E-BUSINESS STRATEGY AND MANAGEMENT

(BPE4733)

E-BUSINESS STRATEGIES

DR.ADEKUNLE QUDUS ADELEKE

Scope of Electronic business

e-business

Electronic
commerce

Mobile
e-commerce
 The focus of the cases is on corporate level
and business unit strategy

Corporate- Corporation
level strategy

Business unit Business Business Business

strategy unit A unit B unit C

Operational strategy R&D Production Etc.

 Definitions of strategy
● Gerry Johnson and Kevan Scholes - the direction and
scope of an organization over the long-term, which
achieves advantage for the organization through its
configuration of resources within a changing environment
to the needs of markets and fulfill stakeholder
expectations.

● Alfred Chandler - the determination of the basic long-term

goals and objectives of an enterprise, and the adoption of
courses of action and the allocation of resources
necessary for carrying out these goals.
 Definitions of strategy
● Bruce Henderson - the deliberate search for a
plan of action that will develop a business’s
competitive advantage and compound it.

● Michael Porter - the strong focus on profitability

not just growth, an ability to define a unique value
proposition, and a willingness to make tough
trade-offs in what not to do.
Key focus of strategy
Strategy is concerned with the long-term direction of the firm.

•
Strategy deals with the overall plan for deploying the resources
that a firm possesses.
•
Strategy entails the willingness to make trade-offs, to choose
between different directions and between different ways of
• deploying resources.
•
Strategy is about achieving unique positioning vis-à-vis
competitors.

The central goal of strategy is to achieve sustainable competitive

advantage over rivals and thereby to ensure lasting profitability.
 Goal of e-business strategy

Formulation
Environment Goals

Market
positioning

Competitive (Long-term)
advantage success

Resource
exploitation

Resources

Implementation
Relationship Marketing and Customer
Relationship Management (CRM)
 Transaction-based
marketing - Buyer and seller
exchanges characterized by
limited communications and
little or no ongoing relationship
Market
between the parties
positioning
 Relationship Marketing -
Competitive (Long-term)
Development, growth, advantageand success
maintenance of long-term, cost-
Resource
effective exploitation
relationships with
individual customers, suppliers,
employees, and other partners
for mutual benefit Implementation
The Shift from Transaction-Based Marketing
to Relationship Marketing

● Shift away from production-oriented marketing

○ Emphasis on individual sales and transactions

○ Limited communication
Market
○ No ongoing relationship
positioning

○ Limited in some markets, such as residential real

Competitive estate
(Long-term)
advantage success

● Shift toward Resource

relationship marketing
exploitation
○ Views customers as equal partners in transactions

○ Encourages long-term relationships, repeat purchases, and multiple brand purchases

from the firm
Implementation
○ Leads to increased sales and low marketing costs
Figure 1.1 - Forms of Buyer-Seller
Interactions from Conflict to Integration

Market
positioning

Competitive (Long-term)
advantage success

Resource
exploitation

Implementation
Relationship Marketing

● Focuses on long term rather than short term

● Emphasizes retaining customers over
making aMarket
sale
● Ranks customer
positioning
service as a high priority
● Encourages frequentCompetitive
customer (Long-term)
advantage contact
success
● Fosters Resource
customer commitment with the
exploitation
firm
● Bases customer interactions on cooperation
Implementation
and trust
Elements of Relationship Marketing

● Firms build long-term relationships in four

ways
○ GatherMarket
information about their customers
positioning
○ Analyze the data andCompetitive
use it to modify the marketing
(Long-term)
advantage
mix success

Resource
○ Monitorexploitation
interactions with customers
○ Use customers’ preferences and knowledge
Implementation
Internal Marketing

External customers - People or

organizations that buy or use a
firm’s goods or services
Market
positioning

Competitive (Long-term)
advantage success
Internal customers -
Employees or departments
Resource
exploitation
within the organization whose
success depends on the work of
other employees or departments
Implementation

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Table 1.1 - Three Levels of Relationship
Marketing

