Strategic Management :

The Internet and

Electronic Commerce

Internet and E-Commerce

Two very hot topics.

Two things that are having a huge impact on businesses in the US and around the world.

Internet Perspective Roadmap

• Making sense of the Internet as a business resource.• Understanding the value of information browsing and search engines (business and personal use).• Appreciating the difference and relationship between E-Business and E-Commerce.• Understanding the multiple roles of Internet technologies: (1) Traditional Internet use, (2) Internal business use (intranet), and (3)Business-to-business use (extranet or B2B).

Internet Perspective Roadmap

• Recognizing its impact on major industries.• Appreciating the significance of Internet laws and

public policies.

• BUSINESS USE OF THE INTERNET - Businesses are broadening their use of the Internet from simple applications like E-mail and marketing themselves on the World Wide Web. Companies are deploying a range of applications that are intended to give them strategic capabilities.

• INTERACTIVE MARKETING - The Internet, along with intranets and extranets, is enabling marketing, development and customer support people within a business to collaborate interactively with customers to provide top quality, personalized service and support.

Important Topics

BUSINESS VALUE OF THE INTERNET - Companies are deriving business value from the Internet.

E-COMMERCE - Encompasses the entire online process of developing, marketing, selling, delivering, servicing and paying for products and services.

E-COMMERCE APPLICATIONS - The Internet’s economic model encourages innovation and entrepreneurship.

ELECTRONIC PAYMENT AND SECURITY - Presents a vital and complex challenge to business and financial institutions to develop efficient, flexible and secure payment systems for electronic funds transfers.

A New Competitive Environment

Traditional brick-and-mortar (store front) companies competing with web-based retailers.

What will prevail over time?

Web-based retailers

Brick-and-mortar retailers

Brick-and-click retailers (combination

of both)

Internet Search Engines and Browsers

Do you understand the differences?

Do you make the best use of browsers to help find the information that you need?

Have you ever done an objective comparison of multiple browsers using the same compound search?

Yahoo

Softbank

Priceline.com

Morgan Stanley

eBay

Amazon.com

Dell Computer

Michael Jordan

Proxicom

MicroStrategy

Amazon.com

Gateway

Broadcast.com

No Limit

Yahoo!

Trilogy Software

Speed

Knowledge

Culture

Technology

Great People

Creative

Destruction

dyb.com

Business

Health

Family

Politics

Internet Truths1. The acceptance of the Internet as a new technology based on

reaching 165 million users( India) happened faster than any

other technology in the history of the world.

3. The Internet has greatly influenced venture capital funding evaluations.

2. The Internet as a business resource is having a dramatic impact on organizations through its use as an intranet and extranet.

4. The Internet redefines itself every two years.

Ways to Win on the Web• Selling to Businesses - Dell Computer• Selling to Businesses - Cisco Systems • A Corporate Intranet - Sun Microsystems• Streamlining the Supply Chain - Pitney Bowes• Recruiting Online - Lots of Companies• Winning and Keeping Web Surfers – Yahoo &

google• Selling to Consumers - Amazon.com, Mantra,

Jabong• Customer Service - Federal Express, Blue dart,• Online Auction - eBay

The Internet Is:

Multidimensional -- It can be used one-to-one, one-to-many or many to many (community emphasis, bulletin boards).

Multipurpose -- Can serve an organization in many different ways. There is no cookie cutter approach relative to the Internet.

Multidisciplinary -- Talent, resources, control and responsibility within an organization.

The Internet Obliterates Traditional Barriers

Geographic barriers: Online businesses can reach every corner of the globe without building physical facilities. Time barriers: People can research and buy 24 hours a day. Information barriers: Comparison shopping is a breeze, even for things that are tough to compare in the real world. Switching barriers: No longer are customers locked in by the time and hassle of finding another supplier, the competition is just a click away.

The Internet Has Created New Models:• Business Strategies and Organization• Consumer Shopping and Purchasing• Advertising• Government Policies and Legislation• Educating K-12 and University Students• Entertaining Children and Adults• Investing and/or Gambling • Information Sources• Communication

Business and the Internet

Broad Base ofBusiness Uses

of the World Wide Web

GatherInformation

Collaborate withOthers

Cross-FunctionalApplications

Vendor Support & Communications

Marketing, Sales& Customer Service

ResearchCompetitors

PublishInformation

Sell Products orServices

CommunicateInternally

Purchase Productsor Services

CustomerSupport & Service

Communications and

Collaboration

InteractiveMarketing

ElectronicCommerce

Strategic Alliances

Major ApplicationCategories for Business

Use of the Internet

Business Use of the Internet

E-Business and E-Commerce

What is E-Commerce?Formal definition:The buying and selling, marketing and servicing, and delivery and payment of products, services, and information over the Internet, intranets, extranets, and other networks, between an inter-networked enterprise and its prospects, customers, suppliers, and other business partners.

