- 1. Chapter 11 E-Strategy,Internet Communities,and Global
EC
2. Learning Objectives
- Describe the importance and essentials of business and EC
strategies
- Describe the strategy planning and formulation process for
EC
- Understand how EC applications are discovered, justified, and
prioritized
- Describe strategy implementation and assessment including the
use of metrics
- Understand EC failures and lessons for success
3. Learning Objectives(cont.)
- Describe the role and impact of virtual communities on EC
- Evaluate the issues involved in global EC
- Analyze the impact of EC on small businesses
- Describe the relationship between EC and BPR, knowledge
management, and virtual corporations
- Describe the future of EC
4. IBMs E-Business Strategy
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- Need to capture new business opportunities and technologies
(like EC)
-
- Develop a business strategy for that purpose
-
- IBMs current strategy is to transform itself into an e-business
in order to provide business value to the corporation and its
shareholders
-
- IBM views e-business as being much broader than EC because
it:
-
-
- Serves a broader constituency
-
-
- Offers a variety of Web-based processes and transactions
5. IBMs E-Business Strategy(cont.)
- The Solution is based on four goals:
-
- Lead IBMs strategy to transform itself into e-business
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- Act as a catalyst to help facilitate that transformation
-
- Help business units become more effective in their use of the
Internet/intranet
6. IBMs E-Businesss Strategy(cont.)
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- Establish a strategy for the corporate Internet site
-
-
- Including definition of how it should look, feel and be
navigated
-
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- Create an online environment most conducive to customers doing
business with IBM
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- Leverage the wealth of e-business transformational case studies
within IBM to highlight the potential of e-business to IBMs
customers
7. IBMs E-Business Strategy (cont.)
- E-care for business partners
- E-marketing communications
- IBM focused on seven key initiatives:
8. IBMs E-Business Strategy(cont.)
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- Implementation of an e-procurement system that spans IBM
globally
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- Saved IBM almost $5 billion over a 3-year period
-
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- Reduces the number of paper invoices
-
-
- Enables fast, competitive tendering from its suppliers
9. IBMs E-Business Strategy(cont.)
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- IBMs evaluation of the procurement process determined where the
use of the Web adds value
-
- Identification of more than 20 initiatives to reduce costs and
improve purchasing including:
-
-
- Collaboration with suppliers
-
-
- Knowledge-management-based applications
10. E-Strategy: Concepts & Overview
- Strategysearch for revolutionary actions that will
significantly change the current position of a company, shaping its
future
-
- Finding the position in a marketplace that best fits the firms
skills
-
- Companys choice of new position that must be driven by its
ability to find new trade-offs and leverage a new system of
complementary activities into sustainable advantage
11. Elements of Strategy
12. Types of E-Strategies
- EC strategy (e-strategy)an organizations strategy for use of
e-commerce or e-business
-
- Click-and-mortar companies that use many EC applications
-
- Click-and-mortar companies that use only one or two EC
applications
-
- Click-and-mortar companies that use one EC application that
fundamentally changes all their business
13. Need for a Strategy
- Why does a company need an e-strategy?
-
- Fast changes in business and technology means that
opportunities and threats can change in a minute
-
- Company must consider EC strategy that includes contingency
plans to deal with changes
-
- May be too costly not to have one
14. Charles Schwabs EC Strategy
- In 1998 Schwab launchedschwab.com oneof the first
click-and-mortar stockbrokers
-
- Changed the company pricing structure radically
-
-
- Took a short-term revenue loss
-
-
- Looking toward a long-term strategic gain
-
- EC strategy fit well with companys overall strategy emphasizing
a one-to-one relationship with its customers
15. Charles Schwab(cont.)
- Schwab had first-mover advantage in securing key
partnerships
-
- Schwab and Nextel agreed to build an infrastructure allowing
investment opportunities over mobile phones or wireless handheld
devices
-
- Initial target was existing off-line customers with incomes
over $150,000 a year and who buy and hold
-
-
- Innovative productsSuperior service
-
-
- Low feesCutting-edge technology
16. Charles Schwab(cont.)
- Partnered with content providers and technology companies to
offer:
-
- Large number of financial services online
-
- Community and personalized services
- Financial model composed of three parts:
17. Charles Schwab(cont.)
- CyberTrader's services are designed for online, self-directed
active traders who use short-term trading strategies to generate
current income
- Cybertrader features include:
-
- Direct Access trading capabilities
-
- Graphical decision support modules
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- Intelligent order routing
18. E-Strategy Landscape
- Strategy initiation: organization prepares information about
its vision,mission,purpose,and the contribution that EC could make
to the business
-
- Identification of EC applications
19. E-Strategy Landscape(cont.)
-
- Organizations resources are analyzed
-
- A plan is developed for attaining the goals
-
- Organization periodically assesses progress toward the
strategic goals
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- Involves the development of EC metrics
20. Exhibit 11.1 The Landscape of EC Strategy 21. Strategy
Initiation
- Strategy initiationthe initial phase of e-strategy in which an
organization prepares information about its vision, mission,
purpose, and the contribution that EC could make
-
- Review the organizations business and IT vision and
mission
-
- Generate vision and mission for EC
-
- Begin with industry and competitive analysis
22. Industry Assessment
- What industry is the EC initiative related to?
- What are the current practices of selling and buying?
- Who are the major competitors? (How intense is the
competition?)
- What e-strategies are used, by whom?
- How is value added throughout the value chain?
- What are the major opportunities and threats?
- Are there any metrics or best practices in place?
- What are the existing and potential partnerships for EC?
23. Company Assessment
- The organization investigates its own:
- It looks at everything that has an impact on its
operations
24. Industry, Company, and Competitive Analysis
- SWOT analysisa methodology that surveys the opportunities and
threats in the external environment and relates them to the
organizations particular strengths and weaknesses
SWOT 25. Exhibit 11.2 SWOT Matrix 26. Competitive Intelligence
on the Internet
- Internet can play a major role as a source of competitive
information (competitive intelligence)
-
- Review competitors Web sites
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- Examine publicly available financial documents
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- Ask the customersaward prizes to those who best describe your
competitors strengths and weaknesses
27. Competitive Intelligence on the Internet (cont.)
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- Analyze related discussion groups
-
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- Find out what people think about a company and its products and
competitor's products
-
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- Reaction to new ideas and products
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- Use information delivery services
-
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- Find out what it published on the Internet
-
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- Known as push technologies
-
- Corporate research companies provide information about your
competitors:
28. Issues in Strategy Initiation
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- Chance to capture large markets
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- Establishing a brand name
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- Exclusive strategic alliances
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- Cost of developing EC initiative is usually very high
-
- Chance of failure is high
-
- System may be obsolete as compared to second wavearrivals
-
- No support services are available at the beginning
- To be a first mover or a follower?
29. Should You Have a Separate Online Company?
-
- Reducing or eliminating internal conflicts
-
- Providing more freedom to management in pricing, advertising,
etc.
-
- Can create new brands quickly
-
- Take the e-business to an IPO and make a fortune
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- May be very costly and risky
-
- Collaboration with off-line business may be difficult
-
- Lose expertise of business functions unless you use close
collaboration
30. Strategy Formulation
-
- Development of long-range and strategic plansto exploit
opportunities and manage threats in the business environment in
light of corporate strengths and weaknesses
- Includes examining or redefining EC mission
-
- Specifying achievable objectives
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- Setting implementation guidelines
31. Discovering EC Opportunities
- 3 common mistakes in allocating EC investment
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- Let a thousand flowers bloomfund many projects
indiscriminately
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- Bet it allput everything on a single high-stake initiative
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- Trend-surffollow the crowd toward the next big thing
- Any of the above can be risky and costly
32. Discovering EC Opportunities(cont.)
- Approaches to identifying EC opportunities
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- Market-drivenwaiting to see what the competitors will do
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- Afraid if they do not practice EC they will be big losers
-
-
- Think they can make lots of money going into EC
33. Determining an Appropriate EC Application Portfolio
- Find the most appropriate portfolio in order to share limited
resources
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- Combine long-term speculative investments in new potentially
high-growth business
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- With short-term investments in existing, profit-making
businesses
- Boston Consulting Groups matrix
-
- Cash cows Questionable projects
34. EC Application Portfolio
- Strategy based on company fit (assessed by five levels from
high to low)
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- Alignment with core capabilities
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- Alignment with other company initiatives
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- Fit with organizational structure
-
- Fit with companys culture and values
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- Ease of technical implementation
- Projects viabilityassessed by 4 criteria
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- Time to positive cash flow
- Tjans portfolio strategyInternet portfolio map
35. Exhibit 11.4 Tjan Application Portfolio Map 36. Strategic
Directions at Chubb
- Typical choice of EC model at Chubb Corp.
