eMarket Services makes it easier for you to use electronic marketplaces for international business

DOING E-BUSINESS e Business Issue
By Bjørn Borg Kjølseth, National Manager – eMarket Services Innovation Norway

www.emarketservices.com
August 2005

E-business “In general, e-business is used in the broadest sense. It includes buying and selling on-line, but also other aspects of on-line business activity, such as purchasing, tracking inventory, managing production and handling logistics, customer support services, supply chain management and collaborative engineering.”

Introduction
“E-business is about changing the way things are done with the business, and between business and customers and suppliers.”i Companies must decide how and when to implement e-business. The choice should be based on an overall assessment that includes an evaluation of costs and benefits and welldefined goals that are dependent on whether the decision was based on business or strategic criteria. This section will present the strategic issue of using e-business in the following chapters: Are you doing e-business already? The strategic planning process Value drivers Strategic or business decision Industry readiness Company readiness

Are you doing e-business already
There are a high and growing number of companies that use computers in their daily business. In Europe 93% of all employees from 7 sectors surveyed work in companies that use computers and 87% in companies with Internet access. It is therefore not surprising that e-business is an important if not significant part of their business strategy. A company that does business often has no real choice, but must use computers and software to conduct his business. If you can say yes to any of these statements, then your business is already doing ebusiness: We communicate with customers, clients or suppliers via email. We send emails to other businesses to order products and services. We sell our products or services via our website. We use the Web to find information, such as prices, phone numbers, reviews of products. We use the Web for research, such as the latest industry trends. We use our website to provide information about our products and services. We use our website as a means of managing the information in our business. We use the Internet for online banking and paying our bills.

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The strategic planning process towards e-business
An organization’s strategic planning process for e-business cannot be created in isolation and it needs to be firmly grounded in the whole of the business. The online strategy developed in relation to the organisation’s total business goals. When considering E-business strategic planning questions to ask include What is our organisation’s offline strategy and offline business goal? How will our organisation’s usage of e-business impact on our customers, suppliers, and business channels? What are our competitors doing? What is allowed and possible (e.g. regulatory, infrastructure and standards limitations)? Will e-business increase our revenues, decrease our costs or both? Is our company prepared to implement e-business? The answers to the above will help to define what e-business model the organisation should adopt to create value from the Internet in the medium to long term. It incorporates both online and offline activities. The basic steps to good E-business Strategy include (a) Understand your organisation’s e-business value drivers (b) Establish online goals (c) Employ analysis to identify and refine goals (d) Select an e-business model (e) Identify business processes affected by goals (f) Identify e-business tools to deliver goals

E-business Value Drivers
When developing an online strategy it is important for the organisation to understand what ‘value driver’ is being addressed by the introduction or perhaps expansion of e-business tools and processes within it.

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There are four value drivers to consider: Operational Excellence refers to the internal operations within the organisation – such as the organisation’s intranet provides efficient communication between business units Relationship Management Excellence refers to how the organisation interacts with external parties – the organisation’s use of an electronic marketplace provides efficient interaction with a number of buyers New Business Models consider how the online and the offline mesh together – the organisation still sells cars from its showroom in a traditional sense but uses its website extensively to provide vehicle information regarding models, pricing, warranty, and finance options Product and Service Innovation considers the unique opportunities that e-business offers the organisation – the organisation provides e-learning services 24x7 The trick is for the organisation to select a value driver, decide on what the particular goal for the value driver is and configure the appropriate online tools and processes with offline tools and processes to achieve the stated goal. It is important to recognize clearly what you want to achieve and remember that an ebusiness solution will not necessarily be the only way to reach a particular objective. Some problems can be solved easily and cheaply with simple process changes.

