Week 5

Slide 5.
Chapter 5
E-business strategy
Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007
Slide 5.2
Learning outcomes
• Follow an appropriate strategy process model

for e-business;
• Apply tools to generate and select e-business
strategies;
• Outline alternative strategic approaches to
achieve e-business.
Slide 5.3
Management issues
• How does e-business strategy differ from

traditional business strategy?
• How should we integrate e-business strategy
with existing business and IS strategy?
• How should we evaluate our investment
priorities and returns from e-business?
Slide 5.4
Michael Porter on the Internet
‘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.’
Porter, M. (2001) Strategy and the Internet,

Harvard Business Review, March 2001, 62–78.
Slide 5.5
Alternative definitions of strategy
What is strategy?
– “Defines how we will meet our objectives”
– “Sets allocation of resources to meet goals”
– “Selects preferred strategic options to

compete within a market”
– “Provides a long-term plan for the development

of the organization”.
Slide 5.6
Figure 5.1 Different forms of organizational strategy
e-Business development
Slide 5.7
Going
Environment Support Levels
Forward
Enterprise Development Levels
Taxation &
Finance ICT adoption
Legal & & use Investment in
Security & Regulatory e-Business Growth
Trust in numbers of
e-Businesses
Research & Numbers
Development employed
National
E-business E-Business
Infrastructure Development Market Size
E-Government
Support E-Business
Services Electronic Export growth
Number of
Skills Business
National e-Commerce
Processes
Education Strategy transcations
Slide 5.8
Key Technology Trends

and Strategies Going Forward
Supplier
Full supply
business benefit
eBusiness evolution and
Integration
chain
integration
Order
taking,
Intranet / making
Web- and
mail tracking
eBusiness
Web functionality
page implemented
INFORM INTERACT TRANSACT INTEGRATE
Slide 5.9
What is working?
• Pornography
• Travel / Tourism
• Retail - items that don’t need personal touch - objectivity in
product quality and performance
– music, books, gifts, Computers, electronic items
– Auctions
• Real Estate - houses and investment properties.
• Customer support services
• More efficient and effective processes between businesses (B 2
B)
Slide 5.10
What is not working?
• Items which require “touch and trial”

– Luxury goods
– Clothes - beyond Tshirts
• Groceries - it works for some people but
market is restricted
Note: Many OFF line factors determine success
of Online service. Eg. Transport network, customer
profiles,
Slide 5.11
Sell-side E-commerce strategy (Chapters 8 & 9)

or E-marketing/E-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 & sales targets
– Acquisition, Conversion, Retention, Service, Profitability
• Communicate benefits of using this channel
• Prioritise products available through channel
• Prioritise audiences targeted through channel
• Select partners for this channel
• Channel strategy thrives on differentials
• BUT, need to manage channel integration.
Slide 5.12
Buy-side E-commerce strategy (Chapters 6 & 7)

or E-supply chain management strategy
• Buy-side e-commerce strategy is about maximizing
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 internal resource management systems with external
purchasing systems
• Prioritize suppliers/partners collaborating using this channel
• Prioritize applications for E-SCM – create a roadmap
• Involves selection of appropriate strategic partners.
Slide 5.13
E-business strategy
• For me, an IS strategy or change

management strategy (Chapter 10) which
ensures resources are managed effectively to
achieve opportunities from Buy-side and Sell-
side e-commerce. Also involves deploying IS
to manage administrative internal process and
employee knowledge
• Involves management of information systems
resources (e-business applications,
infrastructure/hardware and people/change/
knowledge management).
Slide 5.14
Figure 5.2 Relationship between e-business strategy and other strategies
Slide 5.15
Business and E-commerce Strategy
•E-commerce has changed business strategy.

•A strategy is a broad-based formula for how a business is going to
compete, what its goals should be, and what plans and policies will
be needed to carry out those goals.1
1
Michael Porter “What is Strategy”, Harvard Business Review, November 1996, pp. 69-84.
Slide 5.16
E-commerce Strategy
• An e-commerce strategy is a …
• To build an e-commerce strategy requires two view of an organization’s

strategy: what is wants to do (conceptual) and how it will do it
(technology strategy).
• One strategy being used by many companies is customer relationship

management which enables them to create to one-to-one marketing
experience for their customers.
• Other e-commerce strategies include virtual showrooms, increased

channel choices, wider component choice, and use of mobile
technology.
• Mobile commerce is …
Slide 5.17
E-commerce Business Models (cont.)1
Business Description Examples Comments

