Get rich through internet – using Ecommence website as an example
1
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NOT how to implement EC / EB functions
BUT to
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ANALYZE the business requirements in the
perspective of strategic management
FORMULATE suitable business models & strategies
CHOOSE suitable IT options (especially Webbased ones) to implement the strategies
COMP7880-I/E-2
Our Roadmap
Mobile e-commerce strategy
E-business strategy
Strategy
Strategy formulation
implementation
12
Strategic
analysis
3
External
analysis
9
5
Internal
organisation
Strategy
options
Opportunities/
threats
Strengths/
weaknesses
4
Internal
analysis
6
Sustaining
competitive
advantage
8
7
Exploring
new market
spaces
Creating and
capturing
value
10
13
Interaction with
suppliers
Implementation
11
Interaction with
users/customers
COMP7880-I/E-3
E-business strategy formulation
SWOT Analysis
Key environmental/
industry developments
Opportunities
Strengths
Firm
characteristics
Weaknesses
Internal
Analysis
External
Analysis
Threats
• Do we have
the strengths to
seize possible
opportunities?
• Do we have
the strengths to
fend off possible
threats?
• Which opportunities
do we miss because
of our deficits?
• To which threats do
our weaknesses
expose us to?
COMP7880-I/E-4
External Analysis
Examine your opportunities & threats
COMP7880-I/E-5
What is External Analysis?
External Analysis
Scan and evaluate various external environmental
sectors impacting performance
Opportunities
Positive external environmental trends that
improve the organization’s performance
Threats
Negative external environmental trends that
hinder the organization's performance
COMP7880-I/E-6
External Analysis: Impacted by
industry and macro-environment
General
Environment
Technological
Specific Environment
Industry-Competitors
Substitute
Products
Political-Legal
Organization
Bargaining
Power of Bargaining
Suppliers Power of
Buyers
Economic
Current
Rivalry
Potential
Entrants
Demographic
Sociocultural
Source: Adapted from H. Hungenberg (2006), p. 90.
COMP7880-I/E-7
General Environment - Economic
Economic
All the macroeconomic data, current statistics, trends, and changes
•
Interest rates
•
Monetary exchange rates
•
Budget deficit-surplus
•
Trade deficit-surplus
•
Inflation rates
•
GNP or GDP
•
Consumer income, spending, and debt levels
•
Unemployment levels
•
Workforce productivity
COMP7880-I/E-8
General Environment - Demographics
Demographics
Current statistical data and trends in population characteristics
•
Gender
•
Age
•
Income levels
•
Ethnic makeup
•
Education
•
Family composition
•
Geographic location
•
Birth rates
•
Employment status
COMP7880-I/E-9
General Environment - Sociocultural
Sociocultural
• Country's culture
• Society's
•
•
•
•
•
•
Traditions
Values
Attitudes
Beliefs
Tastes
Patterns of behavior
COMP7880-I/E-10
General Environment – Political-Legal
Political-Legal
• Federal, state, and local
• Laws
• Regulations
• Judicial decisions
• Political forces
COMP7880-I/E-11
General Environment - Technical
Technical
Improvements, advancements, and innovations
that create opportunities and threats
• Communications
• Computing
• Transportation
• Manufacturing
• Robotics
• Biotechnology
• Medicine and medical
• Telecommunications
• Consumer electronics
COMP7880-I/E-12
Porter’s 5 force model
Potential entrants
Threat of
new entrants
Industry competition
Suppliers
Bargaining power
of buyers
Rivalry among
existing firms
Bargaining power
of suppliers
Buyers
Threat of
substitutes
Substitutes
One assumption of Porter’s five forces model is that some industries are inherently more
attractive than others; i.e., the profit potential for companies in that industry is higher.
As this figure indicates, the interaction and strength of five forces influences profitability.
Source: Adapted from M. Porter (1998), p. 4.
COMP7880-I/E-13
Complementing Porter’s model:
Co-opetition value network framework
Supplier
Competitors
Firm
Complementors
Buyer
Source: Adapted from A. Brandenburger and B. Nalebuff (1998), p. 17
COMP7880-I/E-14
Internal Analysis
Examine your strength & weakness
COMP7880-I/E-15
What is an Internal Analysis?
