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Outline

Why the Internet

E-Business Strategies
E-business Strategy ???

Determining Competitive Advantage

Implementing Strategy

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“When history is written, the creation of the Internet

may be ranked alongside Johann Gutenberg’s
Why the Internet? printing press and Marconi’s radio as among the
major advancements in human communication.”

Roanoke Times, March 1, 1997

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What do these technologies have in

common with the Internet? Printed Material

Printing press
Over-night delivery
Mass reproduction

Telephone
Facsimile machine
Unknown audience

Automobile
Cellular phone
Wider geographical area

Airplane
Personal computer
One-way communication

Television

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Telephone Planes, Trains & Automobiles

Immediate communication

Interactive two-way
communication

Personal communication

Customer prospecting
Wider geographical base

Wider geographical area
Two-way communication

Perception of above- average
service

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Television Over-night Delivery

Provide immediate service

Wide, mass audience
Create perception of customer care

One-way communication
JIT management systems

60 second sound bite

First visual electronic medium

Federal Express

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FAX - iT Cellular Phone

Immediate transfer of written information

Above average service
Mobility

One-way promotion
Instant access to customers

Closer to the customer
Above average service

24 hour contact

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Personal Computer What do they have in Common?

Faster service
Wider distribution of information

Customer information
Uniform information

Data bases
Assist in marketing function of company

Instant communication
Many were interactive

Allow for impression of above average service

They all have become standards in the industry

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Definitions

Electronic Commerce (EC) is where business transactions
take place via telecommunications networks, especially the
Internet.
Internet  Describes the buying and selling of products, services, and
information via computer networks including the Internet.
 A networked computing environment in business, home, and
government.
 Describes the broadest definition of EC. It includes customer
service and intrabusiness tasks. It is frequently used
interchangeably with EC.
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What is an Intranet? What is an Extranet?

Allows for immediate transfer
An extranet is formed when the company allows outsiders into the

When internet technology is
of technology between intranet pages.
used to create a private
locations.
Customers can order on line.
network within a company an

Provides information such as
Reduces paperwork
intranet is formed.
product pricing, inventory lists,
Minimizes errors
production schedules, and data
Provides better customer services
bases for remote employees.
Shortens delivery times

Support distributors

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What’s Needed Cost

Designated computer

Software to communicate with Internet

$1500 computer

A connection into a network that accesses the Internet

$300 Software

Home page design - $100/hr - ?
Or
Commercial Internet access - >$100/month
* Hire a commercial service and
have a connection to the network

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Current Users What’s Being Sold

Computer software

Computer hardware

Average age is 40
Books

45% female
Music

45% married
Gifts

1/3 computer field, 1/4 educational & 20% professional
Travel

>40% have made purchase over $100
Clothes

>$100 billion sold in 1999
Source:
[Link]/user_surveys/survey-1999
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The Benefits of Electronic Commerce

Benefits to Organizations

1. Expands the marketplace to national and international markets

Why an E-Commerce Strategy 2. Decreases the cost of creating, processing, distributing, storing and
retrieving paper-based information
3. Allows reduced inventories and overhead by facilitating “pull” type
supply chain management
4. The pull type processing allows for customization of products and
services which provides competitive advantage to its implementers

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Benefits to Organizations Benefits to Customers

5. Reduces the time between the outlay of capital and the receipt
1. Enables customers to shop or do other transactions 24 hours a
of products and services day, all year round from almost any location
6. Supports business processes reengineering (BPR) efforts 2. Provides customers with more choices
7. Lowers telecommunications cost - the Internet is much 3. Provides customers with less expensive products and services
cheaper than value-added networks (VANs) by allowing them to shop in many places and conduct quick
comparisons
4. Allows quick delivery of products and services in some cases,
especially with digitized products

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Benefits to Customers Benefits to Society

5. Customers can receive relevant and detailed information in 1. Enables more individuals to work at home, and to do less
traveling for shopping, resulting in less traffic on the roads,
seconds, rather than in days or weeks
and lower air pollution
6. Makes it possible to participate in virtual auctions
2. Allows some merchandise to be sold at lower prices
7. Allows customers to interact with other customers in electronic benefiting the poor ones
communities and exchange ideas as well as compare 3. Enables people in Third World countries and rural areas to
experiences enjoy products and services which otherwise are not available
to them
8. Electronic commerce facilitates competition, which results in
4. Facilitates delivery of public services at a reduced cost,
substantial discounts.
increases effectiveness, and/or improves quality

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Why? Electronic Markets

 A market is a network of interactions and relationships where

Works 24 hours a day information, products, services, and payments are exchanged.

Offers 2 way communication The market handles all the necessary transactions.

Unlimited access
 A place where shoppers and sellers meet electronically.

Interactive advertising
In electronic markets, sellers and buyers negotiate, submit bids,

Supports current business efforts 

agree on an order, and finish the execution on- or off-line.

