Digital Business and E-Commerce
Management
Seventh Edition
Part 2
Strategy and applications
Chapter 5
Digital business strategy
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Learning outcomes
• Follow an appropriate strategy process model
for digital business
• Apply tools to generate and select digital
business strategies
• Outline alternative strategic approaches to
achieve digital business
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Management issues
• How does digital business strategy differ from
traditional business strategy?
• How should we integrate digital business
strategy with existing business and information
systems strategy?
• How should we evaluate our investment
priorities and returns from digital business?
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Michael Porter on the Internet
‘The key question is not whether to deploy Internet
technology – companies have no choice if they
want to stay competitive – but how to deploy it.’
Porter, M. (2001) Strategy and the Internet,
Harvard Business Review, March 2001, 62–78.
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Alternative definitions of strategy
• What is strategy?
– ‘Defines how we will meet our objectives’
– ‘Sets allocation of resources to meet goals’
– ‘Selects preferred strategic option to
compete within a market’
– ‘Provides a long-term plan for the development
of the organisation’.
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Figure 5.2 Different forms of
organisational strategy
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Sell-side e-commerce strategy (Chapters 7 and 8)
or digital marketing/CRM strategy
• Sell-side e-commerce is a channel strategy
• Objectives for online contribution percentage
should drive our strategy
• Our e-commerce strategy defines how we should
– Hit our channel leads and sales targets
Acquisition, Conversion, Retention, Service, Profitability
– Communicate benefits of using this channel
– Prioritise products available through channel
– Prioritise audiences targeted through channel
– Select partners for this channel
• Channel strategy thrives on differentials
• BUT, need to manage channel integration
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Buy-side e-commerce strategy (Chapter 6) or
supply chain management strategy
• Buy-side e-commerce strategy is about maximising
operational efficiencies while improving customer service
quality
• Operational efficiency KPIs should drive our strategy
• Our buy-side e-commerce strategy defines how we should
– Automate internal processes
– Link internal resource management systems with external
purchasing systems
– Prioritise suppliers/partners collaborating using this channel
– Prioritise applications for SCM – create a roadmap
• Involves selection of appropriate strategic partners
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Figure 5.3 Relationship between digital
business strategy and other strategies
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What happens where there is
no digital 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,
for example, Tesco, Dell
• Poor customer experience from poorly integrated
channels
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Figure 5.4 The Onedox revenue model
Source: [Link]
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Examples of platform types
• Aggregation platforms – MoneySupermarket,
the App store, Ebay, Innocentive and Kaggle
• Social platforms – Facebook and Twitter
• Mobilisation platforms – Crowdfunder and
Kickstarter
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Figure 5.5 A generic strategy
process model
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Figure 5.6 Dynamic digital
business strategy model
Source: Adapted from description in Kalakota and Robinson (2000).
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Figure 5.7 Elements of strategic situation
analysis for the digital business
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Table 5.3 A stage model for digital
business development
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Figure 5.8 Summary applications of a
portfolio analysis for a sample B2B company
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Figure 5.9 SWOT/TOWS analysis
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Activity
Impact of Internet
• For one of the industries below, assess how the
Internet has changed the competitive forces, for
example, has it increased or decreased power
of suppliers and customers?
• Industries:
– Banking
– Supermarkets
– Oil industry
– Rail industry
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Figure 5.10 Matrix for evaluation of external
capability against internal capability
Source: Perrott (2005), with permission
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Table 5.4 Capability maturity model of
the adoption of e-business
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Figure 5.11 Competitive threats
acting on the digital business
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Figure 5.12 Elements of strategic
objective setting for the digital business
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Figure 5.13 VMOST analysis
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Figure 5.14 Arriva Bus app
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Figure 5.15 An example of conversion
modelling for an online retailer
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Figure 5.16 Research Online Purchase
Offline example
Figure GoogleResearch
5.16
Source: Online Purchase Offline example
Source: Google.
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Table 5.6 Goals, strategies and objectives (key
performance indicators) for a sample B2B
company (in order of priority)
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Figure 5.17 Grid of product suitability
against market adoption for transactional
e-commerce (online purchase)
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Figure 5.18 Elements of strategy
definition for the digital business
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Figure 5.19 Matrix for evaluating
digital business strategy alternatives
Source: ‘Econsultancy’ (2008a)
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Figure 5.20 Strategic options for a company
in relation to the importance of the
Internet as a channel
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Figure 5.21 Using the Internet to
support different growth strategies
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Figure 5.23 Elements of strategy
implementation for digital business
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Summary
• You should be able to follow an appropriate
strategy process model for digital business
• You should be able to apply tools to
generate and select digital business
strategies
• You should be able to outline alternative
strategic approaches to achieve digital
business
Copyright © 2019, 2015, 2011 Pearson Education, Inc. All Rights Reserved