PP 05

Slide 5.
Chapter 5
E-business strategy
Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 5.2
Learning outcomes
• Follow an appropriate strategy process model

for e-business
• Produce and select e-business strategies
• Outline alternative strategic approaches to
achieve e-business goals.
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
Definitions of Strategy
• What is strategy?
• A plan of action designed to achieve a
particular goal. -wikipedia
– ‘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 organization’
Slide 5.6
Figure 5.1 Different forms of organizational strategy
Slide 5.7
Sell-side e-commerce strategy (Chapters 8 & 9)

• 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, Profitability
• Communicate benefits of using this channel
• Prioritize products available through channel
• Prioritize audiences targeted through channel
• Select partners for this channel
• Channel strategy thrives on differentials
• BUT, need to manage channel integration
Slide 5.8
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 5.9
Figure 5.2 Relationship between e-business strategy and other strategies
Slide 5.10
What happens where there is

no e-business strategy?
• Missed opportunities for additional sales on
the sell-side and for more efficient purchasing
on the buy-side
• Fall-behind competitors in delivering online
services – may become difficult to catch-up,
for example, Tesco, Dell
• Poor customer experience from poorly
integrated channels
Slide 5.11
Figure 5.3 BA communicates its online value proposition (www.britishairways.com)

Source: Based on Revolution (2005)
Slide 5.12
Figure 5.4 A generic strategy process model
Slide 5.13
Figure 5.5 Dynamic e-business strategy model

Source: Adapted from Kalakota/Robinson, EBUSINESS 2.0 © 2001, 1999 Pearson Education, Inc. Reproduced by permission of Pearson Education, Inc.
Slide 5.14
Strategic Analysis
• Collection and review of information about the
external environment and internal resources
– Immediate competition
– Wider environment
– Internal resources
Slide 5.15
Figure 5.6 Elements of strategic situation analysis for the e-business
Slide 5.16
Stage Models of e-Business

Development
• Earlier in chapter 1 a stage model was
presented, which could be helpful in assessing
the business’s position and resources
Slide 5.17
Figure 1.13 A simple stage model for buy-side and sell-side e-commerce
Slide 5.18
Portfolio Analysis
• Portfolio analysis is helpful for assessing
current e-business capability and future e-
business strategies
• The next slide show an example for B2B case
Slide 5.19
Summary applications of a portfolio analysis for an example B2B

Figure 5.7
company
Slide 5.20
SWOT Analysis
• Strengths, weaknesses, opportunities, and
Threats analysis is a useful tool for analyzing
the current situation and for formulating
strategies
• Next slide shows an example of e-business
SWOT analysis
Slide 5.21
Figure 5.8 SWOT analysis
Slide 5.22
Balance Internal and External

• A e-Business strategy must be based on the
balance between internal capability and
external forces
• Next slide presents different options based on
such a balance
Slide 5.23
Figure 5.9 Matrix for evaluation of external capability against internal capability
Source: Perrott (2005)
Slide 5.24
Competitive Environment Analysis

Porter’s five forces
B a r g a in in g
p o w e rs o f
c u s to m e rs
Pow er of T h re a t o f
T h e b u s in e s s
s u p p lie r s s u b s it u te s
E x t e n t o f r iv a lr y
T h re a t o f n e w
b e tw e e n
e n tra n ts
c o m p e tito r s
Source: adapted with the permission of The Free Press, a Division of Simon & Schuster, Inc., from COMPETITIVE STRATEGY: Techniques for Analyzing Industries and Competitors
by Michael E. Porter. Copyright © 1980, 1998 by The Free Press. All rights reserved
Slide 5.25
Activity – Impact of Internet

• For one of the industries below, assess how
the Internet has changed the competitive
forces, for example, has it increased or
decreased power of suppliers and customers?
• Industries:
– Banking
– Supermarkets
– Retail
– Travel
– Oil industry
– Rail industry
Slide 5.26
Figure 5.11 Elements of strategic objective setting for the e-business
Slide 5.27
How can e-business create value

• Following methods were proposed
– Adding values—better quality products and
services
– Reducing cost—making the business process
more efficient
– Managing risks—improve information flow and
availability
– Creating new reality—create new way that
products and or services
Slide 5.28
An evaluation tool relating information to business value. An organization’s

Figure 5.12
use of information on each axis can be assessed from 1 to 10
Source: Marchand et al. (2002)
Slide 5.29
E-Business and Competitive