Model
Brokerage Brokers bring buyers There are many types of

and sellers together brokerage models in all
for a fee. types of e-commerce.
Advertising An extension of the There are many different

traditional media types of advertising, but all
broadcasting model depend on a large volume
in which ads appear of viewer traffic.
on Web sites.
Merchant Sell products, both Commonly referred to as e-

physical and tailers, merchants can use
electronic, to pure e-commerce or a
consumers combination (click and
mortar).
1
Adapted from Micheal Rappa, http://digitalenterprise.org/models/models.html.
Slide 5.18
Business Model Description Examples Comments
Manufacturer Make and sell Products can be

Direct products directly to purchased (PCs), leased
customer (servers), or licensed
(software).
Affiliate Affiliate Web sites Can also include banner

are paid a fee ad exchange between
when purchases affiliated sites as well as
come through revenue-sharing.
them.
Community Based on user loyalty Revenue is generated
because of high through sale of ancillary
investment of time products or voluntary
and emotion. contributions
1
Slide 5.19
Business Description Examples Comments

Model
Subscription Users are charged Subscription may be for
fee to subscribe to premium services;
service to service advertising model may
or information be combined with this
source model
Infomediary Provides data on Usually aimed at helping

consumers and businesses rather than
consumption habits consumers
Coopetitive Enable competitors Usually aimed at

to cooperate on a individuals or small
Web site businesses that cannot
attract customers to
their own Web site.
1
Slide 5.20
Web Sites Classified By Purpose
Web Site Type Purpose Example Business Model
Portal A gateway to many Advertising,

other Web sites Affiliate
Search Engine Finds Web sites that Advertising,
contain a word or Affiliate,
phrase Infomediary
Browse or Sell goods and Merchant,
search and buy services Infomediary,
Manufacturer
Direct, Coopetitive
Sales Support To provide Community,
information on a Infomediary
product before or
after the sale
Slide 5.21
Web Sites Classified By Purpose (Cont.)
Web Site Type Purpose Example Business Model
Information To provide news, Subscription,

Service information, Community,
commentary, and so on. Affiliate
Auction Facilitate sales between Brokerage
third parties
Travel Sell travel tickets and Merchant,
tours Brokerage,
Coopetitive
Special Interest Provide information, Community,
or Services product sales and Merchant,
support, and contacts Affiliate,
between visitors Infomediary,
Advertising
Slide 5.22
B2B Business Models

• Strategic sourcing is often carried out through a one-to-one
business model, but company-centric and exchange models are
also used.
• In the one-to-one business model …
• In the company-centric business model …
• The single company dominates the market and controls the

information systems that supports the transactions. Electronic
data interchange (EDI) or an extranet is often used to link trading
partners.
• E-procurement is often the name for B2B e-commerce in the

many-to-one business model.
Slide 5.23
Company Centric Business Model
Slide 5.24
Exchange Model
• In the exchange business model, many companies

use an exchange to buy and sell from each other
through spot-buying transactions.
Slide 5.25
Mobile Commerce
• Mobile commerce (m-commerce) relies on the

use of wireless devices, such as personal digital
assistants, cell phones, and smart phones, to
place orders and conduct business
• Issues confronting m-commerce
– User-friendliness of the wireless device
– Network speed
– Security
Slide 5.26
What happens where there is

no e-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,
e.g. Tesco, Dell
• Poor customer experience from poorly
integrated channels.
Slide 5.27
Electronic Payment Systems
• Digital certificate: an attachment to an e-mail message

or data embedded in a Web page that verifies the
identity of a sender or a Web site
• Certificate authority (CA): a trusted third party that
issues digital certificates
• Secure Sockets Layer (SSL): a communications
protocol used to secure sensitive data
• Electronic cash: an amount of money that is
computerized, stored, and used as cash for e-commerce
transactions
Slide 5.28
Figure 5.3 BA communicates their online value proposition (www.britishairways.com)

Source: Based on Revolution (2005)
Slide 5.29
Figure 5.4 A generic strategy process model
Slide 5.30
Figure 5.5 Dynamic e-business strategy model

Source: Adapted from description in Kalakota and Robinson (2000)
Slide 5.31
Figure 5.6 Elements of strategic situation analysis for the e-business
Slide 5.32
Figure 5.7 Summary applications of a portfolio analysis for The B2B Company
Slide 5.33
Figure 5.8 SWOT analysis for The B2B Company
Slide 5.34
Figure 5.9 Customer demand for e-marketing services for The B2B Company
Slide 5.35
Figure 5.10 Competitive threats acting on the e-business
Slide 5.36
Porter’s five forces
Bargaining
powers of
customers
Power of Threat of
The business
suppliers substitutes
Extent of rivalry
Threat of new
between
entrants
competitors
Slide 5.37
Activity – impact of Internet
• For one of the industries below, assess how

the Internet has changed the competitive
forces, e.g. has it increased or decreased
power of suppliers and customers
• Industries:
– Banking
– Supermarkets
– Oil industry
– Rail industry
Slide 5.38
Figure 5.11 Elements of strategic objective setting for the e-business
Slide 5.39
An evaluation tool relating information to business value. An