Competitive (Long-term)
advantage success

Resource
exploitation

Implementation

14
 Three Levels of Relationship Marketing

First Level: Focus on Price

● Most superficial level, least likely to lead to long-term

relationships
● Marketers rely on pricing to motivate customers
● Competitors can easily duplicate pricing benefits
Competitive (Long-term)
advantage success
Second Level: Focus on Social Interactions
● Customer service and communication are key factors
● Example: A wine shop holding a wine-tasting reception
Implementation

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 Three Levels of Relationship Marketing
Cont’d

Third Level: Interdependent Partnership

● Relationship transformed into structural changes

that ensure partnership and interdependence
between buyer and seller
Competitive (Long-term)
advantage
● Example: Canadian software marketer Corel
success

chose a cloud-based approach

○ Its tech-help agents to answer customer queries via chat,
telephone, the Web, or social media

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Figure 1.2 - Three Steps to Measure
Consumer Satisfaction

Competitive (Long-term)
advantage success

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Understanding Customer Needs

● To build long-term relationships firms

must understand what customers need,
want, and expect
Competitive (Long-term)
● Must measure customer satisfaction
advantage success

● Marketers need to keep in touch with the

needs of current and potential customers

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 Obtaining Customer Feedback
and Ensuring Satisfaction

● Sources of information include toll free

numbers or online feedback
● Some firms hire mystery shoppers posing
as customers to evaluate
Competitive
service
(Long-term)
advantage
● Complaints help firms overcomesuccess problems
and demonstrate commitment to service
● Some firms conduct surveys to measure
satisfaction

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 Building Buyer-Seller Relationships

● Consumers form relationships to:

○ Reduce choices

○ Simplify information gathering and the entire buying

process

○ Reduce the risk of dissatisfaction

Competitive (Long-term)
advantage success
○ Perceived positive value received in a long-term buyer-
seller relationships is a key benefit for customers

○ Customers may switch loyalties if they perceive better

benefits from a competitor

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 How Marketers Keep Customers

● Retaining customers is more profitable than losing

them
● Customer churn - Customer turnover
○ Is expensive for a company
● Firms generate more profits with each
Competitive additional
(Long-term)
advantage
year of a relationship success

● Frequency marketing - Frequent-buyer or -user

marketing programs that reward customers
● Affinity marketing - Solicits responses from
individuals who share common interests and
activities
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 Database Marketing
 Use of software to analyze data about customers
 Helps firms to:

○ Identify their most profitable customers

○ Calculate the lifetime value of each customer’s business

○ Build relationships and encourage genuine brand loyalty

Competitive (Long-term)
advantage success
○ Improve customer retention and referral rates

○ Reduce marketing and promotion costs

○ Boost sales volume per customer or targeted customer

group

○ Expand loyalty programs

Database Marketing Cont’d

Possible sources of data

o Credit card applications
o Software registration
o Product warranties
o Point-of-sale register
advantage scanners
Competitive (Long-term)
success
o Customer opinion surveys
o Websites
o Telecom companies database
Database Marketing Cont’d

Interactive television - Television service

package that includes a return path for
viewers to interact with programs or
commercials by clicking their remote
controls

Competitive (Long-term)
Application service advantage
providers (ASPs)- success
Outside companies that specialize in
providing both the computers and the
application support for managing
information systems of business clients

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 Customers as Advocates

● Grassroots marketing - Connecting directly

with existing and potential customers
through nonmainstream channels
● Viral marketing - Satisfied customers
spread the word about products
Competitive
advantage
to other
(Long-term)
success
consumers
● Buzz marketing - Gathers volunteers to try
products and then relies on them to talk
about their experiences

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Customer Relationship Management

● Combination of strategies and tools that

drive customer relationship programs
● Leverages technology to manage
customer relationships
Competitive
advantage
(Long-term)
success
● Integrates all stakeholders into a
company’s product design and
development

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Benefits of Customer Relationship Management

1.Maintain a centralized database across your

organization sales.
2.Manage all communication and interactions with
prospects.
3.Automate data entry.
4.Be reminded to follow up with prospects.
5.Organize contact data.
Competitive
6.Segment customers. advantage
(Long-term)
success
7.Create sales reports.
8.Automate forecasting for your sales performance.
9.Scale your sales processes over time.
10.Ensure team communication is facilitated.
11.Keep the same software as your company grows.
12.Make administrative tasks efficient.

