Chapter 13

Planning for Electronic Commerce

Learning Objectives

In this chapter, you will learn about:• Planning electronic commerce initiatives• Strategies for developing electronic commerce

Web sites• Managing electronic commerce implementations

Planning the Electronic Commerce Initiative

A successful business plan for an electronic commerce initiative should include activities that will:– Identify the initiative’s specific objectives

– Link those objectives to business strategies

– Manage the implementation of those business strategies

– Oversee the continuing operations of the initiative after it is launched

Identifying Objectives

• Common objectives include:– 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

• Resource decisions should consider the expected benefits and costs of meeting the objectives.

Linking Objectives to Business Strategies

• Businesses can use downstream strategies, which are tactics that improve the value that the business provides to its customers.

• Businesses can pursue upstream strategies that focus on reducing costs or generating value by working with suppliers or inbound logistics.

Linking Objectives to Business Strategies

• More companies are taking a closer look at the benefits and costs of their electronic commerce projects.

• A good business plan will set specific objectives for the benefits to be achieved and costs to be incurred.

• Companies use pilot Web sites to test an electronic commerce idea, and then release a production version when it works well.

Measuring Benefit Objectives

• Many companies create Web sites to build their brands or enhance existing marketing programs.

• These companies can set goals in terms of increased brand awareness, as measured by market research surveys.

• Companies that sell goods or services on their sites can measure sales volumes in units or dollars.

Measuring Cost Objectives

• Based on data collected in separate recent surveys, International Data Corporation and the GartnerGroup both estimated that the cost for a large company to build and implement an adequate entry-level electronic commerce site was about $1 million.

– About 79% of that cost was labour related

– 10% was the cost of software

– 11% was the cost of hardware

Measuring Cost Objectives

• The McKinsey study estimated costs for two types of magazine sites: a full portal site that would serve as a destination in itself and a more limited magazine companion site.

• The full portal site cost estimate was $2.4 million to build and $4.3 million per year to maintain, with a staff of 35 people.

• The companion site cost estimate was $150,000 to build and $270,000 per year to maintain, with a staff of two people.

Measuring Cost Objectives

• Kmart’s Web store, BlueLight.com, cost more than $140 million to create.

• The site is certainly well-designed and highly functional, but the typical visitor would never guess how much this site cost.

Comparing Benefits to Costs

• If the benefits exceed the cost of a project by a comfortable margin, the company invests in the project.

• Companies should evaluate each element of their electronic commerce strategies using this cost/benefit approach.

• Managers often use return on investment (ROI) to evaluate any capital investment.

Strategies for Web Site Development

• The transformation of Web site functions occurred rapidly, taking only a year or two in most companies.

• Few businesses have caught up with the changes in terms of how they develop Web sites.

• The purposes and scope of Web sites have increased greatly, but few businesses today manage them as the dynamic business applications they have become.

Internal Development vs. Outsourcing

• The key to success is finding the right balance between outside and inside support for the project.

• Hiring another company to provide the outside support for the project is called outsourcing.

Managing Electronic Commerce Implementations

• The best way to manage any complex business software implementation is to use formal project management techniques.

• Individual projects can become so large that it becomes impossible for managers to maintain control without some kind of assistance.

• Microsoft Project and Primavera Project Planner are tools for managing resources and schedules.

Post-Implementation Audits

• A post-implementation audit is a formal review of a project after it is up and running.

• The post-implementation audit gives managers a chance to examine the objectives, performance specifications, and cost estimates, to schedule delivery dates that were established in its planning stage, and to compare them to what actually happened.

Summary

In this chapter, we have looked at:• Planning electronic commerce initiatives• Strategies for developing electronic commerce

Web sites• Managing electronic commerce implementations