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5. E-BUSINESS STRATEGY
Slide 5.2
LEARNING OUTCOMES
Follow an appropriate strategy process model for e-business
Produce and select e-business strategies
Outline alternative strategic approaches to achieve e-business goals.
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 5.3
MANAGEMENT ISSUES
How does e-business strategy differ from traditional business
strategy?
How should we integrate e-business strategy with existing business and
IS strategy?
How should we evaluate our investment priorities and returns from ebusiness?
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 5.4
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.
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 5.5
DEFINITIONS OF STRATEGY
What is strategy?
A plan of action designed to achieve a particular goal. -wikipedia
 ‘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 organization’
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Figure 5.1
Different forms of organizational strategy
Slide 5.7
SELL-SIDE E-COMMERCE STRATEGY
(CHAPTERS 8 & 9)
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
 Prioritize products available through channel
 Prioritize audiences targeted through channel
 Select partners for this channel
Channel strategy thrives on differentials
BUT, need to manage channel integration
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 5.8
BUY-SIDE E-COMMERCE STRATEGY (CHAPTERS
6 & 7) OR E-SUPPLY CHAIN MANAGEMENT
STRATEGY
Buy-side e-commerce strategy is about maximizing 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
 Prioritize suppliers / partners collaborating using this channel
 Prioritize applications for E-SCM – create a roadmap
Involves selection of appropriate strategic partners
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 5.9
Figure 5.2
Relationship between e-business strategy and other strategies
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 5.10
WHAT HAPPENS WHERE THERE IS
NO E-BUSINESS STRATEGY?
Missed opportunities for additional sales on the sell-side and for 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
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Figure 5.3
BA communicates its online value proposition (www.britishairways.com)
Source: Based on Revolution (2005)
Figure 5.4
A generic strategy process model
Figure 5.5
Dynamic e-business strategy model
Source: Adapted from Kalakota/Robinson, EBUSINESS 2.0 © 2001, 1999 Pearson Education, Inc. Reproduced by permission of Pearson Education, Inc.
Slide 5.14
STRATEGIC ANALYSIS
Collection and review of information about the external environment
and internal resources
 Immediate competition
 Wider environment
 Internal resources
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Figure 5.6
Elements of strategic situation analysis for the e-business
Slide 5.16
STAGE MODELS OF E-BUSINESS
DEVELOPMENT
Earlier in chapter 1 a stage model was presented, which could be
helpful in assessing the business’s position and resources
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Figure 1.13
A simple stage model for buy-side and sell-side e-commerce
Slide 5.19
PORTFOLIO ANALYSIS
Portfolio analysis is helpful for assessing current e-business capability
and future e-business strategies
The next slide show an example for B2B case
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 5.20
Summary applications of a portfolio analysis for an example B2B
company
Figure 5.7
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 5.21
SWOT ANALYSIS
Strengths, weaknesses, opportunities, and Threats analysis is a useful
tool for analyzing the current situation and for formulating strategies
Next slide shows an example of e-business SWOT analysis
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 5.22
Figure 5.8
SWOT analysis
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 5.23
BALANCE INTERNAL AND EXTERNAL
A e-Business strategy must be based on the balance between internal
capability and external forces
Next slide presents different options based on such a balance
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 5.24
Figure 5.9
Matrix for evaluation of external capability against internal capability
Source: Perrott (2005)
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 5.25
COMPETITIVE ENVIRONMENT ANALYSIS
Bargaining
PORTER’S FIVE FORCES
powers of
customers
Power of
suppliers
The business
Extent of rivalry
between
competitors
Threat of
subsitutes
Threat of new
entrants
Source: adapted with the permission of The Free Press, a Division of Simon & Schuster, Inc., from COMPETITIVE STRATEGY: Techniques for Analyzing Industries and Competitors
by Michael E. Porter. Copyright © 1980, 1998 by The Free Press. All rights reserved
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 5.26
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:
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Banking
Supermarkets
Retail
Travel
Oil industry
Rail industry
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 5.27
Figure 5.11
Elements of strategic objective setting for the e-business
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 5.28
HOW CAN E-BUSINESS CREATE VALUE
Following methods were proposed

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Adding values—better quality products and services
Reducing cost—making the business process more efficient
Managing risks—improve information flow and availability
Creating new reality—create new way that products and or services
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 5.29
An evaluation tool relating information to business value. An organization’s
use of information on each axis can be assessed from 1 to 10
Figure 5.12
Source: Marchand et al. (2002)
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 5.30
E-BUSINESS AND COMPETITIVE
ADVANTAGE
Read Case Study 5.1 on pages 286-287
Discuss questions on p.287
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 5.31
SMART OBJECTIVES
The 2nd phase of strategy development process will produce
objectives.