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Electronic Commerce is Interdisciplinary Major Business Pressures

Market and Strong competition

Marketing economic pressures Global economy
Regional trade agreements (e.g. NAFTA)

Computer sciences Extremely low labor cost in some countries

Consumer behavior and psychology Frequent and significant changes in markets
Increased power of consumers

Finance
Changing nature of workforce

Economic Societal and Government deregulation of banking and other services

Production/Logistic environmental pressures Shrinking government budgets subsides
Increased importance of ethical and legal issues

Management information systems Increased social responsibility of organizations

Accounting and auditing Rapid political changes

Management Technological
Rapid technological obsolescence
Increase innovations and new technologies

Business law and ethics pressures
Information overload
Rapid decline in technology cost vs. performance ratio
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Competition in Electronic Commerce Competition in Electronic Commerce

Impacts on competition

Perfect competition
 Lower buyers’ search cost
 Enable many buyers and sellers to enter the market at little or no
 Speedy comparisons
cost (no barriers to entry)
 Differentiation
 Not allowing any buyers and sellers to individually influence the
 Lower price
market
 Customer service
 Make certain products homogeneous (no product differentiation)
 Digital products lack normal wear and tear
 Supply buyers and sellers with perfect information about the
products and the market participants and conditions

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Competition in Electronic Commerce

Observations regarding competitiveness

 There will be many new entrants
 The bargaining power of buyers is likely to increase What is Strategy
 There will be more substitute products and services
 The bargaining power of suppliers may decrease
 The number of industry competitors in one location will increase

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What is Strategy

Strategy is the roadmap to success.

The goal is to develop a sustainable competitive advantage.

Strategy answers the question what business are you in?
There are generally two forms of competition, Operating

Strategy determines how you compete within the market you are in.
effectiveness (production) or Competitive position

Strategy focuses the company in a unified direction.
(marketing)

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Competitive Advantage Can Be Achieved By: Generic Strategies

Porter gives us a little more help in strategy formulation by providing

Concentrating on particular market segments (niche markets)
three generic strategies which, if successfully implemented, can allow a

Offering products which differ from the competition (product
firm to stake out a defended position in the marketplace. These
differentiation)
strategies are:

Using alternative distribution channels and manufacturing processes

Employing selective pricing and fundamentally different cost
Overall cost leadership
structures
Differentiation

Focus

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Overall Cost Leadership

Efficient scale facilities Differentiation
Vigorous cost reductions

Cost control Key idea: Create something about your product that is

Overhead control perceived industry wide as being unique
Bases for Differentiation:

Avoid marginal accounts

Minimize R&D
Quality
Reputation / Brand Image

Minimize service

Delivery
Tech. Information

Minimize advertising

Credit and Terms
The Actual Product

Service
Price

Training
Etc.

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Focus

Key Idea: Focus on a particular buyer group,

Differentiation can provide insulation against competitors segment of the product line, or geographic market
because of brand loyalty by customers and a resulting lower
sensitivity to price

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Focus your message

This strategy is built around serving a particular target

Pick your theme to say something
special/unique about your firm, and stick to it.
market very well. The premise is that a firm is able to
serve its narrow strategic target more effectively or
efficiently than competitors who are competing more
Unique product
broadly
Speedy Delivery

Super Service
By effectively implementing this strategy a firm can
?
achieve differentiation by better meeting the market
?
needs or lower costs through specialization, or both

Stay Committed!
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Generic Strategies Summary

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For Successful Strategic

Competition, Select Arenas That Are:

Sheltered from Determining Competitive Advantage

changes in the
business environment

Advantaged to provide
protection from
intense global
competition
Electronic Commerce, 2000
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Strategic Planning Company and Competitive Analysis

Monitoring, evaluating, disseminating of information from the

external and internal environments
Industry and
SWOT Analysis
Strategy Implement-ation Strategy
competitive
formulation plan reassessment
analysis

Strengths Weaknesses

Threats
Opportunities
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SWOT

Strengths – those factors of the company that provide for its success. Company Analysis
A good reputation, quality products or low cost producer. INTERNAL
FACTORS Strengths (S) Weaknesses (W)

Weaknesses – those factors that are a disadvantage for the company. A
high cost producer, a high employee turnover, or much competition.

Opportunities – those factors that are outside the company’s control,
but are areas in which they could capitalize. A changing demographic Production

profile, competition closing plants or e-business allowing for wider

distribution of products.
Marketing

Threats – those items outside the control of the company and that may
hinder it. Items such as new laws, a recession or increased competition.
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Competitive Analysis Company and Competitive

Analysis
INTERNAL
FACTORS Strengths (S) Weaknesses (W)
EXTERNAL Production Marketing EXTERNAL
SO Strategies WO Strategies
FACTORS FACTORS
Generate Generate
strategies here strategies here
that use strengths that take
Opportunities (O) Opportunities (O) to take advantage of
advantages of opportunities by
opportunities overcoming
weaknesses
WT Strategies
ST Strategies
Generate
Generate
Threats (T) Threats (T) strategies here
strategies here
that minimize
that use strengths
weaknesses and
to avoid threats
avoid threats
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Strategic Questions Strategic Questions

The Company
The competition
The market

 What is your uniqueness?  Who are the top 3  What are 3 important
competitors? trends?
 Where are you vulnerable?  What are their strengths?  How is the industry
 Why are you losing existing customers?  Where are they changing?
vulnerable?  How many market
 Where is the greatest value created in the company?  Where can you attack? segments do you serve?
 What are the most common objections you hear from  How do you compare on  Where is the greatest
price, service, quality, etc? growth potential?
customers?
 Which of your customers
are doing well and why?