-
- Create a new business model with EC as a major driverdiscarded
because they had a successful business model with products matching
distribution systems
-
- Spawn a secondary business model around EC; go directly to
consumersdid not want to interrupt their relationships with agents
and brokers
37. Chubb Corp.(cont.)
-
- Use EC as a tool within the existing business model (the
selected model)
-
-
- Helped Chubb further differentiate products and services by
providing superb customer service over the Internet
-
-
- Opened several Web sitesone for each specialty group (e.g., for
wine collectors)
-
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- Enables superb communication with agents and business
partners
-
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- Allows business expansion into 20 countries
38. Making the Business Case for EC
- Business casewritten document that is used by managers to
garner funding for specific applications or projects by providing
justification for investments
-
- Provides foundation for tactical decision making and technology
by management
-
- Helps clarify the companys use of its resources to accomplish
the e-strategy
39. Content of an E-Business Case
- Business case for EC approach for garnering funding for
projects used to:
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- Provide justification for investments
-
- Provides bridge between EC plan and the execution
-
- Provides foundation for tactical decision making and technology
risk management
-
- Clarifies how the organization will use resources to accomplish
the e-strategy
40. Content of an E-Business Case(cont.)
- Content of an E-business case
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- Strategic justificationwhere are we going?
-
- Generational justificationhow will we get there?
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- Technical justificationwhen will we get there?
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- Financial justificationwhy will we win?
41. Cost-Benefit and Risk Analysis
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- Develop short- and long-term action plans
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- Gain approval and support
-
- Properly planned revenue model is a critical success
factor
-
- Revenues from sales depend on customer acquisition cost and
advertisement
-
- Must be figured into the analysis
42. Cost-Benefit and Risk Analysis(cont.)
- It is difficult to justify EC investment due to many intangible
variables
-
- Return on investment (ROI)
Variables 43. Value Proposition
- Value propositionthe benefit a company can derive from
implementing a new project, such as EC, usually by increasing its
competitiveness and by providing better service to its
customers
Service 44. Risk Analysis
- Risk analysis program should
-
- Identify all potential risks
-
- Evaluate possibility of protection (insurance)
-
- Evaluate cost of protection vs. benefits
Risk 45. Issues in Strategy Formulation
- How to handle channel conflicts
-
- Let established old-economy-type dealers handle e-business
fulfillment
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- Sell some products only online
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- Help your intermediaries (e.g., build portals)
46. Issues in Strategy Formulation(cont.)
- How to handle conflict between off-line and online
businesses
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- Clear support of top management
-
- Use of innovative processes that support collaboration
-
- Clear strategy of what and how
47. Issues in Strategy Formulation(cont.)
-
- Setting prices lower than off-line business may lead to
internal conflict
-
- Setting prices at the same level may hurt competitiveness
- Should you get financing from big venture capital firms?
-
- Venture capital financing causes loss of control over
business
-
- Benefit: access to various VC experts and get the cash you
need
48. Strategy Implementation
- Strategy implementation--The execution of the e-strategy plan,
in which detailed, short-term plans are developed forattaining
strategic goals
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- Establish aWeb team thatcontinues the execution of the
plan
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- Start with a pilot project
49. Strategy Implementation(cont.)
- Strategy implementation issues
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- Build an in-house EC infrastructure
-
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- Purchase a commercial EC software package or EC suite
-
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- Use a Web hosting company
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- How to coordinate B2B and B2C
50. Strategy and Project Assessment
- Strategy assessmentthe periodic formal evaluation of progress
toward the organization's strategic goals; may include needed
actions and strategy reformulation
-
- Find out if EC project delivers what it was supposed to
deliver
-
- Adjust plans if necessary
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- Determine if EC project is still viable
-
- Reassess initial strategy in order to learn from mistakes and
improve future planning
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- Identify failing projects as soon as possible and determine
reasons for failure
51. Measuring Results & Using Metrics
- Metrica measurable standard or a target against which actual
performance is compared
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- Response time to customers enquiries
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- Timeliness of fulfillment
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- How up-to-date information
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- Site effectiveness, ease of use, and navigability
