E-commerce

Antoine Harfouche

Session 2

From the e-business strategy to the e-business Model

The Roadmap

Business Strategy

Managerial vision

Marketing Strategy

E-commerceWebsite

Logistics

e-business strategy

From strategy to e-etrategy: Concepts and Overview

• Strategy

A broad-based formula for how a business is going to accomplish its mission, what its goals should be, and what plans and policies will be needed to carry out those goals

• E-strategy (e-strategy)

The formulation and execution of a vision of how a new or existing company intends to do business electronically

E-Business Strategy

• Strategic Planning Tools

– 1. SWOT analysis

A methodology that surveys external opportunities and threats and relates them to internal strengths and weaknesses

– 2. Competitor analysis grid

A strategic planning tool that highlights points of differentiation between competitors and the target firm

• Strategic Planning Tools– 3. 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

– 4. Balanced scorecard

A management tool that assesses organizational progress toward strategic goals by measuring performance in a number of different areas

– 5. Business plan

A written document that identifies the company’s goals and outlines how the company intends to achieve those goals

E-Strategy Formulation

What happens when 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

e-Marketing strategy

Segmentation

Targeting

Value

Differentiation

CRM/PRM

Positioning

Communication

Distribution

Offer

E-MarketingStrategy

Tier 2tasks

Tier 1tasks

Exhibit 3 - 1 Formulating E-Marketing Strategy in Two Tiers

E-Marketing Strategy

No Other Media has all of the Advantages of eMarketing.

• Cost effectiveness

• Global reach

• Interactive response

• Measurability

• Personalization

• Real-time feedback

But E-marketing Suffers From

• Lack of understanding of technology by marketers

• Fast moving and turbulent arena

• Changing technologies

• Lack of trained personal

• Senior management barriers

• Corporate culture

Augmented Product

Pricing: Yield Management

• There are two online pricing trends are:– Dynamic pricing—this strategy applies different price levels

for different customers or situations. The Internet allows firms to price items automatically and “on the fly” while users view pages,

– Online bidding—this presents a way to optimize inventory management.

• E.g. Priceline.com, eBay.com

Promotion: Relationship Management Strategies

• E-marketing communication strategies help build relationships with a firm’s partners, supply chain members, or customers using:

- Customer relationship management (CRM) software to retain customers and increase average order values and lifetime value,

- Partner relationship management (PRM) software to integrate customer communication and purchase behavior into a comprehensive database,

- Life time value

Retail and Wholesale

• Electronic retailing (e-tailing): the direct sale from business to consumer through electronic storefronts, typically designed around an electronic catalog and shopping cart model

• Cybermall: a single Web site that offers many products and services at one Internet location

• Manufacturing, repair, and operations (MRO) goods and services

E-Marketing Strategies (cont.)

There are three extra Ps as the extended marketing mix:

• People: Right person, trained well, motivated

• Process: Providing services to customers

• Physical evidence: Case studies, testimonials

PROCESS

A process is the method and sequence of actions in the e-service performance.

Process is a way of undertaking transaction, supplying information and providing e-services on a way which is acceptable to the e-customer and effective to the organization.

E-services are rendered and experienced simultaneously, therefore it is the process through which consumers go in interaction with service provider.

21Types of E-Markets (cont.)

• E-marketplace: An online market, usually B2B, in which buyers and sellers exchange goods or services; the three types of e-marketplaces are private, public, and consortia

– Private e-marketplaces: Online markets owned by a single company; can be either sell-side or buy-side marketplaces• Sell-side e-marketplace: A private e-market in which a company sells

either standard or customized products to qualified companies

• Buy-side e-marketplace: A private e-market in which a company makes purchases from invited suppliers

– Public e-marketplaces: B2B markets, usually owned and/or managed by an independent third party, that include many sellers and many buyers; also known as exchanges

– Consortia: E-marketplaces owned by a small group of large vendors, usually in a single industry

The e-commerce strategy

E-commerce Strategy:

Creating customer value

Creating Customer Value Online

• Never has competition for online customer attention and dollars been more fierce.

