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    .

K (1971) “The Concept of Corporate Strategy”. 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.. Irwin.Strategy is.. IL. purposes or goals. Homewood.  The pattern of major objectives. Andrews. p28 .. and essential policies or plans for achieving these goals.

2007:30 .Strategic Considerations…… In Chaffey.

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 .

g. virtual partnering.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. webenterprises Subject to externalities (outside environment)     . financial systems & human activity systems or social systems. extended enterprises. information-technology systems. Extent of boundary erosion • Movement towards ‘open’ rather than ‘closed’ systems • Networks.

procedures) • The Channel (offline online mobile )  . technology.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.

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. financial management. supplier and customer relationship management . sales and after-sales support. marketing.

sales. • Leveraging the impact of people and information  Highly skilled. service.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 masscustomised goods and services” (Davidow & Malone. 1992) • Organising to master change and uncertainty  BPR critical: Revision of R&D. distribution. finance etc. marketing. manufacturing. information systems. reliable and educated workers – emphasis of teamwork to achieve common goals .

Collaboration & Integration .

from inbound logistics and production through to sales and marketing Inbound logistics R&D Production Sales & distribution Aftersales. CRM .Reshaping the Value Chain  The traditional value chain – a series of value-adding activities in a company’s processes.

a molecular structure. OR .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.

Customer facing IS: Sales Marketing Distribution After-sales CRM Supplier facing IS: Inbound logistics Procurements SRM/PRM Front-end infrastructure Management facing IS: MIS EIS Decision support Employee facing IS: HRM Production .

Client tier Customer Employee Supplier Internet Business tier Customer facing Data tier Intranet Employee facing Extranet Supplier facing DB / Web integration Beynon-Davies. 2004 Distribution DBMS Database Front end infrastructure .

Sales & after-sales Planning Procurement HRM Purchase order processing Payroll Agent Data flow Sales order processing Stock control Accounting Process Core systems Modelling Back-end infrastructure Data store .

industrial disruption (trade unions) . may encounter employee resistance or (in severe cases).Optimal Reshaping?  Greatest cost savings occur where frontend and back-end are integrated: • Eliminates duplication and waste • Reduce staffing requirements • Automate and standardise – reduce errors  However.

The e-Strategy Process Environmental analysis: •External – PEST Competitors Strategic position: 1) Porter’s 5 forces 2) Industry life cycle 3) Strategic Groups & strategic space 4) Role of technology Corporate mission & goals •Internal – Culture Resources Competencies Strategic capability: 1) Organisational structure & culture 2) The value chain & value system 3) The generic blocks 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? .

3. 2. 6.Strategy Definition  Key strategic decisions: • • • • • • 1. 5. 4. service and revenue models Marketplace restructuring Market & product development strategies Positioning & differentiation strategies . eBusiness channel priorities Organisational restructuring & capabilities Business.

In Search of Superior Performance Distinctive Competences Efficiency Quality Innovation Customer responsiveness •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 systems Travel agents Customers Physical Electronic Old style ticket distribution Airlines Cybermediaries Reservation systems Customers New style distribution Travel agents Source: O’Keefe. 2003 .

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

1999 Based upon Azjen’s TRA: 1985. 1991 . 1988.Technology Acceptance Model Perceived usefulness External variables Attitude towards use Behavioural intention Actual use Perceived ease of use Davis.

2004 .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 .adapted .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.

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? .

(2005). 5 (pp.400-419) Jelassi. and Enders. and Enders. A. eBay Case Studies 22-24   . (2005). T. (2005). T. Case Study 15 (pp.95-119) Jelassi. and Enders. T.Supplementary Reading  Jelassi. J&E ch. A. A.

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