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Looks at the organization’s
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Vision
Mission
Strategic objectives
Identifies and evaluates resources,
capabilities, and core competencies
COMP7880-I/E-16
Company Vision
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Massively inspiring
Overarching
Long-term
Driven by and evokes passion
Fundamental statement of the
organization’s
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Company vision
Values, Aspiration, Goals
E.g., Disneyland: “To be the
Happiest place on earth”
Hierarchy of Goals
COMP7880-I/E-17
Mission Statements
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Purpose of the company
Basis of competition and
competitive advantages
More specific than vision
Focused on the means by
which the firm will compete
E.g., FedEx: “To produce
superior financial returns
for our shareholders as we
serve our customers with
the highest quality
transportation, logistics,
and e-commerce.”
Company vision
Mission statements
Hierarchy of Goals
COMP7880-I/E-18
Strategic Objectives
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Operationalize the mission
statement
Provide guidance on how the
organization can fulfill or move
toward the “higher goals”
More specific, a more well-defined
time frame, measurable (yardstick
for rewards and incentives),
consistent with vision and mission,
realistic (challenging but doable),
timely
E.g., P&G: “Increase sales growth
6% to 8% in each of the next five
years”
Company vision
Mission statements
Strategic objectives
Hierarchy of Goals
COMP7880-I/E-19
Distinctive e-business competencies:
unique resources and capabilities
Resources
Tangible
resources
(Equipment,
location, ...)
Intangible
resources
Capabilities
The ability to
deploy resources
by co-ordinating
them through
• Structures
• Processes
• Systems
(Technology, knowhow, brand, ...)
Build
resources
Source: Adapted from H. Hungenberg (2006), p. 143.
Strategic importance
• Valuable
• Unique
• Hard to imitate/
substitute
• Valuable across different
products/markets
e-Business
competencies
Utilize
resources
COMP7880-I/E-20
Our Roadmap
Mobile e-commerce strategy
E-business strategy
Strategy
Strategy formulation
implementation
12
Strategic
analysis
3
External
analysis
9
5
Internal
organisation
Strategy
options
Opportunities/
threats
Strengths/
weaknesses
4
Internal
analysis
6
Sustaining
competitive
advantage
8
7
Exploring
new market
spaces
Creating and
capturing
value
10
13
Interaction with
suppliers
Implementation
11
Interaction with
users/customers
COMP7880-SO-21
Differentiation & Price Strategies
COMP7880-SO-22
The strategic triangle –
Main drivers of competitive advantage
2
Customer
1
3
Price/
benefit
Company
Cost
Price/
benefit
Competitors
4
Cost
Source: Adapted from H. Hungenberg (2006), p. 185.
COMP7880-SO-23
2 generic approaches of
competitive advantage
Unique product
with price
premium
Goal of the companyBusiness strategy
something
Performance Provide
that is valuable
advantage unique
to buyers
Differentiation
Competitive
advantage
Price
advantage
Similar product
with lower
price
Provide a product
with lowest price
Cost leadership
(Cost/price leadership)
Become the cost
leader in the industry
Source: Adapted from H. Hungenberg (2006), p. 189.
COMP7880-SO-24
Achieving cost leadership position
Economies of
scale
The basic concept of economies of scale is that as a firm
increases its product output, it decreases its unit production
cost.
Economies of
scope
While economies of scale can be realized by increasing the
production of one product type, economies of scope result from
expanding the variety of products sold using the same assets.
Factor costs
Learning
effects
Factor costs represent a crucial cost driver, especially for
retailing companies that act as intermediaries. The ability to
bargain down input prices, for instance, through bulk
purchasing can be an effective lever for lowering costs.
Learning effects can lower costs as a firm improves its
efficiency over time, thereby reducing slack and wasteful
activities.
Tangible and intangible
sources of differentiation
Quality
Customisation
Tangible
sources
Convenience
Speed of delivery
Sources of
differentiation
Product range
Intangible
sources
Brand
Reputation
COMP7880-SO-26
Strategic gameboard for formulating
consistent business strategies
Where do we
2 want to achieve
the competitive
advantage?