A strategic or business decision
In order to measure the effect of deciding to use e-business, the company must first decide if the decision is based on a strategic or business case. A Strategic Case focuses on expectations about the future, that are often difficult to quantify in economical terms but that nevertheless may be critical to a company's future survival. It may include many of the aspects covered in a SWOT analysis. A Business Case by contrast normally focuses on a short timeframe and on known and

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quantifiable facts about the past and future. A Business Case will focus more on cost comparisons and revenue flows. It must be measurable or it is not a Business Case. For example, you may currently be using email to communicate with your suppliers or customers and you expect joining an e-marketplace’s chat functionality is a way of improving this. A measure may be through a customer or supplier satisfaction survey or by interviewing your internal sales staff to measure the transformation in their ease of communicating. It is fine to have both a Strategic Case and a Business Case for a decision, but they won't necessarily always be compatible. For example, the Business Case for a Purchaser to join an e-marketplace may be marginal, as the costs may be higher than the estimated savings, particularly if the company already has substantial legacy e-business infrastructure. However the Purchaser may believe that they must join the e-marketplace because they risk losing market share to their competitors who have taken the step. The reason the distinction is important is because companies often are unclear or forget why they made a decision and later try to measure its success with the wrong parameters. For example they try to measure the success of a decision that was strategic, with cost parameters.

Is your industry ready for e-business?
The use of e-business varies from one industry to another. Before making a strategic decision on which e-business tools to use, your company should consider how and when such tools are used. It is also important to consider the use of e-business in the whole value chain, from supplier to end-customer. The expectations and requirements may set limits to how e-business should be implemented.

Light circles: manufacturing sectors; dark circles: service sectors / financial services (orange) Source: e-Business W@tch (2003) (http://www.ebusiness-watch.org/marketwatch/resources/E-Business2003_SUM.pdf)

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Only 8% of the automobile suppliers use Covisint, and only 6% use SupplyOn. This is so even though the major car producers are actively using and encouraging trade through the e-marketplaces. The study conducted among 7.000 automotive suppliers by Ruhr-University Bochum shows that 90% of the companies have less than 50 employees and lack the resources to use the marketplace efficiently. VDI Nachrichten, Germany - 28. February 2003

The extent of e-business use within a sector can be due to influences like: (a) Technical issues (availability of computers, internet etc. within the industry) (b) Company resources and competence (c) Suitability of products and services sold (expensive equipment must be inspected before purchase, products sold are not standardised) (d) Legal issues (privacy for e.g. patients) Within some industries the available software applications defines the degree of e-business. E-Business W@tch has conducted a studyii of 15 sectors in 2003 and groups them in 4 categories: E champions: This group consists of the ICT sector itself that implements information and communication technology in a way that surpasses other sectors. From the ICT sector there is a lesson to be learned on how to manage business processes, for example when dealing with large number of customers. E-intensive: Sectors that use ICT-networks and specific applications like CRM to deal with large number of customers E-specific: The companies in this group focus on specific aspects of e-business. There are large companies, as within the chemical industry that dominate the impression of the industry in the media and this impression does not give a true picture of use of ebusiness. Late e-adopters: Companies that deliver specialized products in small quantities, or legal systems that regulates privacy of personal information.-

Is your company ready for e-business
Having decided that e-business is right for your business partners, you must determine how and if your own company is ready for e-business. It is not a question of e-business or not, but a question of how much e-business to implement. There is hardly a company that does not use one or the other form of e-business with their customers or suppliers. The ebusiness tools like e-mail, Internet pages, online marketing and sales, EDI etc. is growing, but at the same time each company must find the right mix of online and off-line business.

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According to Armando Pardo, e-business for the SME can be divided into five levels of involvementiii Messaging Sending messages by e-mail can be an advantage on using a fax or the post. However, you should bear in mind that e-mail is just another customer service vehicle that works best alongside other options such as telephone or face-to-face contact. Publishing An updated web page can provide the latest information about your company and its products. Potentially you can reach a wider and international market than the one you are presently serving. Interacting An effective web-site allows the customers to interact with your business and place orders. Transacting At this level the web-site cover the whole process from product selection through ordering and confirmation of delivery agreements to online payment. Integrating All the business activities are integrated through IT, also bringing together online and offline processes from different parts of the company. In addition to these five levels, the company can use the available information and services that are online, for activities like market research and marketing. Services such as emarketplaces and on-line directories can be used to reach new, to service existing customers or find new suppliers.

E-Business Technology - an SME Planning Perspective : http://www.usherproject.org.uk/support/docs/sm-eb-plan.pdf ii http://www.ebusiness-watch.org/marketwatch/resources/E-Business-2003_SUM.pdf iii http://www.usherproject.org.uk/support/docs/sm-eb-plan.pdf

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