Sixth Edition 21

Late Outsourcing

• Information systems professionals– Do initial design and development work

– Implement system

– Operate system until it becomes a stable part of the business operation

• Once a company has gained a competitive advantage maintenance of the electronic commerce system can be outsourced

Electronic Commerce, Sixth Edition 22

Partial Outsourcing

• Company identifies specific portions of the project that can be completely designed, developed, implemented, and operated by another firm

• Many smaller Web sites outsource their e-mail handling and response functions

Electronic Commerce, Sixth Edition 23

Selecting a Hosting Service

• Factors to evaluate when selecting a hosting service

– Functionality

– Reliability

– Bandwidth and server scalability

– Security

– Backup and disaster recovery

– Cost

Electronic Commerce, Sixth Edition 24

New Methods for Implementing Partial Outsourcing

• Incubators

– Company that offers start-up companies a physical location with

• Offices, accounting, and legal assistance

• Computers and Internet connections

– Receive ownership interest in the company

Electronic Commerce, Sixth Edition 25

New Methods for Implementing Partial Outsourcing (continued)

• Fast venturing– Existing company that wants to launch an

electronic commerce initiative joins external equity partners and operational partners

• Equity partners – Banks or venture capitalists

• Operational partners– Firms that have experience in moving projects

along and scaling up prototypes

Electronic Commerce, Sixth Edition 26

Elements of Fast Venturing

Electronic Commerce, Sixth Edition 27

Managing Electronic Commerce Implementations

• Project management– Formal techniques for planning and controlling

activities undertaken to achieve a specific goal

• Project plan– Includes criteria for cost, schedule, and performance

• Project management software products– Microsoft Project – Primavera Project Planner

Electronic Commerce, Sixth Edition 28

Tracking Activities in Primavera Project Planner

Electronic Commerce, Sixth Edition 29

Project Portfolio Management

• Each project is monitored as if it were an investment in a financial portfolio

• Chief Information Officer

– Records projects in a list

– Updates the list with current information about each project’s status

– Assigns ranking for each project based on importance and level of risk

Electronic Commerce, Sixth Edition 30

Staffing for Electronic Commerce

• General areas of staffing– Business managers

– Project managers

– Account managers

– Applications specialists– Web programmers– Web graphics designers

– Customer service

– Systems administration

Electronic Commerce, Sixth Edition 31

General Areas of Staffing

• Business manager – Should be a member of the internal team that sets

objectives for a project

• Project manager – Person with specific training or skills in tracking

costs and accomplishment of specific objectives

• Account manager – Keeps track of multiple Web sites in use by a

project

Electronic Commerce, Sixth Edition 32

General Areas of Staffing (continued)

• Applications specialists – Maintain accounting, human resources, and

logistics software

• Web programmers– Design and write underlying code for dynamic

database-driven Web pages

• Web graphics designer– Person trained in art, layout, and composition

– Understands how Web pages are constructed

Electronic Commerce, Sixth Edition 33

General Areas of Staffing (continued)

• Customer service personnel– Help design and implement customer relationship

management activities

• Call center– Company that handles incoming customer

telephone calls and e-mails for other companies

• Systems administrator – Responsible for the system’s reliable and secure

operation

Electronic Commerce, Sixth Edition 34

Postimplementation Audit

• Formal review of a project after it is up and running

• Gives managers a chance to examine

– Objectives

– Performance specifications

– Cost estimates

– Scheduled delivery dates

Electronic Commerce, Sixth Edition 35

Postimplementation Audit (continued)

• Allows internal team, business manager, and project manager to

– Raise questions about the project’s objectives

– Provide feedback on strategies

• Final report should analyze

– Project’s overall performance

– How well the project was administered

– Specific performance of the project team(s)

Electronic Commerce, Sixth Edition 36

Summary• Plans for electronic commerce implementations

– Set objectives

– Benefit and cost objectives should be stated in measurable terms

• Project evaluation technique

– Return on investment

• Determining an outsourcing strategy

– Form an internal team that includes knowledgeable individuals from within the company

Electronic Commerce, Sixth Edition 37

Summary (continued)• Project management

– Formal way to plan and control specific tasks and resources used in a project

• Project portfolio management techniques– Used to track and make trade-offs among multiple

ongoing projects

• Critical staffing areas– Business management– Application specialists

– Systems administration