E-BUSINESS

PART 1 – INTRODUCTION
CHAPTER 1 – INTRODUCTION TO DIGITAL BUSINESS AND E-COMMERCE

Learning outcomes:

- Define the meaning and scope of the business and e-commerce and their different
elements.
- Summarise the main reason for adoption of digital business and barriers that may
restrict adoption.
- Outline the ongoing business challenges of managing digital business in an
organisation, particularly online start-up businesses.

Management issues:

- How do we explain the scope and implications of digital business to staff?

- What is the full range of benefits of introducing digital business and what are the risk?
- How do we evaluate our current digital business capabilities?

Organization have now been applying technologies based on the Internet, World Wide Web
and wireless communications to transform their business for over 20 years since the creation
of the first website in 1991.

Since Google was launched in 1998 which online start-ups have transformed the way we work,
live and play? How has Google innovated in search and its business model?
Evolution of web technologies

1. THE IMPACT OF ELECTRONIC COMMUNICATIONS ON TRADITIONAL BUSINESSES

Many businesses are reviewing the benefits, costs, and risks of digital business technologies
they are currently implementing as part of digital business transformation projects. There are
two key opportunities of digital transformation open to most business: inbound marketing and
mobile marketing.

Inbound Marketing

On the internet it is often the customer who initiates contact. It is a “pull” mechanism where it
is important to have good visibility in search engines. Google have referred to this consumer
decision-making before they visit a retailer as the Zero Moment of Truth (ZMOT).
Inbound marketing is powerful since advertising wastage is reduce. Search marketing, content
marketing and social media marketing can used to target prospects with a defined need- they
are proactive and self-selecting.

The impact and time to react varies by sector. Andy Grove, Chairman of Intel, one of the early
adopters of e-commerce, has made a meteorological analogy with the Internet. He says: “The
Internet is a typhoon force, a ten times force, or is it a bit of wind? Or is it a force that
fundamentally alters our business?”

Mobile Commerce

Electronic transactions and communications conducted using mobile devices such as

smartphones and tablets, and typically with a wireless connection.

2. WHAT IS THE DIFFERENCE BETWEEN DIGITAL BUSINESS AND E-COMMERCE?

Definitions:

Electronic commerce: All electronically mediated information exchanges between an

organisation and its external stakeholders. E-Commerce is not solely restricted to the actual
buying and selling of products, but also includes pre-sale and post-sale activities across the
supply chain.

Digital business: How businesses apply digital technology and media to improve the
competitiveness of their organization through optimising internal processes with online and
traditional channels to market and supply.
 Different types of sell-side e-commerce

Sell-side e-commerce doesn’t only involve selling products online, but also involves using
digital technologies to market services using a range of techniques. 5 types of online presence:

1. Transactional e-commerce sites: These enable purchase of products online. Retail

sites, travel sites and online banking services.
2. Services-oriented relationship-building websites: Provide information to stimulate
purchase and build relationships, particularly where products are not suitable for sale
online.
3. Brand-building sites: Provide an experience to support the brand. They are typical for
low-value, high-volume and fast-moving consumer goods.
4. Publisher or media sites: Provide information, news, or entertainment about a range
of topics.
5. Social network sites (SNS): Social networks could be considered to be in the previous
category since they are often supported by advertising, but their influence suggest
forming a separate category.

3. DIGITAL BUSINESS OPPORTUNITIES

The Internet provides significant opportunities for many businesses to built closer relationships
with their existing customers and suppliers online to help achieve customers retention.

Digital marketing definitions:

- Digital marketing involves: Applying these technologies which form online channels to
market: Web, email, databases, plus mobile/wireless and digital TV.
- To achieve these objectives: Support marketing activities aimed at achieving profitable
acquisition and retention of customers…within a multichannel buying process and
customer lifecycle.
- Through using these marketing tactics: recognising the strategic importance of digital
technologies and developing a planned approach to reach and migrate customers to
online services through e-communications and traditional communications. Retention
is achieved through improving our customer knowledge (of their profiles, behaviour,
value and loyalty drivers), then delivering integrated, targeted communications and
online services that match their individual needs.

