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Slide 5.1
Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
CHAPTER 5E-BUSINESS STRATEGY
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Slide 5.2
Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Learning outcomes Follow an appropriate strategy process
model for e-business; Apply tools to generate and select e-
business strategies; Outline alternative strategic approaches
to achieve e-business.
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Slide 5.3
Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Management issues How does e-business strategy differ from
traditional business strategy? How should we integrate e-business
strategy with existing business and IS strategy?
How should we evaluate our investment priorities and returns from e-business?
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Slide 5.4
Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
E-business Strategy
StrategyDefinition of the future direction and actions of a company defined as approaches to achieve specific objectives
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Slide 5.5
Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Alternative definitions of strategy
What is strategy? “Defines how we will meet our objectives”
“Sets allocation of resources to meet goals”
“Selects preferred strategic options to compete within a market”
“Provides a long-term plan for the development of the organization”.
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Figure 5.1 Different forms of organizational strategy
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Slide 5.7
Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
The imperatives for e-business strategy Missed opportunities from lack of
evaluation of opportunities Inappropriate direction of e-business
strategy Limited integration of e-business at a
technical level Resource wastage
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Slide 5.8
Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
E-channel strategies
How a company should set specific objectives and develop specific differential strategies for communicating with its customers and partners through e-media
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Figure 5.2 Relationship between e-business strategy and other strategies
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Slide 5.10
Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Multi-channel e-business strategies Characteristics:
E-business strategy is a channel strategy Specific e-business objectives need to be
set Creating differential values Defines how an organization gains value
internally
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Slide 5.11
Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
What happens where there is no e-business strategy?
Missed opportunities for additional sales on the sell-side and more efficient purchasing on the buy-side
Fall-behind competitors in delivering online services – may become difficult to catch-up, e.g. Tesco, Dell
Poor customer experience from poorly integrated channels.
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Figure 5.3 BA communicates their online value proposition (www.britishairways.com)Source: Based on Revolution (2005)
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Slide 5.13
Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Strategy process models
A management team needs to agree on the framework they will follow
Common element: Internal and external environment scanning A clear statement of vision and objectives Can be broken down to option generation,
evaluation and selection Implementation Control is required
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Slide 5.14
Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Suggestions on e-business strategy Hackbarth and Kettinger (2000)
Four-stage ‘strategic e-breakout’ Deise et al. (2000)
Approach based on work conducted on PWC Rowley (2002)
Strategy development similar with other business context
Venkatram (2000) Five-stage strategy process
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Slide 5.15
Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Venkatram (2000)
What is your strategic vision? How do you govern dot-com operations? How do you allocate key resources? What is your operating infrastructure? Is your management team aligned for
the dot-com agenda?
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Figure 5.4 A generic strategy process model
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Figure 5.5 Dynamic e-business strategy modelSource: Adapted from description in Kalakota and Robinson (2000)
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Slide 5.18
Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Strategic Analysis
Collection and review of information about an organization’s internal processes and resources and external marketplace factors in order to inform strategy definition
Involves reviews of: Resources and processes Competitive environment Wider environment
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Figure 5.6 Elements of strategic situation analysis for the e-business
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Slide 5.20
Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Resource Analysis
Review of the technological, financial and human resources of an organization and how they are utilized in business processes
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Slide 5.21
Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Decision on marketing services Level 0: No web site or presence on the web Level 1: Basic web presence Level 2: Simple static informational web site Level 3: Simple interactive site Level 4: Interactive site supporting
transaction with users Level 5: Fully interactive site supporting the
whole buying process
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Slide 5.22
Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Brochureware
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Slide 5.23
Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Product sourcing development (Buy-side E-Commerce)
Level I: No use of the web Level II: Review and selection from competing
suppliers using intermediary web Level III: Orders placed electronically through
EDI Level IV: Orders placed electronically with
integration of company’s procurement system Level V: Orders placed electronically with full
integration of company’s procurement, manufacturing requirements planning and stock control system
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Slide 5.24
Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Applications portfolio analysis Used to assess current information
systems capability and also to inform future strategies
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Figure 5.7 Summary applications of a portfolio analysis for The B2B Company
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Slide 5.26
Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Organizational and IS SWOT analysis Help organization analyze their
resources in term of strengths and weaknesses and match them against threats and opportunities
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Figure 5.8 SWOT analysis for The B2B Company
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Slide 5.28
Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Human and financial resources Human resources Financial resources
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Slide 5.29
Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Demand Analysis
Assessment of the demand for e-commerce services amongst existing and potential customer segments