Advantage
• Read Case Study 5.1 on pages 286-287
• Discuss questions on p.287
Slide 5.30
SMART Objectives
• The 2nd phase of strategy development
process will produce objectives.
• The objectives should be SMART
– Specific
– Measurable—both efficient and effective
– Actionable
– Relevant
– Time-Related
• Example—ref. p. 289, table 5.6
Slide 5.31
Figure 5.13 Arena Flowers (www.arenaflowers.com)
Slide 5.32
SMART Objectives
• Online Revenue Contribution--% of company
revenue directly generated through online
transactions
• B2B should consider indirect revenue
• Conversion Modeling for B2C
– Using various conversion rates to measure the
effectiveness of e-marketing
– Ref. p. 291 Box 5.5
Slide 5.33
Figure 5.14 An example of conversion modelling for an online retailer
Slide 5.34
Case Study
• Read page 292-293 Case study 5.2
• Answer the questions on page 293
• Activity 5.2, pages 293
Slide 5.35
Grid of product suitability against market adoption for transactional

Figure 5.15
e-commerce (online purchases)
Slide 5.36
Scorecard for Objective Setting

• Scorecard is a comprehensive framework for
setting and monitoring business performance.
• Metrics includes
– Customer issues
– Internal efficiency
– Financial, and
– Innovation
• Example—p. 295, table 5.8
Slide 5.37
Figure 5.16 Elements of strategy definition for the e-business
Slide 5.38
Strategy Definition
• Various models were suggested for defining
e-business strategies
• Ref. pp.296-297
• The next slide shows a strategy selection
model based on portfolio analysis proposed
by EConsultancy
Slide 5.39
Figure 5.17 Matrix for evaluating e-business strategy alternatives

Source: Econsultancy (2008a)
Slide 5.40
D. 1 Channel Priority
• “Getting the right mix of bricks and clicks”
• The next slide shows various options
Slide 5.41
Strategic options for a company in relation to the importance of the

Figure 5.18
Internet as a channel
Slide 5.42
D. 1 Channel Priority
• Right-Channeling
– Integrate different channels to reach the right
person at the right time using the right channel
with a relevant offer, product or message
• Right-channeling example
– Ref. pp. 299-300, table 5.9
Slide 5.43
D.2 Market and Product Development

• A key strategic considering is which market to
target and using what products
• The next slide shows a matrix with different

options to grow market and product
development
Slide 5.44
Figure 5.19 Using the Internet to support different growth strategies
Slide 5.45
D.3 Positioning and Differentiation

• Once the market is identified, we need to
define the best position of our e-commerce
services relative to competitors.
• Research suggests that customer brand
perception is determined by this formula
Value = (product quality * service quality)/
(price * fulfillment time)
• Strategies can be developed around this
formula
Slide 5.46
D.3 Positioning and Differentiation

• Commonly used Criteria that customers use to
benchmark e-tailor performance is presented
in table 5.10 on p. 304
Slide 5.47
Activity
• Read Activity 5.3 on pages 305-306
• Discuss the questions 1 and 2 on page 305
Slide 5.48
D.4 Business, Service and Revenue Model
• Review business model (ch2)

• This decision is closely related or similar to
D3. However, here it emphasizes new
models, e.g., Amazon
• “Only the paranoid will survive” (Andy Grove)
• Also need to notice that many companies are

successful by sticking to a single business
model not far from their original vision
Slide 5.49
D.5 Marketplace Restructuring
• Companies should also look at the new

opportunities created by Internet in this regard
– Disintermediation
– Re-intermediation
– Counter-mediation
• Mini Case Study 5.4 3M on pp. 308-309
• What did 3M do in taking advantages of
market restructuring?
Slide 5.50
D.6 SCM Capabilities
• This might be considered together with

decision 5 but could be examined on its own
– How to interact more closely with suppliers?
– What to be covered in this e-relationship?
– Participate in marketplace to reduce cost?
Slide 5.51
D.7 Internal KM Capabilities
• What is knowledge?
• Patterns, rules, and contexts that provide a
framework for creating, evaluating, and using
information.
• Can be tacit (undocumented) or explicit
(documented) knowledge
• What is knowledge management?
• Set of processes to create, store, transfer, and
apply knowledge
Slide 5.52
D.8 Organizational Resources and Capabilities
• What changes does the organization need to

make?
• Available options
– In-house division (integration)
– Joint venture (mixed)
– Strategic partnership (mixed)
– Spin-off (separation)
Slide 5.53
• Questions & Discussion

– What are the pros and cons for in-house
option?
– When the separation option would be a good
choice?
Slide 5.54
• Other changes to be examined