Content marketing

The management of text, rich media, audio and video content aimed at engaging customers
and prospects to meet business goals, published through print and digital media including web
and mobile platforms, which is repurposed and syndicated to different forms of web presence
such as publisher sites, blogs, social media and comparison sites.
 Digital business opportunities

- Reach: Over 1 billion users globally. Connect to millions of products.

- Richness: Detailed product information on 20 billion+ pages indexed by Google. Blog,
videos, feeds…
- Affiliation: Partnership are key in the networked economy.
 4. RISKS AND BARRIERS TO BUSINESS ADOPTION

What can go wrong with a transactional site?

- Site downtime affecting whole site or some processes

- Security attack (denial of service, content hijacked)
- Wrong content presented for site visitor)

Cost / efficiency drivers

- Increasing speed with which supplies can be obtained

- Increasing speed with which goods can be dispatched
- Reduced sales and purchasing cost
- Reduced operating costs.

Competitiveness drivers

- Customer demand
- Improving the range and quality of services offered
- Avoid losing market share to businesses already using e-commerce

CHAPTER 2 – MARKETPLACE ANALYSIS FOR E-COMMERCE

Learning outcomes:

- Complete an online marketplace analysis to assess competitor, customer and

intermediary use of digital technologies and media as part of strategy development.
- Identify the main business and marketplace models for electronic communications and
trading.
- Evaluate the effectiveness of business and revenue models for online businesses,
particularly online start-up.

Management issues:

- What are the implications of changes in marketplace structures for how we trade with
customers and other partners?
- Which business models and revenue models should we consider exploiting the
internet?
- What will be the importance of online intermediaries and marketplace hubs to our
business and what actions should we take to partner these intermediaries?

1. Online marketplace analysis

Understanding the online elements of and organisation’s environment, which are shown in
figure above, is a key part of situation analysis for digital business strategy development.
There is also the need for a process to continually monitor the environment, which is often
referred to as environmental scanning.

Process for online marketplace analysis

Analysis of the online marketplace is a key part of developing a long-term digital business plan.
The main elements of the online marketplace map which should be reviewed as part of the
process of marketplace analysis are:

- Customer segment
- Search intermediaries
- Intermediaries, influencers, and media sites
- Destination sites
 Environment constraints and opportunities

- Customers: Which services are they offering via their website that your organisation
could support them in?
- Competitors: Need to be benchmarking in order to review the online services they are
offering – do they have a competitive advantage?
- Intermediaries: Are new or existing intermediaries offering products or services form
your competitors while you are not represented?
- Suppliers: Are suppliers offering different methods od procurement to competitors
that give them a competitive advantage?
- Macro-enviroment:
Society What is the ethical and moral consensus on holding personal
information?
Country specific, international legal What are the local and global legal
constraints, for example, on holding personal information, or taxation rules on sale
of goods?
Technology What new technologies are emerging by which to deliver online
services such as interactive digital TV and mobile phone-based access?
 2. Location of trading in the marketplace

While traditional marketplaces have a physical location, an Internet-based market has no

physical presence but virtual. This has implications for the way in which the relationship
between the different actors.

Marketplace channel structures describe the way a manufacturer or organization delivers

products and services to its customers. This picture is from a typical channel structure. A
distribution channel will consist of one or more intermediaries such as wholesalers and
retailers. This figure can be dramatically altered by opportunities afforded by internet. This
process is known as disintermediation. The next figure illustrates that.
a) Shows the former position where a company marketed and sold its products by
“pushing” them through a sales channel.
b) C) Show two different types of disintermediation in which the wholesaler or
wholesaler and retailer are bypassed, allowing the producer to sell and promote direct
to the consumer.