52. Measuring Results &Using Metrics(cont.)
- Balanced scorecarda structured methodology for measuring
performance in organizations, using metrics in four areas
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- Internal business processes
53. Measuring Results &Using Metrics(cont.)
- Performance dashboarda structured methodology proposed by
Rayport and Jaworski (2001) for measuring EC performance
using:
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- Leading and lagging indicators of performance
54. EC Failures & Lessons Learned
-
- Need to move to new business model
-
- Levi Strauss stopped online direct sales of its apparel
(levistrauss.com) when major distributors and retailers put
pressure on the company not to compete with their brick-and-mortar
outlets
55. Success Stories & Lessons Learned
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- Brick-and-mortar companies add online channels
-
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- Analyze the opportunities
-
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- Start small (one thing at a time)
56. Success Stories &Lessons Learned(cont.)
-
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- Select robust business models
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- Evaluate a spin-off strategy
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- Employ ex-dot-com staffers
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- Focus on the e-generation as your market
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- Get the technology right, avoid expensive technology and
technology malfunctions
57. Virtual Communities
- Virtual communitya group of people with similar interests who
interact with one another using the Internet
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- Communicationbulletin boards, chat rooms/threaded discussions,
e-mail and instant messaging
-
- Informationdirectories and yellow pages, search engine,
member-generated content
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- EC elementse-catalogs, shopping carts, ads, auctions of all
types
58. Virtual Communities(cont.)
- Communities of transactionsfacilitate buying and selling
- Communities of interestpeople interact with each other on a
specific topic
- Communities of relations (practice)organized around certain
life experiences
- Communities of fantasyshare imaginary environments
59. Virtual Communities(cont.)
- Commercial aspects of community:
-
- Understand aparticular niche industry
-
- Build a site that provides valuable information
-
- Site should mirror the steps a user goes through in the
information-gathering and decision-making process
-
- Build a community that relies on the site for decision
support
-
- Start selling products and services that fit into the
decision-support process
60. Exhibit 11.9 Value Creation in E-Communities 61. Virtual
Communities(cont.)
- Financial viability of communities
-
- Based on sponsorship and advertisement
-
- Expenses are very high because of the need to provide:
-
- This model did not work well, many companies sustained heavy
losses in 2000-2001; too few members, too few purchases
62. Virtual Communities(cont.)
- Key strategies for successful online communities
-
- Increase traffic and participation
-
- Focus on the needs of the members (facilitators and
coordinators)
-
- Encourage free sharing of opinions and information
-
- Financial sponsorship is a must
-
- Consider the cultural environment
-
- Provide tools and activities for member use
-
- Community members involved in activities and recruiting
-
- Guide discussions, provoke controversy, and raise sticky
issues
63. Going Global
- Decision to go global is a strategic one
-
- Geographical borders are falling
-
- Artificial borders are being erected through
-
-
- Local language preferences,
64. Benefits and Extent of Operations
- Major advantage of ECability to dobusiness any time, anywhere,
rapidly at a reasonable cost
-
- E*TRADE or boom.com as your broker for stock trading
-
- Small companies sell to hundreds of customers worldwide
(virtualvine.com)
-
- Increasing number of out-of-the-country vendorsparticipate in
electronic requests for quotes
-
- Successful employees recruitment
-
- Successful collaboration in B2B exchanges
65. Barriers to Global Electronic Commerce
-
- Uncoordinated actions must be avoided and an international
policy of cooperation should be encouraged
-
- Companies starting e-commerce need to evaluate bandwidth needs
by analyzing the data required, time constraints, access demands,
and user technology limitations
-
- Electronic payment systems
66. Small Business Goes Global
- Cardiac Sciencetrying to break into the international market
for years
-
- Within 2 years after Internet inception in the company, it was
shipping its products to 46 countries
-
- Today, 85 percent of the companys revenue is international,
much of this is executed at (cardiacscience.com)
67. Small Business Goes Global(cont.)
- Advice for small businesses going global at:
-
- Universal Business Exchange ( unibex.com )
-
- Several government agencies ( stat-usa.gov )
- Cardiacs CEO crafting a solid export strategy takes a lot more
commitment than putting up a snazzy Web site and waiting for the
world to show up at our door. Its all about building
relationships.
