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


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


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


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


Measuring Benefits

• Tangible benefits of electronic commerce initiatives

– Increased sales

– Reduced costs

• Intangible benefits of electronic commerce initiatives

– Increased customer satisfaction


Measuring the Benefits of Electronic Commerce Initiatives


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


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


Starting a Web Business: Three Price Tags


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


Cost Estimates for Building and Operating Magazine Publisher Web

Sites


Cost Estimates for Building and Operating Magazine Publisher Web

Sites (continued)


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


Cost/Benefit Evaluation of Electronic Commerce Strategy

Elements


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


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


Increasing Complexity of Web Site Functions


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


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


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


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


Selecting a Hosting Service

• Factors to evaluate when selecting a hosting service

– Functionality

– Reliability

– Bandwidth and server scalability

– Security

– Backup and disaster recovery

– Cost


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


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


Elements of Fast Venturing


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


Tracking Activities in Primavera Project Planner


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


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


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


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


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


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


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)


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


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

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