The objectives should be SMART




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Specific
Measurable—both efficient and effective
Actionable
Relevant
Time-Related
Example—ref. p. 289, table 5.6
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 5.32
Figure 5.13
Arena Flowers (www.arenaflowers.com)
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 5.33
SMART OBJECTIVES
Online Revenue Contribution--% of company revenue directly
generated through online transactions
B2B should consider indirect revenue
Conversion Modeling for B2C
 Using various conversion rates to measure the effectiveness of e-marketing
 Ref. p. 291 Box 5.5
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 5.34
Figure 5.14
An example of conversion modelling for an online retailer
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 5.35
CASE STUDY
Read page 292-293 Case study 5.2
Answer the questions on page 293
Activity 5.2, pages 293
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 5.36
Grid of product suitability against market adoption for transactional
e-commerce (online purchases)
Figure 5.15
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 5.37
SCORECARD FOR OBJECTIVE SETTING
Scorecard is a comprehensive framework for setting and monitoring
business performance.
Metrics includes
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Customer issues
Internal efficiency
Financial, and
Innovation
Example—p. 295, table 5.8
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 5.38
Figure 5.16
Elements of strategy definition for the e-business
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 5.39
STRATEGY DEFINITION
Various models were suggested for defining e-business strategies
Ref. pp.296-297
The next slide shows a strategy selection model based on portfolio
analysis proposed by EConsultancy
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 5.40
Figure 5.17
Matrix for evaluating e-business strategy alternatives
Source: Econsultancy (2008a)
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 5.41
D. 1 CHANNEL PRIORITY
“Getting the right mix of bricks and clicks”
The next slide shows various options
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 5.42
Strategic options for a company in relation to the importance of the
Internet as a channel
Figure 5.18
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 5.43
D. 1 CHANNEL PRIORITY
Right-Channeling
 Integrate different channels to reach the right person at the right time using the right
channel with a relevant offer, product or message
Right-channeling example
 Ref. pp. 299-300, table 5.9
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 5.44
D.2 MARKET AND PRODUCT
DEVELOPMENT
A key strategic considering is which market to target and using what
products
The next slide shows a matrix with different options to grow market
and product development
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 5.45
Figure 5.19
Using the Internet to support different growth strategies
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 5.46
D.3 POSITIONING AND DIFFERENTIATION
Once the market is identified, we need to define the best position of
our e-commerce services relative to competitors.
Research suggests that customer brand perception is determined by
this formula
Value = (product quality * service quality)/
(price * fulfillment time)
Strategies can be developed around this formula
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 5.47
D.3 POSITIONING AND DIFFERENTIATION
Commonly used Criteria that customers use to benchmark e-tailor
performance is presented in table 5.10 on p. 304
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 5.48
ACTIVITY
Read Activity 5.3 on pages 305-306
Discuss the questions 1 and 2 on page 305
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 5.49
D.4 BUSINESS, SERVICE AND REVENUE
MODEL
Review business model (ch2)
This decision is closely related or similar to D3. However, here it
emphasizes new models, e.g., Amazon
“Only the paranoid will survive” (Andy Grove)
Also need to notice that many companies are successful by sticking to
a single business model not far from their original vision
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 5.50
D.5 MARKETPLACE RESTRUCTURING
Companies should also look at the new opportunities created by
Internet in this regard
 Disintermediation
 Re-intermediation
 Counter-mediation
Mini Case Study 5.4 3M on pp. 308-309
What did 3M do in taking advantages of market restructuring?