– Strategy process and performance
improvement
– E-commerce infrastructure
– Senior management support
– Market integration
– Online market focus
• An e-commerce capability maturity model
– Ref. p. 311, Table 5.11
Slide 5.55
Strategy Implementation
Figure 5.20 Elements of strategy implementation for the e-business
Slide 5.56
Failed e-Business Strategies
Some reasons were articulated

– Overestimate the speed that the marketplace
adopts the dot.com innovation
– Timing errors
– Lack of creativity
– Free services
– Over ambition
Slide 5.57
Failed e-Business Strategies
• Usually there are more fundamental problems

than surfaced
• Major problems occurred at the strategy
development and implementation process
– Situation Analysis—insufficient research on
demand and completive forces
– Object setting—no objectives or unrealistic
– Strategy definition—poor business models
– Implementation—problems with customer
services and product quality, etc.
Slide 5.58
Implementation Success Factors for SMEs

• Content—effective presentation
• Convenience—usability
• Control—manageable and under control
• Interaction
• Community
• Price sensitivity
• Brand image
• Commitment
• Partnership
• Process Improvement
• Integration
Slide 5.59
Case Study
• Read the case study on pages 316-318
• Answer the questions on page 318
Slide 5.60
IS Strategy and e-Business Strategy

• These two are closely related.
• Business-alignment approach—top down. Start
with business strategy and make IS strategy so
that it aligns with business strategy
• Business-impact approach—bottom up. Examine
new IS opportunities to see if they can bring
positive impact to business strategy
Slide 5.61
The Productivity Paradox
• Research indicates that there is a week or poor

correlation between IS investment and business
performance
• It’s agreed that IT investment has a strong
positive relationship with sales, assets and equity
but not with net income.
• Investment on IT staff and user training does
show positive relationship on income
• It’s strongly recommended that more attention
should be paid to business process change when
implementing e-business strategy
Slide 5.62
Next Class
• Read the Econsultancy interview on pages 606-

608 of chapter 11
• Answer the following questions
• What is Arena Flowers’ business model?
• How competitive is Arena Flowers on the market
and Why?
• Is this a business of bricks & mortar, bricks &
clicks, or pure play? Are they planning to change
that soon and why?
• Do they do cross-selling? How successful and
why?
• Is their site developed and maintained in-house
or outsourced? Dave Chaffey, E-Business and E-Commerce Management, 4th Edition, © Marketing Insights Limited 2009
Slide 5.63
Next Class
• Econsultancy interview (Continues)

• Is their site developed and maintained in-house
or outsourced?
• What’s the pros and cons of their approach?
• What else can we learn from this interview?

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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,

Figure 5.1 Different forms of organizational strategy

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

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

Figure 5.2 Relationship between e-business strategy and other strategies

What happens where there is

Figure 5.3 BA communicates its 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

Stage Models of e-Business

Summary applications of a portfolio analysis for an example B2B

Figure 5.8 SWOT analysis

Balance Internal and External

Competitive Environment Analysis

Activity – Impact of Internet

Figure 5.11 Elements of strategic objective setting for the e-business

How can e-business create value

An evaluation tool relating information to business value. An organization’s

E-Business and Competitive

Figure 5.13 Arena Flowers (www.arenaflowers.com)

Figure 5.14 An example of conversion modelling for an online retailer

• Activity 5.2, pages 293

Grid of product suitability against market adoption for transactional

Scorecard for Objective Setting

Figure 5.16 Elements of strategy definition for the e-business

Figure 5.17 Matrix for evaluating e-business strategy alternatives

Strategic options for a company in relation to the importance of the

D.2 Market and Product Development

• The next slide shows a matrix with different

Figure 5.19 Using the Internet to support different growth strategies

D.3 Positioning and Differentiation

D.3 Positioning and Differentiation

D.4 Business, Service and Revenue Model

• Review business model (ch2)

• Also need to notice that many companies are

D.5 Marketplace Restructuring

• Companies should also look at the new

D.6 SCM Capabilities

• This might be considered together with

D.7 Internal KM Capabilities

D.8 Organizational Resources and Capabilities

• What changes does the organization need to

D.8 Organizational Resources and Capabilities

• Questions & Discussion

D.8 Organizational Resources and Capabilities

• Other changes to be examined

Figure 5.20 Elements of strategy implementation for the e-business

Failed e-Business Strategies

Some reasons were articulated

Failed e-Business Strategies

• Usually there are more fundamental problems

Implementation Success Factors for SMEs

IS Strategy and e-Business Strategy

The Productivity Paradox

• Research indicates that there is a week or poor

• Read the Econsultancy interview on pages 606-