E-Business Strategies: E-Business Strategies Bob Smith
Associate Professor/Extension Specialist
Dept. of Wood Science and Forest Products
Virginia Tech E-Commerce: Impacting the Way We do Business
October 1-2, 2001, Nashville TN
Outline: Outline Why the Internet
E-business Strategy ???
Determining Competitive Advantage
Implementing Strategy
Why the Internet?: Why the Internet?
Slide4: “When history is written, the creation of the Internet may be ranked alongside Johann Gutenberg’s printing press and Marconi’s radio as among the major advancements in human communication.”
Roanoke Times, March 1, 1997
What do these technologies have in common with the Internet?: What do these technologies have in common with the Internet? Printing press
Telephone
Automobile
Airplane
Television Over-night delivery
Facsimile machine
Cellular phone
Personal computer
Printed Material: Printed Material Mass reproduction
Unknown audience
Wider geographical area
One-way communication
Telephone: Telephone Immediate communication
Interactive two-way communication
Customer prospecting
Wider geographical area
Planes, Trains & Automobiles: Planes, Trains & Automobiles Personal communication
Wider geographical base
Two-way communication
Perception of above- average service
Television: Television Wide, mass audience
One-way communication
60 second sound bite
First visual electronic medium
Over-night Delivery: Over-night Delivery Provide immediate service
Create perception of customer care
JIT management systems Federal Express
FAX - iT: FAX - iT Immediate transfer of written information
Above average service
One-way promotion
Closer to the customer
Cellular Phone: Cellular Phone Mobility
Instant access to customers
Above average service
24 hour contact
Personal Computer: Personal Computer Faster service
Customer information
Data bases
Instant communication
What do they have in Common?: What do they have in Common? Wider distribution of information
Uniform information
Assist in marketing function of company
Many were interactive
Allow for impression of above average service
They all have become standards in the industry
Slide15: Internet
Definitions: Definitions Electronic Commerce (EC) is where business transactions take place via telecommunications networks, especially the Internet.
Electronic commerce describes the buying and selling of products, services, and information via computer networks including the Internet.
The infrastructure for EC is a networked computing environment in business, home, and government.
E-Business describes the broadest definition of EC. It includes customer service and intrabusiness tasks. It is frequently used interchangeably with EC. Electronic Commerce, 2000
What is an Intranet?: What is an Intranet? When internet technology is used to create a private network within a company an intranet is formed. Allows for immediate transfer of technology between locations.
Provides information such as product pricing, inventory lists, production schedules, and data bases for remote employees.
What is an Extranet?: What is an Extranet? An extranet is formed when the company allows outsiders into the intranet pages. Customers can order on line.
Reduces paperwork
Minimizes errors
Provides better customer services
Shortens delivery times
Support distributors
What’s Needed: What’s Needed Designated computer
Software to communicate with Internet
A connection into a network that accesses the Internet Or
* Hire a commercial service and
have a connection to the network
Cost: Cost $1500 computer
$300 Software
Home page design - $100/hr - ?
Commercial Internet access - >$100/month
Current Users: Current Users Average age is 40
45% female
45% married
1/3 computer field, 1/4 educational & 20% professional
>40% have made purchase over $100 Source:
www.gvu.gatech.edu/user_surveys/survey-1999
What’s Being Sold: What’s Being Sold Computer software
Computer hardware
Books
Music
Gifts
Travel
Clothes
>$100 billion sold in 1999
What’s Being Sold? : What’s Being Sold? Source: Forester Research Inc. 1998
Technology Update (It took this many years to reach 50 million users): Technology Update (It took this many years to reach 50 million users) Radio - 38 years
Television - 13 years
Internet - 4 years
Why an E-Commerce Strategy: Why an E-Commerce Strategy
The Benefits of Electronic Commerce: The Benefits of Electronic Commerce Expands the marketplace to national and international markets
Decreases the cost of creating, processing, distributing, storing and retrieving paper-based information
Allows reduced inventories and overhead by facilitating “pull” type supply chain management
The pull type processing allows for customization of products and services which provides competitive advantage to its implementers Benefits to Organizations Electronic Commerce, 2000
Benefits to Organizations : Benefits to Organizations Reduces the time between the outlay of capital and the receipt of products and services
Supports business processes reengineering (BPR) efforts
Lowers telecommunications cost - the Internet is much cheaper than value-added networks (VANs) Electronic Commerce, 2000
Benefits to Customers: Benefits to Customers Enables customers to shop or do other transactions 24 hours a day, all year round from almost any location
Provides customers with more choices
Provides customers with less expensive products and services by allowing them to shop in many places and conduct quick comparisons
Allows quick delivery of products and services in some cases, especially with digitized products Electronic Commerce, 2000
Benefits to Customers: Benefits to Customers Customers can receive relevant and detailed information in seconds, rather than in days or weeks
Makes it possible to participate in virtual auctions
Allows customers to interact with other customers in electronic communities and exchange ideas as well as compare experiences
Electronic commerce facilitates competition, which results in substantial discounts. Electronic Commerce, 2000
Benefits to Society: Benefits to Society Enables more individuals to work at home, and to do less traveling for shopping, resulting in less traffic on the roads, and lower air pollution
Allows some merchandise to be sold at lower prices benefiting the poor ones
Enables people in Third World countries and rural areas to enjoy products and services which otherwise are not available to them
Facilitates delivery of public services at a reduced cost, increases effectiveness, and/or improves quality Electronic Commerce, 2000
Why?: Why? Works 24 hours a day
Offers 2 way communication
Unlimited access
Interactive advertising
Supports current business efforts
Slide32: A market is a network of interactions and relationships where information, products, services, and payments are exchanged. The market handles all the necessary transactions.