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 5.51
D.6 SCM CAPABILITIES
This might be considered together with decision 5 but could be
examined on its own
 How to interact more closely with suppliers?
 What to be covered in this e-relationship?
 Participate in marketplace to reduce cost?
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 5.52
D.7 INTERNAL KM CAPABILITIES
What is knowledge?
 Patterns, rules, and contexts that provide a framework for creating, evaluating, and using information.
 Can be tacit (undocumented) or explicit (documented) knowledge
What is knowledge management?
 Set of processes to create, store, transfer, and apply knowledge
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 5.53
D.8 ORGANIZATIONAL RESOURCES AND
CAPABILITIES
What changes does the organization need to make?
Available options
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In-house division (integration)
Joint venture (mixed)
Strategic partnership (mixed)
Spin-off (separation)
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 5.54
D.8 ORGANIZATIONAL RESOURCES AND
CAPABILITIES
Questions & Discussion
 What are the pros and cons for in-house option?
 When the separation option would be a good choice?
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 5.55
D.8 ORGANIZATIONAL RESOURCES AND
CAPABILITIES
Other changes to be examined
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Strategy process and performance improvement
E-commerce infrastructure
Senior management support
Market integration
Online market focus
An e-commerce capability maturity model
 Ref. p. 311, Table 5.11
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 5.56
Strategy Implementation
Figure 5.20
Elements of strategy implementation for the e-business
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 5.57
FAILED E-BUSINESS STRATEGIES
Some reasons were articulated
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Overestimate the speed that the marketplace adopts the dot.com innovation
Timing errors
Lack of creativity
Free services
Over ambition
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 5.58
FAILED E-BUSINESS STRATEGIES
Usually there are more fundamental problems than surfaced
Major problems occurred at the strategy development and
implementation process
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Situation Analysis—insufficient research on demand and completive forces
Object setting—no objectives or unrealistic
Strategy definition—poor business models
Implementation—problems with customer services and product quality, etc.
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 5.59
IMPLEMENTATION SUCCESS FACTORS FOR
SMES
Content—effective presentation
Convenience—usability
Control—manageable and under control
Interaction
Community
Price sensitivity
Brand image
Commitment
Partnership
Process Improvement
Integration
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 5.60
CASE STUDY
Read the case study on pages 316-318
Answer the questions on page 318
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 5.61
IS STRATEGY AND E-BUSINESS STRATEGY
These two are closely related.
Business-alignment approach—top down. Start with business strategy
and make IS strategy so that it aligns with business strategy
Business-impact approach—bottom up. Examine new IS opportunities
to see if they can bring positive impact to business strategy
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 5.62
THE PRODUCTIVITY PARADOX
Research indicates that there is a week or poor correlation between IS
investment and business performance
It’s agreed that IT investment has a strong positive relationship with
sales, assets and equity but not with net income.
Investment on IT staff and user training does show positive relationship
on income
It’s strongly recommended that more attention should be paid to
business process change when implementing e-business strategy
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 5.63
NEXT CLASS
Read the Econsultancy interview on pages 606-608 of chapter 11
Answer the following questions
What is Arena Flowers’ business model?
How competitive is Arena Flowers on the market and Why?
Is this a business of bricks & mortar, bricks & clicks, or pure play? Are
they planning to change that soon and why?
Do they do cross-selling? How successful and why?
Is their site developed and maintained in-house or outsourced?
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 5.64
NEXT CLASS
Econsultancy interview (Continues)
Is their site developed and maintained in-house or outsourced?
What’s the pros and cons of their approach?
What else can we learn from this interview?
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009