What it really means:It is the way companies do business with customers and other businesses by using computer-based (web-based in most cases) systems.

What is E-Business?

E-Business enables businesses and organizations to realize the potential of E-Commerce through the creation of business processes and strategies geared to this objective.

In other words… it helps position organizations with better business processes and strategies to successfully realize E-Commerce potential through web-based systems.

E-Commerce Characteristics

• Barriers to entry are low.

• Marketing niches abound.

• Revenue sources are many.

• No dominance in the market.

• Everyone utilizes the same technology.

• Access is becoming universal.

• There is room for teams of successful players.

For Instance• It was much easier for Dell Computer to use a web-based direct marketing approach since it had emphasized such an approach with an earlier Electronic Data Interchange system. • Dell’s advantage was that it had a significant amount of experience with a similar approach. It internal processes, employee knowledge and experience and even its corporate culture was geared to a direct marketing business model. • A similar case can be made for Charles Schwab.

Making Money Via the Internet

1. Sales Transactions

2. Advertising Revenue

3. Subscription Fees

4. Sales Transaction Partnership “Linkage

Finder Fees.”

Brick-and-Mortar Versus E-Commerce

What is the point?

What happened to the days when people were predicting the demise of large brick-and-mortar retailers?

Is the bloom really off the bush relative to Internet-only based retailers?

What happened to their low cost advantage?

Is the best strategy of brick-and-mortar retailers based on an established reputation and a combination of both web-based and brick-and-mortar outlets?

Brick-and-Mortar Retailers

Traditional store front retailers that come in all shapes and sizes under the umbrella of general merchandising:• Large chain discounters like big bazar, walmart• Established good reputation department stores like

Next.• Thousands of mom-and-pop single location retailers that

tend to be specialty stores.

Internet Only Retailers

Many of the top web sites still only run web-based operations.

Top Web Retailers

1. Amazon.in2. Jabong.com3. Mantra.com4. Yebhi.com5. ebay.in6. Homeshop18.com7. Snapdeal.com8. Flipkart.com9. futurebazaar.com

Don’t Forget

Many web sites spend money on radio, TV, bill boards and printed media to advertise their business.

Is Brand Identity a Key Factor?

Amazon.com certainly pursued this as a high priority strategy.

“It would be a mistake to make a profit instead of spending all the money we can to establish a brand identity.”

A path to profitability that emphasizes planning and patience versus an ROI for now mentality.

Profit seems to have become a recent, important consideration.

Considerations

Amazon.com is not going to put Bigbazar or Reliance fresh out of business.

Both of them can and have had a very negative impact on the small mom-and-pop retail store.

Large Brick-and-Mortar CompaniesAdvantages:1. Reputation and customer confidence.2. Financial staying power.3. Volume buying power results in lower prices.4. Can combine the strengths of brick-and-mortar and web-based retailing which many have not done very well in the past.Challenges:1. A fundamental change in business model.2. A question of priorities: B&M versus web.

Conclusions1. The Internet retailer fall-out has happened and seems to be continuing.2. Small specialty retailers face major challenges to even survive.3. The experts are predicting that “the big guys with both store fronts and good web operations (bricks- and-clicks) will win in the long run.”

Internet Principles

The Internet is not a strategy: It serves the business strategy.

Internet initiatives require commitment and leadership.

The Internet requires the re-examination of intermediate relationships.Internet technology advances are not enough: It is business model advances that count.

Partnering is the key to success in the Internet’s multi-functional environment.

Some Good QuestionsHow can the Internet help reach our business objectives in a way that is better, delivers more revenue and/or reduces costs?

In what way does the Internet enhance what I am already doing?

Is anyone doing this with any success?

What commitment are we willing to make to enhance our chances of success?

Do we have the right resources in house?

Performance andService

Socialization

Look and Feel

Security andReliability

Personalization IncentivesFactors

AffectingRetailing on

the Web

Retailing on the Web

Business Value of the Internet

35% Cost Savings

32%CustomerService

18% RevenueGeneration

13%Marketing2%

Other

Customer Value & the Internet

How the Internet Increases Customer Value

• Helps gain customer loyalty

• Anticipates future needs of the customers

• Responds to Customer Concerns

• Improves Customer Service

All of these factors are directly or indirectly related to the communication dimension of the Internet.

Lower Costs Global Access

ImprovedService

EmpowersBusiness

Proactive Service PriorityResponsiveness