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E-Commerce Strategy and Global EC
Strategy: A broad-based formula for how a business is going to compete, what its goals should be, and what plans and policies will be needed to carry out those goals
Strategy is also about making tough decisions about what not to do
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Strategy is focused on questions about: organizational fit trade-offs profitability value
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E-commerce strategy (e-strategy): The formulation and execution of a vision for how a new or existing company intends to do business electronically
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The processes of strategy:1. Initiation2. Formulation3. Implementation4. Assessment
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Strategic planning process Strategy initiation: The initial phase of
strategic planning in which the organization examines itself and its environment
Value proposition: The benefit that a company’s products or services provide to customers; the consumer need that is being fulfilled
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Outcomes from strategy initiation phase Company analysis (including value
proposition) Core competencies (abilities) Forecasts Competitor (industry) analysis
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Strategy formulation: The development of strategies to exploit opportunities and manage threats in the business environment in light of corporate strengths and weaknesses
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Specific activities and outcomes from strategy formulation phase: Business opportunities Cost-benefit analysis Risk analysis, assessment, and
management
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Strategy implementation: The development of detailed, short-term plans for carrying out the projects agreed on in strategy formulation
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Specific activities and outcomes from strategy implementation phase: Business planning Resource allocation Project management
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Strategy assessment: The continuous evaluation of progress toward the organization’s strategic goals, resulting in corrective action and, if necessary, strategy reformulation
Specific measures called metrics are used to assess the progress of the strategy
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SWOT analysisA methodology that surveys external opportunities and threats and relates them to internal strengths and weaknesses
Competitor analysis grid: A strategic planning tool that highlights points of differentiation between competitors and the target firm
Scenario planning: A strategic planning methodology that generates plausible alternative futures to help decision makers identify actions that can be taken today to ensure success in the future
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Return on investment (ROI): A ratio of required costs and perceived benefits of a project or an application
Balanced scorecard: An adaptive tool that assesses organizational progress toward strategic goals by measuring performance in a number of different areas
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Organizational difference Born-on-the-Net and move-to-the-Net
firms both start with substantial assets and liabilities that influence their ability to formulate and execute an e-commerce strategy
The difference between success and failure is the company’s ability to utilize its strengths effectively
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Issues in e-strategy initiation Be a first mover or a follower?▪ Size of the opportunity▪ Commodity products▪ Be the best
Go Global?
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Have a Separate Online Company?▪ Advantages of creating a separate company ▪ reduction or elimination of internal conflicts▪ more freedom for the online company’s
management in pricing, advertising, etc.▪ ability to create a new brand quickly
▪ Disadvantages of creating an independent division ▪ may be very costly and/or risky▪ expertise vital to the existing company may be lost
to the new firm
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Have a separate online brand?▪ Companies with strong, mature, international
brands will want to retain and promote that brand online▪ Firms with a weak brand or a brand that does
not reflect the intent of the online effort may decide to create a new brand
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Approaches for strategy formulation: Problem driven Technology driven Market driven
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Cost-benefit analysis A valuable planning tool and assists
in the development of metric measures that later will be used in strategy assessment
Many of the costs of an EC project can be clearly identified and estimated ( like costs of hardware, software, new staff, and facilities)
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Risk analysis and management E-commerce risk: The likelihood that a
negative outcome will occur in the course of developing and operating an electronic commerce strategy
The first step in any risk assessment is risk analysis—identifying and evaluating the sources of risk
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Four sources of business risk in an e-commerce strategy:
1. Competitive risk2. Transition risk3. Customer-induced risk4. Business partner risk
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Starting a pilot projectpilot projects help uncover problems early, when the plan can be easily modified before significant investments are made
Allocating resources The resources required for the EC
projects depend on information requirements and capabilities of each project
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Application development Should site development be done
internally, externally, or in combination? Should the software application be built
or will commercially-available software be satisfactory?
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Partners’ strategy Outsourcing: The use of a third-party vendor
to provide all or part of the products and services that could be provided internally
Alliances in e-commerce Partners in different locations communicate
and collaborate online When EC initiatives are too large and
complex for one company to undertake A strategic partner should be one that has
the ability to deliver and is willing to collaborate to provide a service
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Alliances in e-commerce Partners in different locations
communicate and collaborate online
When EC initiatives are too large and complex for one company to undertake
A strategic partner should be one that has the ability to deliver and is willing to collaborate to provide a service
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E-commerce successes Brick-and-mortar companies are
adding online channels using use organizational knowledge, brand, infrastructure, and other strategic assets
Move to higher quality customers Change products or services in
existing market Establish an off-line presence
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The top three factors for successful B2C e-commerce: effective marketing management attractive Web site building strong connections to
customers
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The top three factors for successful B2B e-commerce: readiness of trading partners information integration inside the
company and in the supply chain completeness of the application
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The top three factors for overall, successful e-business: proper business model readiness of the firm to become an e-
business internal enterprise integration
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Benefits and extent of operations The major advantage of EC is the
ability to do business▪ at any time▪ from anywhere▪ at a reasonable cost
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Barriers to global EC authentication of buyers and sellers generating and retaining trust order fulfillment and delivery security domain names
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Barriers to global EC
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Cultural issues cultural attributes determine how
people interact with companies, agencies, and each other based on:▪ social norms▪ local standards▪ religious beliefs▪ language
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Administrative issues National governments and international
organizations are working together to find ways to avoid uncoordinated actions and encourage uniform legal standards
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International trade organizations are attempting to reduce EC trade barriers like:▪ pricing regulations▪ customs▪ import/export restrictions▪ tax issues▪ product specification regulations
Privacy protection
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Geographical issues Government tariffs Customs Taxation
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A major key financial barrier to global EC is electronic payment systems
Although credit cards are widely used in the U.S., many European and Asian customers prefer to complete online transactions with off-line payments
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