Figure 5.12
organization’s use of information on each axis can be assessed from 1 (low use
of information) to 10 (high use of information)
Source: Marchand et al. eds (1999)
Slide 5.40
Figure 5.13 Capital One web site (www.capitalone.co.uk)
Slide 5.41
Figure 5.14 Direct and indirect Internet contributions for fast-growth companies in
the USA
Source: PricewaterhouseCoopers (2000)
Slide 5.42
Grid of product suitability against market adoption for transactional

Figure 5.15
e-commerce (online purchases)
Slide 5.43
Table 5.5 Vision of online revenue contribution for The B2B Company
Slide 5.44
Figure 5.16 Elements of strategy definition for the e-business
Slide 5.45
Strategic options for a company in relation to the importance of the

Figure 5.17
Internet as a channel
Slide 5.46
Right Channelling
• Right channelling can be summarized as:
– Reaching the right customer
– Using the right channel
– With the right message or offering
– At the right time
• Examples:
– B2B serve SMEs through e-channels and larger clients
through personal service
– Encourage consumers to buy and serve through lower
cost electronic channels
– Encourage offline fulfillment/conversion as appropriate
– Different levels of service/promotion for different
customers.
Slide 5.47
Figure 5.18 Liveperson – an example of a service to assist with ‘right-channelling’

Source: www.liveperson.com
Slide 5.48
Figure 5.19 Using the Internet to support different growth strategies
Slide 5.49
Figure 5.20 smile (www.smile.co.uk)

Source: Reprinted by permission of The Co-operative Bank
Slide 5.50
Figure 5.21 Dabs.com (www.dabs.com)
Slide 5.51
Figure 5.22 Elements of strategy implementation for the e-business

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Slide 5.

• Follow an appropriate strategy process model

• How does e-business strategy differ from

Michael Porter on the Internet

‘The key question is not whether to deploy

Porter, M. (2001) Strategy and the Internet,

Alternative definitions of strategy

– “Sets allocation of resources to meet goals”

– “Selects preferred strategic options to

– “Provides a long-term plan for the development

Figure 5.1 Different forms of organizational strategy

Key Technology Trends

INFORM INTERACT TRANSACT INTEGRATE

What is not working?

• Items which require “touch and trial”

Sell-side E-commerce strategy (Chapters 8 & 9)

Buy-side E-commerce strategy (Chapters 6 & 7)

• For me, an IS strategy or change

Figure 5.2 Relationship between e-business strategy and other strategies

Business and E-commerce Strategy

•E-commerce has changed business strategy.

• To build an e-commerce strategy requires two view of an organization’s

• One strategy being used by many companies is customer relationship

• Other e-commerce strategies include virtual showrooms, increased

E-commerce Business Models (cont.)1

Business Description Examples Comments

Brokerage Brokers bring buyers There are many types of

Advertising An extension of the There are many different

Merchant Sell products, both Commonly referred to as e-

E-commerce Business Models (cont.)1

Business Model Description Examples Comments

Manufacturer Make and sell Products can be

Affiliate Affiliate Web sites Can also include banner

E-commerce Business Models (cont.)1

Business Description Examples Comments

Infomediary Provides data on Usually aimed at helping

Coopetitive Enable competitors Usually aimed at

Web Sites Classified By Purpose

Web Site Type Purpose Example Business Model

Portal A gateway to many Advertising,

Web Sites Classified By Purpose (Cont.)

Web Site Type Purpose Example Business Model

Information To provide news, Subscription,

B2B Business Models

• In the company-centric business model …

• The single company dominates the market and controls the

• E-procurement is often the name for B2B e-commerce in the

Company Centric Business Model

• In the exchange business model, many companies

• Mobile commerce (m-commerce) relies on the

• Issues confronting m-commerce

– User-friendliness of the wireless device

What happens where there is

• Missed opportunities for additional sales on

Electronic Payment Systems

• Digital certificate: an attachment to an e-mail message

Figure 5.3 BA communicates their online value proposition (www.britishairways.com)

Figure 5.4 A generic strategy process model

Figure 5.5 Dynamic e-business strategy model

Figure 5.6 Elements of strategic situation analysis for the e-business

Figure 5.8 SWOT analysis for The B2B Company

Figure 5.10 Competitive threats acting on the e-business

Porter’s five forces

Activity – impact of Internet