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e-Business (Spring 2011)

Lecture 1: Introduction to e-Business

Dr. Philip Fei Wu

e-Business Defined
o  “e-” electronic, or information and communication
technologies, particularly the Internet
o  Internet ≠ Web
o  e-business as a type of business
o  e-business as an adjective to describe a set of Internet-
enabled strategies and operations
o  Differences between e-business and e-commerce

07  Feb  2011   School  of  Management,  University  of  Surrey,  U.K.     1  

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Now, a very sketchy history of e-business …

07  Feb  2011   School  of  Management,  University  of  Surrey,  U.K.     4  

Technology Revolution Stages

3 CRASH

Source: Carlota Perez (2002).Technological Revolutions and Financial Capital: The Dynamics
of Bubbles and Golden Ages.
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Major Tech Revolutions

Source: Carlota Perez (2002).Technological Revolutions and Financial Capital: The Dynamics
of Bubbles and Golden Ages.
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The Evolution of eBusiness

o  Pre-Internet (1980s – early 1990s)
•  Electronic data interchange
•  Internal IT systems
•  Limited interorganizational systems
o  Rise of the Internet-enabled eBusiness (1995 – 1999)
o  The crash (Monday, 13 March 2000 – early 2003)
o  The golden age (2003 – ?)
o  The next big thing?

07  Feb  2011   School  of  Management,  University  of  Surrey,  U.K.     7  

Motivations for e-Business

o  Cost reductions through automation, standardisation,
integration and real-time communications
o  Enhance ‘reach’ and market exposure
o  Enhance relationships with consumers
o  Reinforce company and brand positioning
o  Facilitate consumer decision-making

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Motivations of Consumers
o  Information search:
•  Convenience – reduce search costs, both time and
energy
•  Access – to information about products and companies
•  Availability – 24/7
o  Evaluation of alternatives:
•  Increased number of alternatives
•  Enhanced transparency – facilitates comparison
o  Decision-making:
•  Third party expertise
•  Enhanced confidence

07  Feb  2011   School  of  Management,  University  of  Surrey,  U.K.     9  

The Great Promises/Myths

o  First-mover advantage
o  Customer lock-in
o  Network effects
o  Low-cost startup and operation
o  Unbundled corporation
o  Economies of scale

07  Feb  2011   School  of  Management,  University  of  Surrey,  U.K.     10  

Barriers to Adoption
o  Business: cost, ‘bleeding edge’, security, ownership
o  Consumer: cost, effort, confidentiality, trust
o  Staff: training, management competence, employee
knowledge & expertise
o  Technology: compatibility, functionality, reliability,
usability

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A Common Reason for Failures

o  Massively overestimate the degree and speed at which

the marketplace would adopt an innovation!

o  Case studies
•  ‘Paperless office’ (1975)
•  Online grocery shopping
•  Boo.com (Chaffey, 2009, p.316)
•  FordDirect.com

07  Feb  2011   School  of  Management,  University  of  Surrey,  U.K.     12  

Case Study: Ford on the Web

o  “We are now measuring speed in gigahertz, not

horsepower.” - Jac Nasser, former Ford CEO
o  Three strategic e-business moves in 1999
•  Covisint – B2B
•  Wingcast – Internet-enabled vehicles
•  FordDirect.com – B2C
o  Estimated loss:1 billion USD
o  Nasser resigned in 2001; Bill Ford took over
o  Bill Ford: “We need to get our focus back on the basics
of our business … building great cars and trucks.”
07  Feb  2011   School  of  Management,  University  of  Surrey,  U.K.     13  

The Dell Model

o  ‘Build to order’
o  Just in time
•  Reduce inventory to six days
•  Low risk of obsolete technology
o  Remove middleman (“disintermediation”)
o  Intimate customer relations
•  More responsive to customer needs
o  Strategic outsourcing
•  Focus on core competency

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Case Study: Dell again

o  Starting in 2006, Dell sales started to slip, falling
behind HP
o  In 2007, Dell computers entered retail stores of Best
Buy, Wal-Mart, Staples
o  The Dell model “has been a revolution, but is not a
religion.” (Michael Dell)
o  Why change?

07  Feb  2011   School  of  Management,  University  of  Surrey,  U.K.     15  

Does IT Matter?
Two seminal articles on HBR:
o  Michael E. Porter (2001). “Strategy and the Internet”
o  Nicholas G. Carr (2003). “IT Doesn’t Matter”

Common theme:
IT itself doesn’t matter! What really matters is how to
deploy IT to support a defined business strategy that
leads to sustainable competitive advantage.

07  Feb  2011   School  of  Management,  University  of  Surrey,  U.K.     16  

IT Doesn’t Matter
o  IT spending  strategic value
o  IT standardizes operations  competitive
convergence
o  IT has become a commodity, a utility
o  New IT strategies
•  Spend less on IT
•  Follow, don’t lead
•  Focus on vulnerabilities, not opportunities
•  Focus on business, not “e-”
•  Focus on profitability, not growth
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e-Business Channel Strategy

o  ‘Getting the right mix of bricks and clicks’

(Source: Chaffey, 2009)

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Case Study: Groupon

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