The importance of multichannel marketplace models

 3. Business models for e-commerce

Timmers (1999) defines a “business model” as:

An architecture for product, service and information flows, including a description of the
various business actors their roles; and a description of the potential benefits for the various
business actors; and a description of the sources of revenue.
 CHAPTER 3 – MANAGING DIGITAL BUSINESS INFRASTRUCTURE

Learning outcomes:

- Outline the range of hardware and software technologies used to build a digital
business infrastructure within an organisation and with its partners.
- Review the management actions needed to maintain service quality for users of digital
platforms.

Management issues:

- What are the practical risks to the organization of failure to manage the e-commerce
infrastructure adequately?
- How should we evaluate alternative models of delivering web services?

Defining an adequate technology infrastructure is vital to all start-up online business and
existing companies making the transformation to digital business.

1. Digital business infrastructure components

Digital business infrastructure refers to the combination of hardware such as servers and client
desktop computers and mobile devices, the network used to link this hardware and the
software applications used to deliver services to workers and customers.

Why do business managers need to know about the jargon and technology? Because it can
happen typical problems that need to be solve such as:

- Website communications too slow

- Site is not viewable on mobile
- Website not available
- Bugs on site through pages being unavailable or information typed in forms not being
executed
- Ordered products not delivered on time
- Emails not replied
- Customer’s privacy or trust is broken through security problems such as credit cards
being stolen or addresses sold to other companies.
Some definitions:

Internet: The client-server based “network of networks”, linking together hundreds of

thousands private networks via common technical standards, which can be described in five
subsequent layers of abstraction.

Client-server computing: The computing scheme, based in distribution of data processing

among multiple servers (storing the data and hosting the applications), which are responding
to the requests from clients- typically networked PCs/Macs/thin clients…
 2. A short introduction to Internet technology

Internet enables communications between millions of connected computers worldwide, but

how does the seamless transfer od data happen?
3. Managing internal digital communications through intranets and extranets

- Intranet: A manner of connecting servers and clients inside the organization via the
same technical standards used to communicate with the “rest of the internet”.
Interconnectivity of an organization’s information system (IS) is achieved
simultaneously with the secure access to privileged information.
- Extranet: Extension of an intranet, which connects external individuals (Including
remote employee access to the intranet) and organizations (such as customers and
suppliers) to those of the intranet they need to conduct business with the
organization.

4. Web presentation and data exchange standards

- World Wide Web (WWW): an information service, developed by Tim Berners Lee of
CERN in early ‘90s, serving as a standard for exchanging and developing information on
the internet. Fundamental WWW technical components/concepts:
- Web servers: hosting static and dynamic web pages/sites
- Web browsers: sending requests from client computers
- Web standards: Used for structuring information exchanged and structuring
communication via protocols, such as HTTP, HTTPS…
 Engineers’ experience of the internet

- Seamless integration of various computing systems/platforms via the common

networking standard – TCP/IP and the common networking approach – packet-based
data exchange.
- For ease of transmission and system management, each transmission is broken into
smaller parts- packets, which are being exchanged among two IP addresses – unique
numerical addresses of the data source and destination.
- TCP manages the exchange of IP packages.
 Standards for data presentation: HTML and XML

 HTLM (Hypertext Markup Language): A standard format used to define the text and
layout (presentation) of web pages. HTML files usually have the extension .HTML
or .HTM
 XLM or eXtensible Markup Language: A standard for transferring structured data,
unlike HTML which is purely presentational.

Media standards

 GIF (Graphics Interchange Format): A graphics format and compression algorithm best
used for simple graphics.
 JPEG (Joint Photographic Experts Group): A graphics format and compression
algorithm best used for photographs.
 Streaming media: Sound and video that can be experienced within a web browser
before the whole clip is downloaded.

Who controls the Internet?

Essentially no one; there is no centralized control over the Internet. Robust client-server
architecture combined with TCP/IP and DNS standards enables it to keep it up and running
even after essential parts of the network are shut off.

The issue might be who sets standards used by the Internet company: national bodies (USA?),
international organizations or companies?