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Problems with Customer Relationship Management

• Customer experience may dis-improve due to

staff over-reliance on system.
• Security and data protection issues with
centralised data.
• Time and initial Competitive
productivity(Long-term)
advantage cost of
success
implementation.
• Requires a process-driven sales
organisation.
• It requires extensive training to be an expert.

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Retrieving Lost Customers

● Customers leave for a variety of reasons

○ Boredom

○ Move to a new location

Competitive
○ No longer have a need for the product
advantage
(Long-term)
success

○ Prefer competing products

● Customer win-back - Process of
rejuvenating lost relationships with
customers
Figure 1.3 - Customer Retention in the Auto
Industry: A Representative Sample

Competitive (Long-term)
advantage success
Retrieving Lost Customers

● Rules for service providers

▮ To anticipate where problems will arise and figure
out how to prevent them.
Competitive (Long-term)
▮ To accept that mistakes will occur in even the
advantage success

best systems and have a high-quality recovery

effort in place that employees are empowered to
enact.

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Business-to-business marketing
- Organizational sales and
purchases of goods and services to
support production of other
products Competitive (Long-term)
advantage success

32
Buyer-Seller Relationships in
Business-to-Business Markets

● Advantages of buyer-seller
relationships
○ Lower prices

○ Quicker delivery Competitive (Long-term)

advantage success
○ Improved quality and reliability

○ Customized product features

○ Favorable financing terms

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Buyer-Seller Relationships in
Business-to-Business Markets Cont’d

Partnership - Affiliation of two or

more companies that help each
other achieve common goals
Protect or improve position in
Competitive
existing markets advantage
(Long-term)
success

Gain access to new domestic or

international markets
Quickly enter new markets

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Choosing Business Partners

• Partner firms must add value to the

relationship
• Partner firms often complement each other
• Both firms must share similar values and
goals Competitive (Long-term)
• Both firms must posses business network
advantage success

• Financial strength of the partnering firms must

be strong
• Integrity from both firms is paramount

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Types of Partnerships

● Internal partnerships - Relationship involving

customers within an organization
○ Foundation of an organization’s ability to meet its
commitment to external Competitive
entities
(Long-term)
advantage
● Lateral partnerships - Strategic relationship success

that extends to external entities but involves

no direct buyer-seller interactions

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Cobranding and Co-marketing

● Cobranding - Cooperative arrangement in which

two or more businesses team up to closely link
their names on a single product
● Co-marketing - Cooperative
Competitive arrangement
(Long-term)
in
advantage
which two businesses jointly marketsuccess
each other’s
products

37
Electronic Data Exchanges and Web Services

● Electronic data interchanges (EDI) - Computer-to-

computer exchanges of invoices, orders, and other
business documents
● Quick-response merchandising - A just-in-time
strategy that reduces the time merchandise is held in
Competitive (Long-term)
inventory advantage success
● Web services - Platform-independent information
exchange systems that use the Internet to allow
interaction between the firms

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Electronic Data Exchanges and Web Services

● Electronic data interchanges (EDI) - Computer-to-

computer exchanges of invoices, orders, and other
business documents
● Quick-response merchandising - A just-in-time
strategy that reduces the time merchandise is held in
Competitive (Long-term)
inventory advantage success
● Web services - Platform-independent information
exchange systems that use the Internet to allow
interaction between the
firms

