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eBusiness Lecture 2

Dr Ailsa Kolsaker
Value and Strategy

 Strategic concepts and theories in the context


of e-business
• User motivations
• Concept of ‘value’ in the new economy
• Value creation
• Using value to create competitive advantage
• Strategy and the Internet by Michael Porter (2001)
• E-commerce application (Turban et al, 2006)
Business motivations

 Cost reductions through automation,


standardisation, integration and real-time
communications
AND
 Enhance ‘reach’ and market exposure
 Revenue-generation opportunities
 Reinforce company and brand positioning
 Accelerate consumer decision-making
 Enhance relationships with consumers
Consumer motivations

 Information search:
• Convenience – reduce search costs, both time and
energy
• Access – to information about products and companies
• Availability – 24/7

 Evaluation of alternatives:
• Increased number of alternatives
• Enhanced transparency – facilitates comparison

 Decision-making:
• Third party expertise
• Enhanced confidence
Government motivations (e-Gov)

 Reduce costs of service provision


 Streamline internal processes
 Enhance international competitiveness
(improve the country’s profile and improve
business performance)

 Enhance service delivery


 Reduce distance between government and
citizens
 Improve participation
Strategy is...

 The pattern of major objectives,


purposes or goals, and essential policies
or plans for achieving these goals,
stated in such a way as to define what
business the company is in or is to be in
and the kind of company it is or is to be.
Andrews, K (1971) “The Concept of Corporate Strategy”, Irwin,
Homewood, IL., p28
Strategic Considerations……

In Chaffey, 2007:30
E-Business As a System
Goal: Seamless value delivery to end customer
• Integration emphasis [Systems Theory]

External environment

Control

Processes

Buy side Internal systems


Sell side
E-Business: A System (1)
 A set of interdependent components that are structured and
organised as a coherent system to provide a stable environment for
activities and processes to achieve

 Expressed as an input-process-output model (earlier slide)

 Consists sub-systems e.g. information-technology systems,


financial systems & human activity systems or social systems.

 Extent of boundary erosion


• Movement towards ‘open’ rather than ‘closed’ systems
• Networks, virtual partnering, extended enterprises, web-
enterprises

 Subject to externalities (outside environment)


E-Business: A System (2)

 Central premise: holistic approach

 E-Business Strategy as a ‘whole’ value


creation system:
• The Identity (own/partner service & branding)
• The Organisation (infrastructure, technology,
procedures)
• The Channel (offline online mobile )
Integrated Value System

 Extensive Collaboration/Partnering:
• Design becomes part of the production process
which is inter-weaved through a series of internal
and external partnerships to procurement, stock
control, marketing, financial management, sales
and after-sales support, supplier and customer
relationship management
Away from Vertical Integration

 Moving away from vertical integration:


• Enriching the customer
 ‘solutions’ not products
 customisation & customer-involvement
• Cooperating to enhance competitiveness
 Aim: “cost-effective instantaneous production of mass-
customised goods and services” (Davidow & Malone,
1992)
• Organising to master change and uncertainty
 BPR critical: Revision of R&D, manufacturing, marketing,
sales, service, distribution, information systems, finance
etc.
• Leveraging the impact of people and information
 Highly skilled, reliable and educated workers – emphasis
of teamwork to achieve common goals
Collaboration & Integration
Reshaping the Value Chain

 The traditional value chain – a series of


value-adding activities in a company’s
processes, from inbound logistics and
production through to sales and marketing

Inbound Sales & After-


R&D Production
logistics distribution sales;
CRM
Towards An Electronic Value
Chain

 The value chain no longer takes its linear shape


 It is more likely to resemble a jigsaw puzzle or at
its most cohesive, a molecular structure.