Internet neutrality principle (abandoned by the US FCC in December 2017)

International org’s responsible for standards

- Internet Corporation for Assigned Names & Numbers (ICANN): non-profit corporation
managing IP numbers & domain names allocation (www.icann.org)
- The Internet Society (www.isoc.org): A non-profit association of internet-related IT
professionals, striving to provide open/transparent development of standards.
- Internet Engineering Task Force (www.ietf.org): an international engineering
community developing & certifying new internet standards.
- World Wide Web Consortium: (www.w3c.org) : Similar to IETF, but concentrated to the
WWW standards.
 CHAPTER 4 – E-ENVIROMENT

Learning outcomes:

- Identify the different elements of an organisation macro-environment that impact on

an organisation’s digital business and digital marketing strategy.
- Assess the impact of legal privacy and ethical constraints or opportunities on a
company.
- Assess the role of macro-economic factors such as economics, governmental digital
business policies, taxation, and legal constraints.

Management issues:

- What are the constraints such as legal issues which should be taken into account when
developing and implementing a digital business strategy?
- How can trust and privacy be assured for the customer while seeking to achieve
marketing objectives of customer acquisition and retention?
- Assessment of the business relevance of technological innovation.

This table represents the main marketplace or macro-environmental factors and the micro-
environmental factors that directly affect an organisation. Often these factors are known as
the PEST factors.
 1. Social and legal factors

The social and cultural impacts of the Internet are important from an e-commerce perspective
since they govern demand for Internet services and propensity to purchase online and use
different types of e-commerce services.
 Ethical issues and data protection

Ethical issues concerned with personal information ownership have been usefully summarised
by Mason (1986) into four areas:

- Privacy: What information is held about the individual?

- Accuracy: Is it correct?
- Property: Who owns it and how can ownership be transferred?
- Accessibility: Who is allowed to access this information, and under which conditions?
 Ethics – Fletcher’s view

Fletcher (2001) provides an alternative perspective, raising these issues of concern for both the
individual and the marketer:

- Transparency: Who is collecting what information?

- Security: How is information protected once collected by a company?
- Liability: Who is responsible if data are abused?

The 8 principles for data protection

 Fairly and lawfully processed

 Processed for limited purposes
 Adequate, relevant and not excessive
 Accurate
 Not kept longer than necessary
 Processed in accordance with the data subject’s rights
 Secure
 Not transferred to countries without adequate protection
 Localisation

Singh and Pereira (2005) provide an evaluation framework for the level of localisation:

- Standardised websites (not localised). A single site serves all customers segments
(domestic and international).
- Semi-localised websites. A single site serves all customers; however, there will be
contact information about foreign subsidiaries available for international customers.
Many sites fall into this category.
- Localised website. Country-specific websites with language translation for
international customers, wherever relevant. 3M (www.3m.com) has adapted the
websites for many countries to local language versions. It initially focused on the major
websites.
- Highly localised websites: country-specific websites with language translation; they
also include other localisation efforts in term of time, date, postcode, currency
formats. Dell (www.dell.com) provides highly localised websites.
- Culturally customised websites. Websites reflecting complete “immersion” in the
culture of target customer segments; as such, targeting a particular country may mean
providing multiple websites for that country depending on the dominant cultures
present. Durex (www.durex.com) is a good example of a culturally customised
website.

2. Economic and competitive factors / Political factors

Ensuring companies competitiveness:

 - Funding for education and technology
- Promoting new technology for example, broadband 12% in UK, 70% Taiwan, south
Korea.

Achieving government efficiencies:

- E-government – all UK services online by 2005

- Singapore “Intelligent Island”

Taxation regimes:

- Legislation for offshore trading

3. Technological innovation and technology assessment

Rate of change. Which new technologies should we adopt?

- Monitoring for new techniques

- Evaluation are we early adopters?
- Re-skilling and training

Are our systems secure?

 PART 2 – STRATEGY AND APPLICATIONS
CHAPTER 5 – DIGITAL BUSINESS STRATEGY

In part 2 of the book approaches to developing digital business strategy and applications are
review for the organisation as a whole (chapter 5), with and emphasis on buy-side e-commerce
(chapters 6 and 7) and sell-side e-commerce (chapters 8 and 9).