Market segment (niche)
Whole market
Performance
Cost/
price
New
game
Old
game
3
How do we
want to
achieve the
competitive
advantage?
1 Which competitive
advantage do we aim for?
Source: Adapted from H. Hungenberg (2006), p. 251.
COMP7880-SO-27
E-business models
COMP7880-SO-28
What is a Business Model?
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Six key questions
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How do we create value?
For whom do we create value?
What is our source of competence/ advantage?
How do we differentiate ourselves?
How do we make money (revenue model)?
What are our time, scope, and size ambitions?
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Typical Business Models in EC
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Online direct marketing
Electronic tendering
systems (e.g., reverse
auction)
Name your own price
Affiliate marketing
Virtual marketing
Group purchasing
Online auctions
Product and service
customization
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Electronic marketplaces
and exchanges
Value-chain integrators
Value-chain service
providers
Information brokers
Bartering
Deep discounting
Membership
Supply chain improvers
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Typical revenue models
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Tangible goods
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Web catalog revenue model
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Taking mail order catalog model to the Web
Digital Content Revenue Models
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Advertising-Supported Revenue Models
Subscription Revenue Models
Advertising-Subscription Mixed Revenue Models
Agency and Services
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Fee-for-Transaction Models
Fee-for-Service Models
COMP7880-SO-31
Revenue Strategy Issues
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Channel conflict (or cannibalization)
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Channel cooperation
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Giving customers access to the company’s products through a
coordinated presence in all distribution channels (e.g., Staples,
Eddie Bauer)
Strategic alliance: when two or more companies join
forces to undertake an activity over a long period of time
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Sales activities on a company’s Web site interfere with existing
sales outlets (e.g., Levi Strauss)
Account aggregation services
Channel distribution managers (i.e., fulfillment
managers): firms that take over the responsibility for a
particular product line within a retail context
32
Our Roadmap
Mobile e-commerce strategy
E-business strategy
Strategy
Strategy formulation
implementation
12
Strategic
analysis
3
External
analysis
9
5
Internal
organisation
Strategy
options
Opportunities/
threats
Strengths/
weaknesses
4
Internal
analysis
6
Sustaining
competitive
advantage
8
7
Exploring
new market
spaces
Creating and
capturing
value
10
13
Interaction with
suppliers
Implementation
11
Interaction with
users/customers
COMP7880-EN-33
Value curve provides insights into
new market spaces
High
Performance
Value curve of
traditional
bookstores
Value curve of
Amazon.com
Price
Speed
Convenience Selection
range
Dimensions of benefit
Face-to-face
interaction
Source: Adapted from C. Kim and R. Mauborgne, (1999).
COMP7880-EN-34
Value innovations focus on
customers rather than competitors
Characteristics of conventional and value innovation logic
Conventional logic
Value innovation logic
Assumption
An industry's value curves
follow one basic shape.
New value curves can be shaped
that solve traditional trade-offs.
Strategic
focus
Build a competitive advantage
and beat the competition.
Pursue a quantum leap in customer
value. Competition is no benchmark.
Customers
Retain and expand customer
base through segmentation and
customization. Focus on the
differences.
Target the mass of buyers. Let
some existing customers willingly
go. Focus on key commonalities
in what customers value.
Resources
Utilize existing assets and
capabilities.
Ask what we would do if we were
starting anew?
Offerings
Offer the products and services
of your industry.
Offer the total customer solution
exceeding industry boundaries.
COMP7880-EN-35
Value innovation shifts from head-to-head
competition to creating new market
Six path framework to create value innovations
Head-to-head competition
Creating new market space
Focuses on rivals in its industry Looks across substitute industries
across strategic groups
Strategic
Focuses on competitive posi- Looks
within its industry
group
tion within strategic group
Buyer group Focuses on better serving the Redefines the buyer group
own buyer group
Product scope Focuses on maximising value Looks across complementary
offerings beyond the bounds
of the industry's products/
of its industry
services
Rethinks the functional/emoAppeal
Focuses on improving the
tional orientation
given appeal
Time/trends Focuses on adapting to trends Adopts the results of future
trends today
as they occur
Industry
COMP7880-EN-36