OR
Customer facing IS:
Supplier facing IS:
Sales
Marketing
Inbound logistics
Distribution
Procurements
After-sales
SRM/PRM
CRM

Front-end infrastructure

Management facing IS:


Employee facing IS:
MIS
EIS
HRM
Decision support
Production
Client tier

Customer Employee Supplier

Internet Intranet Extranet


Distribution

Business tier

Customer facing Employee facing Supplier facing


DB / Web
Data tier DBMS integration

Database

Front end infrastructure

Beynon-Davies, 2004
Sales & Procurement
after-sales
HRM
Planning
Purchase
order
Stock processing
Process
Sales control Data flow
Accounting Agent
order Payroll
processing

Core systems
Modelling

Back-end infrastructure Data store


Optimal Reshaping?

 Greatest cost savings occur where front-


end and back-end are integrated:
• Eliminates duplication and waste
• Reduce staffing requirements
• Automate and standardise – reduce errors

 However, may encounter employee


resistance or (in severe cases), industrial
disruption (trade unions)
The e-Strategy Process
Strategic position:
Environmental
1) Porter’s 5 forces
analysis:
2) Industry life cycle
•External –
3) Strategic Groups
PEST & strategic space
Competitors 4) Role of technology
Corporate
mission & Strategic capability:
goals 1) Organisational
•Internal – structure & culture

Culture 2) The value chain &


value system
Resources
3) The generic blocks
Competencies of competitive
advantage
4) Portfolio analysis
E-Strategy Process:
Starting with the Fundamental
Questions

• Where are we now?

• Where do we want to
go?

• How do we get there?


Strategy Definition

 Key strategic decisions:

• 1. eBusiness channel priorities


• 2. Organisational restructuring & capabilities
• 3. Business, service and revenue models
• 4. Marketplace restructuring
• 5. Market & product development strategies
• 6. Positioning & differentiation strategies
In Search of Superior
Performance

Distinctive
Competences

Customer
Efficiency Quality Innovation responsive-
ness

•Low Cost
•Differentiation
•Niche
Disintermediating the Value Chain

Producer

Wholesaler

Retailer

Customer

Removing others along the channel structure by


internalising part of the value chain
Example
Example
Airline Tickets

Airlines Reservation Travel Customers


systems agents
Old style ticket distribution
Physical

Electronic
Airlines
Cybermediaries

Reservation
systems

Travel
Customers agents

New style distribution

Source: O’Keefe, 2003


Barriers

 Technophobia – ‘won’t use’


 Digital divide – ‘can’t use’
 Myopia – ‘if we can do it, everyone can’
 Cost
 Shortcomings of technology – compatibility,
functionality, reliability
 Shortcomings of staff – management competence,
employee knowledge & expertise
 Consumer concerns – confidentiality, security, risk,
trust
 Business concerns – ownership, authority, trust,
competitive advantage
Technology Acceptance Model

Perceived
usefulness

External Attitude Behavioural Actual


variables towards intention use
use

Perceived
ease of use Davis, 1999
Based upon Azjen’s
TRA: 1985, 1988, 1991
Challenges

 Top 10 Technical Challenges:


• Security
• Adequate infrastructure
• Data access
• Back-end system integration
• Bandwidth
• Network connectivity
• Uptime
• Data warehousing and mining
• Systems that do not scale
• Content distribution
Turban et al, 2004
Challenges

 Top 10 Managerial Challenges:

• Unrealistic management expectations


• High cost of capital expenditures
• Budgets
• Keeping up with technology
• Project deadlines
• Reaching new customers
• Improving customer ordering services
• Privacy issues
• Employee resistance
• Training

Turban et al, 2004 - adapted


eBay Case Study

Consider:
 What value does eBay offer?
(define ‘value’)
 How is that value created?
 Who are eBay’s competitors?
 How does it contribute

to eBay’s competitive
advantage?
 How sustainable is it?
Supplementary Reading

 Jelassi, T. and Enders, A. (2005), J&E


ch. 5 (pp.95-119)

 Jelassi, T. and Enders, A. (2005), Case


Study 15 (pp.400-419)

 Jelassi, T. and Enders, A. (2005), eBay


Case Studies 22-24