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Business Model

A business model is a set of

planned activities (sometimes
referred to as business processes)
designed to result in a profit in a
marketplace. A business model is
not always the same as a business
strategy, although in some cases The business model is at the
they are very close insofar as Competitive
the centre of the business plan. A
(Long-term)
business model explicitly takes advantage
into business plan is a document
success
account the competitive that describes a firm’s business
environment. model. A business plan always
takes into account the
competitive environment. An e-
commerce business model aims
to use and leverage the unique
qualities of the Internet, the
Web, and the mobile platform.
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Eight Key Elements of a Business Model

If you hope to develop a successful

business model in any arena, not just
e-commerce, you must make sure that
the model effectively addresses the
eight elements listed in Figure 1.4

These elements are value proposition, revenue model,

market opportunity,
Competitive competitive environment,
(Long-term)
competitive advantage,
advantage market success
strategy, organizational
development, and management team. Many writers
focus on a firm’s value proposition and revenue model.
While these may be the most important and most
easily identifiable aspects of a company’s business
model, the other elements are equally important when
evaluating business models and plans, or when
attempting to understand why a particular company
has succeeded or failed
41
Eight Key Elements of a Business Model Cont’d

Competitive (Long-term)
advantage success

42
Eight Key Elements of a Business Model Cont’d
Value Proposition
A company’s value proposition is at the
very heart of its business model. A value
proposition defines how a company’s
product or service fulfills the needs of
customers (Kambil, Ginsberg, and
Bloch, 1998). To develop and/or analyze
a firm’s value proposition, you need to
understand why customers will choose
to do business with the firm instead of
another company and what the firm
provides that other firms do not and
cannot.
A value proposition may include one or more of the
following points:
• Reduced price
• Improved service or convenience such as the "1
click" checkout
• Speed of delivery and assistance
• Products that lead to increased efficiency and
productivity
Competitive
• Access to a large and(Long-term)
available
advantage success inventory that
presents options for the buyer
Providing value in an e-business uses the same
approach as providing value in any business,
although it may require different capabilities. But
common to both are the customers who seek out
value in a business transaction. The value proposition
helps focus the business on the well-being of the
customer, where it remains in successful companies.
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Eight Key Elements of a Business Model Cont’d

Revenue Model
A firm’s revenue model describes how the firm will earn revenue, generate profits, and
produce a superior return on invested capital. We use the terms revenue model and
financial model interchangeably. The function of business organizations is both to
generate profits and to produce returns on invested capital that exceed alternative
investments. Profits alone are not sufficient to make a company “successful” (Porter,
1985). In order to be considered successful, a firm must produce returns greater than
alternative investments. Firms that fail this test go out of existence
A mix of revenue sources is often referred to as a revenue model but may be mistakenly called
a business model. Some of these sources Competitive
of revenue are:
• Advertising (Long-term)
advantage success
• Affiliation
• Agent commissions
• Licensing
• Sales commissions
• Sales profits
• Sponsorship
• Subscription
• Syndication
• Use Fees

44
 Eight Key Elements of a Business Model Cont’d

Market Opportunity
The term market opportunity refers to the
company’s intended marketspace (i.e., an
area of actual or potential commercial
value) and the overall potential financial
opportunities available to the firm in that
marketspace. The market opportunity is
usually divided into smaller market niches.
Competitive (Long-term)
advantage
The realistic market opportunity is defined by the
success
revenue potential in each of the market niches
where you hope to compete. For instance, let’s
assume you are analysing a software training
company that creates online software-learning
systems for sale to businesses. The overall size of
the software training market for all market segments
is approximately $70 billion.

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Eight Key Elements of a Business Model Cont’d

Competitive Environment
A firm’s competitive environment refers to the other companies
selling similar products and operating in the same marketspace. It
also refers to the presence of substitute products and potential new
entrants to the market, as well as the power of customers and
suppliers over your business. We discuss the firm’s environment
later in the chapter. The competitive environment for a company is
influenced by several factors: how many competitors are active,
how large their operations are, what the market share of each
competitor is, how profitable these firmsCompetitive
are, and how they (Long-term)
price
advantage success
their products.