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Competitive Strategies Competitive Strategies

Offensive strategy— usually takes place in an established
competitor’s market
 Frontal Assault— attacker must have superior resources and
Defensive strategies— takes place in the firm’s
willingness to persevere own current market position as a defense against
 Flanking Maneuver— attack a part of the market where the possible attack by a rival
competitor is weak
 Lower the probability of attack
 Bypass Attack— cut the market out from under an established
defender by offering a new type of product that makes the  Divert attacks to less threatening avenues
competitor’s product unnecessary  Lessen the intensity of an attack
 Encirclement— greater product variety and/or serves more  Make competitive advantage more sustainable
markets
 Guerrilla Warfare— use of small, intermittent assaults on
different market segments held by the competitor Slide 59 Slide 60

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Competitive Strategies Strategic Summary

Cooperative Strategies

Focus your efforts!

Collusion— active cooperation of firms within an industry to reduce
Define your competitive advantage!
output and increase prices in order to get around the normal
Have a clear strategy!
economic law of supply and demand (illegal)

Strategic Alliance— partnership of two or more corporations or
Do it!
business units to achieve strategically significant objectives that are
mutually beneficial

Joint Venture— a way to temporarily combine the different
strengths of partners to achieve an outcome of value to both

Value-Chain Partnership— a strong and close alliance in which one
company or unit forms a long-term arrangement with a key supplier
or distributor for mutual advantage

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Questions

Objectives
Savings
Implementing Strategy

Benefits to customers
Competitive
advantage

Current business

Presentation

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Questions Objectives

What are you producing and selling?

How are you unique?
Introduce new product or service

Why should the customer buy from you?
Advertising existing business

How are you going to reach the customer?
Supplement existing business program

What’s success?
Reach broader customer base

Provide better service

Information exchange

Reduce transaction costs

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Current Customers Marketing Mix

Benefits
Promotional Tool

Easier access to
Ads, publicity, sales
information tool

Shipping schedules
Pricing

Discounts

Product Information

Invoicing

Distribution

Inventories

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Home Page
Savings
KISS

Support time  Keep it simple, stupid
1. Decide what information you want to share

Order entry 2. Grab their attention quickly

Promotion response 3. Present information in simple, logical fashion

E-mail

Shipping and $ 4. Do not put lots of graphics on first page
5. Should be pleasant to the eye
6. Each page should have company name, logo, e-
invoicing information mail address and toll-free phone number

Customer lists
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Promoting Your E-business Why Do You Need Promotion?

Just because you build it, doesn’t mean they will come.

You are competing against not only your market area, but the
entire world.

Your current and future customers need to be able to find you.

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HOW? Link to?

List homepage address
Register with search

on all current advertising. engines.
Your trade associations

Put on all publicity
Link to other sites and
Suppliers
 newsletters your association sites.
Customers
 letterhead
Advertise on the web.
Complementary products
 business cards
 billing statements
 fax cover sheets

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Good Internet Advertising

Includes:
Advertising on the Web

To build awareness
Clear message and identification on 1st page.

Facilitates easy access to further information.

Develop prospects

The advertisement downloads quickly.

Meet customer needs
Provides the right information.

Generate orders  Product description, payment options, and contact

Build customer information.
relations

Test market
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Common Search Engines

The Advantage for Small

Submit it - [Link] Businesses

Yahoo - [Link] 4 Inexpensive source of information

Webcrawler - [Link] 4 Inexpensive way of advertising

Infoseek - [Link] 4 Inexpensive way of conducting market research

Lycos - [Link] 4 Inexpensive way to build (or rent) a storefront

Google - [Link] 4 Lower transaction cost

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The Advantage for Small

Businesses The Risks and Disadvantages for
Small Businesses
4 Niche market, specialty products (cigars, wines, sauces) are
the best
4 Image and public recognition can be accumulated fast 8 Disadvantage when a commodity is the product (for
example, CDs)
4 Inexpensive way of providing catalogs 8 No more personal contact which is a strong point of a
4 Inexpensive way to reach worldwide customers small business
8 No advantage being in a local community

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Success Factors for Small

The Risks and Disadvantages
Businesses
for Small Businesses

Niche products

Small volume
8 Lack of expertise in legal issues, advertisement
Capital investment must be small
8 Lack of resources to fully exploit the Web
Inventory should be minimal or non-existent
8 Less risk tolerance than a large company

Electronic payments schema exist

Payment methods must be flexible

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Success Factors for Small

Businesses

Logistical services must be quick and reliable

The Web site should be submitted to directory-
based search engine services like Yahoo in a
correct way

Join an online service or mall and do banner
exchange

Design a Web site that is functional and
provides all needed services to consumers

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