68. Barriers to GlobalElectronic Commerce(cont.)
-
-
- Primary problems are cost, speed, inaccuracy
-
-
- Adapt local business practices
-
-
- Multiple cultures warrant different marketing approaches
69. Attracting Japanese Customersto Your Site
- English-Japanese Promotion ( ajpr.com )
-
- Helps clients avoid the mistakes often made when they selling
to the Japanese customers
-
- Target audience uses Japanese-only Web search engines
-
- Alert companies when logos or themes are likely to strike a
sour chord with Japanese sensibilities
70. Japanese Customers(cont.)
-
- Japanese respond well to symbols or characters
-
- Productshould be geared to Japanese males in their twenties and
thirties
- Ajpr.comalso provides help to Japanese companies develop
English versions of their sites
-
- Provides localization advice
71. Breaking down the Global EC Barriers
- Keep the site flexible and up-to-date
- Dismantling the Barriers to Global EC
72. EC in SMEs
- Advantages/benefits of EC in SMEs
-
-
- Conducting market research
-
-
- Build(or rent) a storefront
-
-
- Way to reach worldwide customers
73. EC in SMEs(cont.)
-
- Inability to use EDI, unless it is EDI/Internet
-
- Lack of resources to fully exploit the Web
-
- Lack of expertise in legal issues, advertisement
-
- Less risk tolerance than a large company
-
- 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 to being in a local community
74. Critical Success Factors for SMEs
- Capital investment must be small
- Inventory should be minimal or non-existent
- Electronic payments scheme
- Payment methods must be flexible
- Logistical services must be quick and reliable
- The Web site should be submitted to directory-based search
engine services
- Join an online service or mall and do banner exchange
- Design a Web site that is functional and provides all needed
services to consumers
75. Supporting Small Business
- Technical support from IBM (for a fee of only $25 per month) at
ibm.com.search:businesscenter
- Microsofts Personal Web Server(PWS)
- U.S. government at ecommerce.gov
- Gartner Group provides access to online research material at
gartner.com
76. Business Process Reengineering (BPR)
- Organizational transformationthe process of completely or
drastically transforming an entire organization to a new mode of
operation
- Business process reengineering (BPR)a methodology for
comprehensive redesign of an enterprises processes
77. BPR(cont.)
- Redesign of the enterprise process and BPR
-
- Does not make sense to automate poorly designed processso
restructure
-
- Necessary to change processes to fit commercially available
software
-
- Fit is required between systems and processes of different
companies
-
- Change processes to fit procedures and standards of public
e-marketplaces
-
- Adjust procedures and processes to align with available
services (logistics, payments, security)
-
- Changes to assure flexibility and scalability
78. Workflow Technologies
- Workflow systemsoftware programs that manage all the steps in a
business process from start to finish, including all exception
conditions
-
- Collaborative workflowproducts address project-oriented and
collaborative processes
-
- Production workflowtools address mission-critical,
transaction-oriented processes
79. Virtual Corporations
- Virtual corporationan organization composed of several business
partners (some of whom may be pure-play EC players) sharing costs
and resources for the production or purchasing of a product or
service
-
- Opportunism Lack of borders
-
- Trust Adaptability to change
80. The Future of EC
- Increased security and trust
- Efficient information handing
- E-government--comprehensive
81. EC Technology Trends
82. The Digital Divide
- Digital dividethe gap between those who have and those who do
not have the ability to access electronic technology in general,
and the Internet and EC in particular
Digital Divide 83. IntegratingMarketplace and Marketspace
- Click-and-mortar organization
-
- How to cooperate in planning, advertising, logistics, resource
allocation
-
- How to align the strategic plans
- The impact of EC on our lives may be as much as, ormore than
that of the IndustrialRevolution
84. Managerial Issues
- What is the strategic value of EC to the organization?
- What are the benefits and risks of EC?
- What metrics should we use?
- Can we do a pilot project?
- Can we learn to love smallness?
85. Summary
- Importance of strategic planning for EC
- The strategy planning and formulation process
- Application discovery, justification, and prioritization
- EC strategy implementation and assessment
86. Summary(cont.)
- Understanding failures and learning from them
- The role and impact of virtual communities
- Restructuring and virtual organizations