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Figure 5.9 Customer demand for e-marketing services for The B2B Company
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Slide 5.31
Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Competitive Threats
1. Threat of new e-commerce entrants2. Threats of new digital products3. Threat of new business models
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Slide 5.32
Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Sell-side threats
1. Customer power and knowledge• Use Internet to evaluate products and
compare prices
2. Power of intermediaries• Channel conflicts result of
disintermediation
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Slide 5.33
Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Buy-side threats
1. Power of suppliers• An opportunity for buyers
2. Power of intermediaries• Risk include cost of integration
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Figure 5.10 Competitive threats acting on the e-business
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Slide 5.35
Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Porter’s five forces
Power ofsuppliers
Bargainingpowers ofcustomers
Extent of rivalrybetween
competitors
Threat ofsubstitutes
Threat of newentrants
The business
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Figure 5.11 Elements of strategic objective setting for the e-business
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Slide 5.37
Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Defining vision and mission
Company vision will be based on the managers’ view of the future relevance of the Internet to their industry
Can the Internet primarily complement the company other channel or whether it will replace other channel? Customer access to Internet is high Offer a better value proposition Product can be delivered over the Internet Product can be standardized
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Slide 5.38
Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
How can e-business create business value? Adding value
Providing better-quality products and services
Reduce costs Making business process more efficient
Manage risks Create different functions and professions
Create new reality Can be used to innovate
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Figure 5.12 An evaluation tool relating information to business value. An organization’s use of information on each axis can be assessed from 1 (low useof information) to 10 (high use of information)Source: Marchand et al. eds (1999)
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Figure 5.13 Capital One web site (www.capitalone.co.uk)
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Slide 5.41
Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Objective Setting
Objectives Develop revenue from new geographical
markets Strategies to achieve goals
Create EC facility for standard products and assign agents to these markets
Key performance indicators Achieve combined revenue of RM1mil by
year-end online revenue contribution of 70%
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Slide 5.42
Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Online Revenue Contribution States the percentage of company
revenue directly generated through online transaction
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Figure 5.14 Direct and indirect Internet contributions for fast-growth companies inthe USASource: PricewaterhouseCoopers (2000)
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Figure 5.15 Grid of product suitability against market adoption for transactionale-commerce (online purchases)
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Figure 5.16 Elements of strategy definition for the e-business
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Slide 5.46
Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Decision 1: E-business channel priorities Strategic e-commerce alternatives for
companies should be selected according to the percentage of target market who can be persuaded to migrate use the e-channel
Bring benefits to the company by bringing higher sales volume and reduce costs for customer acquisition and retention
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Slide 5.47
Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Right Channelling Right channelling can be summarized as:
Reaching the right customer– Using the right channel
With the right message or offering– At the right time
Examples: B2B serve SMEs through e-channels and larger clients
through personal service Encourage consumers to buy and serve through lower cost
electronic channels Encourage offline fulfillment/conversion as appropriate Different levels of service/promotion for different
customers.
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Figure 5.17 Strategic options for a company in relation to the importance of the Internet as a channel
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Figure 5.18 Liveperson – an example of a service to assist with ‘right-channelling’Source: www.liveperson.com
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Slide 5.50
Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Decision 2: Organizational restructuring How the company should restructure in
order to achieve the priorities set for e-business
The choices are: In-house division Joint venture Strategic partnership Spin-off
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Slide 5.51
Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Decision 3: Business, service and revenue models Review of opportunities from new
business and revenue models Need to review new revenue
opportunities and competitor innovations
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Slide 5.52
Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Decision 4: Marketplace restructuring Consider options created through
disintermediation and reintermediation
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Slide 5.53
Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Decision 5: Market and product development strategies Decide on which market to target
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Figure 5.19 Using the Internet to support different growth strategies
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Figure 5.20 smile (www.smile.co.uk)Source: Reprinted by permission of The Co-operative Bank
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Slide 5.56
Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Decision 6: Positioning and differentiation strategies Strategies should review the extent to
which increases in product and service quality can be matched by decreases in price and time
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Figure 5.21 Dabs.com (www.dabs.com)
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Figure 5.22 Elements of strategy implementation for the e-business
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Slide 5.59
Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Failed e-business strategies
Timing errors Lack of creativity Offering free services Over-ambition
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Slide 5.60
Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Classic Mistakes Business Made Situation analysis Objective setting Strategy definition Implementation
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Slide 5.61
Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
EB Strategy Implementation Success1. Content2. Convenience3. Control4. Interaction5. Community6. Price sensitivity7. Brand image8. Commitment9. Partnership10. Process improvement11. Integration