Firms typically have both direct and indirect competitors. Direct competitors are
companies that sell products and services that are very similar and into the same
market segment. For example, Priceline and Travelocity, both of whom sell discount
airline tickets online, are direct competitors because both companies sell identical
products—cheap tickets. Indirect competitors are companies that may be in different
industries but still compete indirectly because their products can substitute for one
another.

46
Eight Key Elements of a Business Model Cont’d

Competitive Advantage
Firms achieve a competitive advantage
when they can produce a superior product
and/or bring the product to market at a
lower price than most, or all, of their
competitors (Porter, 1985). Firms also
compete on scope. Some firms can
develop global markets, while other firms
Competitive
can develop only a national or regional
advantage
market. Firms that can provide superior
products at the lowest cost on a global
basis are truly advantaged

Firms achieve competitive advantages because they have somehow

been able to obtain differential access to the factors of production that
are denied to their competitors—at least in the short term (Barney,
1991). Perhaps the firm has been able to obtain very favourable terms
from suppliers, shippers, or sources of labour.

47
Eight Key Elements of a Business Model Cont’d

Market Strategy

No matter how tremendous a firm’s qualities, its marketing strategy

and execution are often just as important. The best business
concept, or idea, will fail if it is not properly marketed to potential
customers. Everything you do to promote your company’s products
and services to potential customers is known as marketing. Market
strategy is the plan you put together that details exactly how you
Competitive
intend to enter a new marketadvantage and attract new customers. For
instance, Twitter, YouTube, and Pinterest have a social network
marketing strategy that encourages users to post their content on
the sites for free, build personal profile pages, contact their friends,
and build a community. In these cases, the customer becomes part
of the marketing staff!

48
Eight Key Elements of a Business Model Cont’d

Organizational Development
Although many entrepreneurial ventures are
started by one visionary individual, it is rare
that one person alone can grow an idea into a
multi-million dollar company. In most cases,
fast-growth companies—especially e- Companies that hope to grow and
commerce businesses—need employees and thrive need to have a plan for
a set of business procedures. In short, all organizational development that
firms—new ones in particular—need an describes how the company will
organization to efficiently implementCompetitive
their organize the work that needs to be
advantage accomplished. Typically, work is
business plans and strategies. Many e-
commerce firms and many traditional firms divided into functional departments,
that attempt an e-commerce strategy have such as production, shipping,
failed because they lacked the organizational marketing, customer support, and
structures and supportive cultural values finance. Jobs within these functional
required to support new forms of commerce areas are defined, and then
(Kanter, 2001). recruitment begins for specific job
titles and responsibilities.

49
Eight Key Elements of a Business Model Cont’d

Management Team
Arguably, the single most important element of a
business model is the management team
responsible for making the model work. A strong
management team gives a model instant
credibility to outside investors, immediate
market-specific knowledge, and experience in
implementing business plans. A strong
management team may not be able to salvage a
weak business model, but the team should Competitive
be
able to change the model and redefine theadvantage
business as it becomes necessary.

Eventually, most companies get to the point of

having several senior executives or managers.
How skilled managers are, however, can be a
source of competitive advantage or
disadvantage. The challenge is to find people
who have both the experience and the ability to
apply that experience to new situations

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Key Elements of a Business Model

Competitive
advantage

51
RAISING CAPITAL

Raising capital is one of the most important functions for a founder

of a start-up business and its management team. Not having
enough capital to operate effectively is a primary reason why so
many start-up businesses fail. Many entrepreneurs initially
“bootstrap” to get a business off the ground, using personal funds
derived from savings, credit card advances, home equity loans, or
from family and friends.
Competitive
advantage
Funds of this type are often referred to as seed capital. Once such
funds are exhausted, if the company is not generating enough
revenue to cover operating costs, additional capital will be needed.
Traditional sources of capital include incubators, commercial
banks, angel investors, venture capital firms, and strategic
partners.

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