An electronic market is a place where shoppers and sellers meet electronically.
In electronic markets, sellers and buyers negotiate, submit bids, agree on an order, and finish the execution on- or off-line.
Electronic Markets Electronic Commerce, 2000
Electronic Commerce is Interdisciplinary: Marketing
Computer sciences
Consumer behavior and psychology
Finance
Economic
Production/Logistic
Management information systems
Accounting and auditing
Management
Business law and ethics Electronic Commerce is Interdisciplinary Electronic Commerce, 2000
Slide34: Major Business Pressures Market and
economic pressures Strong competition
Global economy
Regional trade agreements (e.g. NAFTA)
Extremely low labor cost in some countries
Frequent and significant changes in markets
Increased power of consumers Societal and
environmental pressures Changing nature of workforce
Government deregulation of banking and other services
Shrinking government budgets subsides
Increased importance of ethical and legal issues
Increased social responsibility of organizations
Rapid political changes Technological pressures Rapid technological obsolescence
Increase innovations and new technologies
Information overload
Rapid decline in technology cost vs. performance ratio Electronic Commerce, 2000
Competition in Electronic Commerce: Competition in Electronic Commerce Impacts on competition
Lower buyers’ search cost
Speedy comparisons
Differentiation
Lower price
Customer service
Digital products lack normal wear and tear
Electronic Commerce, 2000
Competition in Electronic Commerce: Competition in Electronic Commerce Perfect competition
Enable many buyers and sellers to enter the market at little or no cost (no barriers to entry)
Not allowing any buyers and sellers to individually influence the market
Make certain products homogeneous (no product differentiation)
Supply buyers and sellers with perfect information about the products and the market participants and conditions Electronic Commerce, 2000
Competition in Electronic Commerce: Competition in Electronic Commerce Observations regarding competitiveness
There will be many new entrants
The bargaining power of buyers is likely to increase
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 Electronic Commerce, 2000
What is Strategy: What is Strategy
Slide39: Strategy is the roadmap to success.
Strategy answers the question what business are you in?
Strategy determines how you compete within the market you are in.
Strategy focuses the company in a unified direction.
The goal is to develop a sustainable competitive advantage. There are generally two forms of competition, Operating effectiveness (production) or Competitive position (marketing): The goal is to develop a sustainable competitive advantage. There are generally two forms of competition, Operating effectiveness (production) or Competitive position (marketing)
Competitive Advantage Can Be Achieved By:: Competitive Advantage Can Be Achieved By: Concentrating on particular market segments (niche markets)
Offering products which differ from the competition (product differentiation)
Using alternative distribution channels and manufacturing processes
Employing selective pricing and fundamentally different cost structures
Generic Strategies Porter gives us a little more help in strategy formulation by providing three generic strategies which, if successfully implemented, can allow a firm to stake out a defended position in the marketplace. These strategies are:: Generic Strategies Porter gives us a little more help in strategy formulation by providing three generic strategies which, if successfully implemented, can allow a firm to stake out a defended position in the marketplace. These strategies are: Overall cost leadership
Differentiation
Focus
Overall Cost Leadership Efficient scale facilities Vigorous cost reductions: Overall Cost Leadership Efficient scale facilities Vigorous cost reductions Cost control
Overhead control
Avoid marginal accounts
Minimize R&D
Minimize service
Minimize advertising
Differentiation Key idea: Create something about your product that is perceived industry wide as being unique Bases for Differentiation:: Differentiation Key idea: Create something about your product that is perceived industry wide as being unique Bases for Differentiation: Quality
Delivery
Credit and Terms
Service
Training Reputation / Brand Image
Tech. Information
The Actual Product
Price
Etc.