Learning outcomes:

- Follow an appropriate strategy process model for digital business

- Apply tools to generate and select digital business strategies
- Outline alternative strategic approaches to achieve digital business

Management issues:

- How does digital business strategy differ from traditional business strategy?
- How should we integrate digital business strategy with existing business and
information systems strategy?
- How should we evaluate our investment priorities and returns from digital business?

1. What is digital business strategy?

Developing a digital business strategy requires strategic evaluation, strategic objectives,

strategy definition and strategy implementation.

Michael Porter said: “The key question is not whether to deploy internet technology-
companies have no choice if they want to stay competitive- but how to deploy it”.

Strategy defines the future direction and actions of an organisation or part of an organisation.
What is strategy so:

- Defines how we will meet our objectives

- Sets allocation of resources to meet goals
- Selects preferred strategic option to compete within a market
- Provides a long-term plan for the development of the organisation
We identify corporate strategy which is concerned with the overall purpose and scope of the
organisation, business unit strategy which defines how to compete successfully in a particular
market and operational strategies which are concerned with achieving corporate and business
unit strategic. Additionally, functional strategies describe how the corporate and business unit
strategies will be operationalised in different functional areas. Functional strategies refer to
marketing, supply chain management, human resources, finance, and information systems
strategic. Usually, digital business strategy can be incorporated within the functional
strategies.

An important aspect of digital business strategies is that they create new “e-channel
strategies”.
 Buy-side e-commerce strategy or e-supply chain management strategy

Buy-side e-commerce strategy is about maximising operational efficiencies while improving

customer service quality. Operational efficiency KPIs should drive our strategy. Our buy-side e-
commerce strategy defines how we should:

- Automate internal processes

- Link international resource management systems with external purchasing systems
- Prioritise suppliers/partners collaborating using this channel
- Prioritise applications for SCM-create a roadmap

Involves selection of appropriate strategic partners.

Sell-side e-commerce strategy or e-marketing / CRM strategy

Sell-side e-commerce is a channel strategy. Objectives for online contribution percentage

should drive our strategy. Our e-commerce strategy defines how we should:

- Hit our channel leads and sales targets (acquisition, conversion, retention, service and
profitability)
- Communicate benefits of using this channel
 - Prioritise products available through channel
- Prioritise audiences targeted through channel

Channel strategy thrives on differentials. But, need to manage channel integration.

What happens where there is no digital business strategy?

 Missed opportunities for additional sales on the sell-side and more efficient purchasing
on the buy-side.
 Fall-behind competitors in delivering online services- may become difficult to catch-up,
for example, Tesco or Dell.
 Poor customer experience from poorly integrated channels
2. Strategic analysis
3. Strategic objectives
 The fundamental marketing objective. Customer profiling & conversion

How to convert a non-customer (just “browsing” a company’s web) into a customer? One-to-
one relationship marketing, CRM:

- Customer identification (cookies, login)

- Customer needs analysis (connected to results of other strategic analyses)
- Customer interactions (performing transactions/providing service, giving answer)
- Customizing communications and/or product
Conversion of offline audience into online visitors into regular visitors into prospects/leads
into customers into repeated customers.

Customer lifecycle segmentation

4. Strategy definition

Internet/online revenue contribution (Market potential – potential sales)

The fundamental e-business objective, related to the percentage of company revenue directly
generated by e-business. For B2B companies, a far higher amount of indirect revenue
contribution can be expected (purchase not made online, but rather influenced by the
company’s online presence)
 Segmentation, targeting and positioning.

 Segmentation: Identification of different groups within a target market in order to

develop offers suited to the needs/wishes of specific customer groups.
 Targeting: Evaluation and selection of appropriate segments, which can be successfully
served by the organization and development of appropriate offerings.
 Positioning: Influencing customer’s perception of a company’s offerings in relation to
its competitors. It involves defining a value proposition – a statement of value created
for the customer by the company.
5. Strategy implementation