To succeed, firms must employ that result in

Customer value = Benefits – Costs.

Creating Customer Value Online

• But what exactly is value?

– The entire product experience:• Customer’s first awareness of a product, • All customer touch points (including the Web site

experience and e-mail from a firm),• The actual product usage and postpurchase customer

service,• The compliments a consumer gets from friends while

using the product.

– Value is defined wholly by the customer. – Value involves customer expectations; if the actual

product experience falls short of their expectations, customers will be disappointed.

– Value is applied at all price levels.

Creating eBusiness Model

A Business Model• A business model can best be described through nine basic building blocks

that show the logic of how a company intends to make money.

• The nine blocks of the following model cover the four main areas of a business:

1. Customers

2. Offer

3. Infrastructure

4. Financial viability

• The business model is like a blueprint for a strategy to be implemented through organizational structures, processes, and systems.

Source: Business Model Generation, Osterwalder and Pigneur 2010

Customer SegmentsFor whom are we creating value?Who are the most important customers?

Mass Market Niche Market Segmented Diversified Multi-sided platform

Value PropositionsValue Propositions describes what creates value for a targeted Customer Segment.

Newness Performance Customization “Getting the job done” Brand / Status Design

Cost reduction Risk reduction Accessibility Convenience Usability

ChannelsValue Propositions are delivered to customers through communication, distribution and sales channels.

How a company communicates with and reaches its customer segments to deliver a value proposition.

Which Channels do our Customer Segments want to be reached? How are we reaching them now? Which are working best (or not working)?

Enabling customers to evaluate a firm’s products

Allowing customers to purchase

Providing post-purchase customer support

Channels

Customer RelationshipsThe types of relationships the firm establishes with its customers. What types of relationships does our customer expect and how much does this cost? How does this support the value proposition?

Personal Assistance Dedicated Personal Assistance Self-service Automated Services Communities Co-Creation

Revenue StreamsFor what value are our customers really willing to pay?

Asset sale [product sale] Usage fee Subscription fee Lending / Renting / Leasing Licensing Brokerage fees Advertising Service

Pricing Mechanism

Fixed Menu Pricing Predefined prices are based on static variables

Dynamic Pricing Prices change based on market conditions

List Price

Price set by product, service, or other Value Propositions

Negotiation Price determined by bargaining skills and leverage

Product Feature

Price depends on the number and quality of Value Proposition features

Yield Management

Price depends on inventory and time of purchase

Customer Segment

Price depends on the type and characteristic of a Customer Segment Real-time-market

Price is determined dynamically based on supply and demand

Volume

dependent

Price as a function of quantity purchased Auctions Price determined by outcome of competitive bidding

Revenue Streams

Key ResourcesThe most important assets required to deliver our value proposition, distribution channel, and customer relationships

Physical

Intellectual

Human

Financial

Production

Platform

Key Activities [Capabilities]The most important activities a company must do, in order to deliver its value proposition, and makes its business model work.Marketing

Engineering

Managing

Selling

Logistics

Problem solving

Managing

Key Partners

Partnerships can be motivated by needs to acquire knowledge, licenses, or access to customers.

Example: Mobile phone companies that license Android, or insurance companies that rely on independent brokers.

Partnerships can be motivated by needs to acquire knowledge, licenses, or access to customers.

Example: Mobile phone companies that license Android, or insurance companies that rely on independent brokers.

Who are key partners in terms of suppliers and intermediaries between the firm and its end-users? Which key resources are we acquiring from partners? Which key activities do partners perform?Motivations for Partnerships

Optimization and economy

Reduction of risk and uncertainty

Acquisition of particular resources and activities

Cost Structure

Some business models, are more cost-driven than others. “No frills” airlines, for instance, have built business models entirely around Low Cost Structures.

Some business models, are more cost-driven than others. “No frills” airlines, for instance, have built business models entirely around Low Cost Structures.

What are the most important costs inherent in delivering the value proposition? Which key resources are most expensive? Which key activities are most expensive?Is our business model more Cost

driven or Value driven?

Types of costs Fixed Variable Economies of scale Economies of scope