Differentiation can provide insulation against competitors because of brand loyalty by customers and a resulting lower sensitivity to price: Differentiation can provide insulation against competitors because of brand loyalty by customers and a resulting lower sensitivity to price
Focus Key Idea: Focus on a particular buyer group, segment of the product line, or geographic market: Focus Key Idea: Focus on a particular buyer group, segment of the product line, or geographic market
This strategy is built around serving a particular target 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 broadly By effectively implementing this strategy a firm can achieve differentiation by better meeting the market needs or lower costs through specialization, or both: This strategy is built around serving a particular target 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 broadly By effectively implementing this strategy a firm can achieve differentiation by better meeting the market needs or lower costs through specialization, or both
Focus your message Pick your theme to say something special/unique about your firm, and stick to it.: Focus your message Pick your theme to say something special/unique about your firm, and stick to it. Unique product
Speedy Delivery
Super Service
?
?
Stay Committed!
Generic Strategies Summary: Generic Strategies Summary
For Successful Strategic Competition, Select Arenas That Are:: For Successful Strategic Competition, Select Arenas That Are: Sheltered from changes in the business environment
Advantaged to provide protection from intense global competition Electronic Commerce, 2000
Determining Competitive Advantage: Determining Competitive Advantage
Strategic Planning: Strategic Planning Industry and competitive analysis Electronic Commerce, 2000
Company and Competitive Analysis: Company and Competitive Analysis Monitoring, evaluating, disseminating of information from the external and internal environments
SWOT Analysis Strengths Weaknesses Opportunities Threats Electronic Commerce, 2000
SWOT: SWOT Strengths – those factors of the company that provide for its success. A good reputation, quality products or low cost producer.
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 profile, competition closing plants or e-business allowing for wider distribution of products.
Threats – those items outside the control of the company and that may hinder it. Items such as new laws, a recession or increased competition.
Slide56: Strengths (S) Weaknesses (W) INTERNAL FACTORS Company Analysis Production Marketing Electronic Commerce, 2000
Slide57: Opportunities (O) Threats (T) EXTERNAL FACTORS Competitive Analysis Production Marketing Electronic Commerce, 2000
Slide58: Strengths (S) Weaknesses (W) Opportunities (O) Threats (T) INTERNAL FACTORS EXTERNAL FACTORS SO Strategies Generate strategies here that use strengths to take advantages of opportunities WO Strategies Generate strategies here that take advantage of opportunities by overcoming weaknesses ST Strategies Generate strategies here that use strengths to avoid threats WT Strategies Generate strategies here that minimize weaknesses and avoid threats Company and Competitive Analysis Electronic Commerce, 2000
Strategic Questions: Strategic Questions The Company
What is your uniqueness?
Where are you vulnerable?
Why are you losing existing customers?
Where is the greatest value created in the company?
What are the most common objections you hear from customers?
Electronic Commerce, 2000
Strategic Questions: Strategic Questions The competition
Who are the top 3 competitors?
What are their strengths?
Where are they vulnerable?
Where can you attack?
How do you compare on price, service, quality, etc?
The market
What are 3 important trends?
How is the industry changing?
How many market segments do you serve?
Where is the greatest growth potential?
Which of your customers are doing well and why? Electronic Commerce, 2000
Competitive Strategies: Competitive Strategies Offensive strategy— usually takes place in an established competitor’s market
Frontal Assault— attacker must have superior resources and willingness to persevere
Flanking Maneuver— attack a part of the market where the competitor is weak
Bypass Attack— cut the market out from under an established defender by offering a new type of product that makes the competitor’s product unnecessary
Encirclement— greater product variety and/or serves more markets
Guerrilla Warfare— use of small, intermittent assaults on different market segments held by the competitor
Electronic Commerce, 2000
Competitive Strategies: Defensive strategies— takes place in the firm’s own current market position as a defense against possible attack by a rival
Lower the probability of attack
Divert attacks to less threatening avenues
Lessen the intensity of an attack
Make competitive advantage more sustainable Competitive Strategies Electronic Commerce, 2000
Cooperative Strategies: Cooperative Strategies Collusion— active cooperation of firms within an industry to reduce output and increase prices in order to get around the normal economic law of supply and demand (illegal)
Strategic Alliance— partnership of two or more corporations or 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
Competitive Strategies Electronic Commerce, 2000
Strategic Summary: Strategic Summary Focus your efforts!
Define your competitive advantage!
Have a clear strategy!
Do it!
Implementing Strategy: Implementing Strategy
Questions : Questions Objectives
Benefits to customers
Current business Savings
Competitive advantage
Presentation
Questions: Questions What are you producing and selling?
How are you unique?
Why should the customer buy from you?
How are you going to reach the customer?
What’s success?
Objectives: Objectives Introduce new product or service
Advertising existing business
Supplement existing business program
Reach broader customer base
Provide better service
Information exchange
Reduce transaction costs
Current Customers: Current Customers Benefits
Easier access to information
Shipping schedules
Discounts
Invoicing
Inventories
Marketing Mix: Marketing Mix Promotional Tool
Ads, publicity, sales tool
Pricing
Product Information
Distribution
Savings: Savings Support time
Order entry
Promotion response
E-mail
Shipping and invoicing information
Customer lists $
Home Page: Home Page KISS
Keep it simple, stupid 1. Decide what information you want to share
2. Grab their attention quickly
3. Present information in simple, logical fashion
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- mail address and toll-free phone number
Promoting Your E-business: Promoting Your E-business
Why Do You Need Promotion?: 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.
HOW?: HOW? List homepage address on all current advertising.
Put on all publicity
newsletters
letterhead
business cards
billing statements
fax cover sheets Register with search engines.
Link to other sites and your association sites.
Advertise on the web.
Link to?: Link to? Your trade associations
Suppliers
Customers
Complementary products
Advertising on the Web: Advertising on the Web To build awareness
Develop prospects
Meet customer needs
Generate orders
Build customer relations
Test market
Good Internet Advertising Includes:: Good Internet Advertising Includes: Clear message and identification on 1st page.
Facilitates easy access to further information.
The advertisement downloads quickly.
Provides the right information.
Product description, payment options, and contact information.
Common Search Engines: Common Search Engines Submit it - www.submit-it.com
Yahoo - www.yahoo.com
Webcrawler - www.webcrawler.com
Infoseek - www.infoseek.go.com
Lycos - www.lycos.com
Google - http://www.google.com/
The Advantage for Small Businesses: The Advantage for Small Businesses Inexpensive source of information
Inexpensive way of advertising
Inexpensive way of conducting market research
Inexpensive way to build (or rent) a storefront
Lower transaction cost Electronic Commerce, 2000
The Advantage for Small Businesses: The Advantage for Small Businesses Niche market, specialty products (cigars, wines, sauces) are the best
Image and public recognition can be accumulated fast
Inexpensive way of providing catalogs
Inexpensive way to reach worldwide customers
Electronic Commerce, 2000
The Risks and Disadvantages for Small Businesses: The Risks and Disadvantages for Small Businesses Disadvantage when a commodity is the product (for example, CDs)
No more personal contact which is a strong point of a small business
No advantage being in a local community
Electronic Commerce, 2000
The Risks and Disadvantages for Small Businesses: The Risks and Disadvantages for Small Businesses
Lack of expertise in legal issues, advertisement
Lack of resources to fully exploit the Web
Less risk tolerance than a large company Electronic Commerce, 2000
Success Factors for Small Businesses : Success Factors for Small Businesses Niche products
Small volume
Capital investment must be small
Inventory should be minimal or non-existent
Electronic payments schema exist
Payment methods must be flexible Electronic Commerce, 2000
Success Factors for Small Businesses: 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 Electronic Commerce, 2000
Summary: Summary Successful firms will integrate the E-business into their company’s strategy.
Used properly, E-business will be one more method of increasing income and profits.
It is just a matter of time before it will be as common as the fax, cell-phone and digital camera.
References: References Electronic Commerce: A Managerial Perspective. 2000. By Efraim Turban, Jae Lee, David King, and H. Michael Chung. Prentice Hall, Upper Saddle Rivern New Jersey. (slides are marketed).
E-Business Revolution. 2000. By Daniel Amor. Prentice Hall,Upper Saddle Rivern New Jersey.
Strategic Internet Marketing. 1996. Tom Vassos. MacMillan Computer Publishing, Indianapolis, IN.
E-Business Readiness. 2001. By James Craig and Dawn Jutla. Anderson-Wesley. Upper Saddle Rivern New Jersey.