E-business

MANAGEMENT AND STRATEGY

 Contents
• Introductions
• E-business technology
• E-business markets and models
• E-business economics
• E-marketing
• Management of e-business

2
 Contents (cont.)
• E-business strategy :
Formulation
• E-business strategy :
Implementation
• E-business strategy : Evaluation
• The internet : law, privacy and
security
• E-business in the future
3
 Introduction
• Defining e-business
• The development of the new
economy
• Types of e-business and related
industries
• The growth of e-business
• Use of the internet
• Key people
4
 Defining e-business
• E-business can be defined as the use
of the internet to network and
empower business processes,
electronic commerce, organizational
communication and collaboration
within a compay and with its
customers, suppliers, and other
stakeholders
• E-business utilise the internet,
intranets, extranets and other
networks to support their commercial
processes
5
• E-commerce is the buying and
selling, marketing and servicing
of products and services via
computer networks
• E-business and e-commerce are
often used synonymously
• Chaffey (2004)  e-commerce
can best be conceived as a
subser of e-business

6
 The relationship between e-
business and e-commerce

• Buying and selling • Sell-side e-commerce

electronically
• Buy side e-commerce
• Electronic distribution
• Online customer
service
• Electronic marketing
• Secure transactions
• Automation of
processes
• Electronic
collaboration
7
The development of the new economy

• Don Tapscott (1997) : “Digital Economy:

Promise And Peril In The Age Of
Networked Intellegency“, memaparkan
bagaimana perekonomian bergeser
menuju pada perekonomian baru yang
disebut sebagai digital economy
• Perekonomian baru (digital economy)
adalah perekonomian yang didasarkan
pada ilmu pengetahuan, sehingga
disebut juga dengan knowledge
economy
8
• This terms are used to define the
distinct contributions to the economy
through use of the internet, digital
technology, or information and
communications technology (ITC).
• Called “new economy”  based on
entrepreneurship in knowledge
creation and sharing, innovation and
creativity, and utilising information
technology for developing and selling
new products and services.
9
• The new economy has been boosted
by the development of the
infrastructure that supports the
internet, ICT and digital technology
• The internet has opened up the
possibility of exchanging information,
products and services around the
globe without any restrains of time or
distance.
• This has given rise to the concept of
the ‘boundaryless’ organization
10
 Digital Convergence

Content

Interactive Multimedia
Experience
Computing Communications
• Hal penting dalam perubahan
teknologi terhadap tata kehidupan
manusia adalah dapat disatukannya
tiga kegiatan pokok yaitu computing,
communication dan content dalam 11
satu sistem yaitu multimedia.
An Internet Framework (Hanson, 2000)

Digital
Networked
Individuals

Marketing

The Web is fundamentally

Internet about individuals using a
Marketing
network to access digital
Technology Economics products

12
Key differences Isues Old economy New economy
between the old and
new economy Economy factors
Market Stable Dynamic and complex
Competition National International and global
Structure Manufacturing Service
Value driver Physical capital Human capital
Business Factor
Organisation Hierarchy Network or virtual
Production Mass Flexible, customised
Growth driver Capital and labour Innovation and
knowledge
Technology driver Machines Digital and electronic
Competitive advantage Low cost/high Innovation, speed,
production quality
Relationships Independent Collaborative
Consumer factors
Tastes Stable Dynamic, segmented
Skills Specialised Multiple and flexible
Educational needs Trade orientated Lifelong learning 13
 “How Business Practices are Changing”
Table 2-1: Old Economy vs. New Economy
(Kotler, 2004)

Old Economy New Economy

Organize by product units
Focus on profitable transactions
Look primarily at financial scorecard
Focus on shareholders
Marketing does the marketing
Build brands through advertising
Focus on customer acquisition
No customer satisfaction
measurement
Overpromise, underdeliver
Organize by customer segments
Focus on customer lifetime value
Look also at marketing scorecard
Focus on stakeholders
Everyone does the marketing
Build brands through behavior
Focus on customer retention and
growth
Measure customer satisfaction and
retention rate
Underpromise, overdeliver

14
Procter & Gamble’s Reflect.com site allows customers
to design their own beauty products

15
 Types of e-business and related
industries
• Radically transformed by
development of the internet and
related technologies.
– B2B
– B2C
– C2C

16
 The growth of e-business
Firm Consumers
Ease of access Ease of access
Ease of use Ease of use
Access to wider market Access to market
information
Potential economies of Convenience
scale
Marketing economies Lower prices
Improved logistics Personalisation
Automated processes Customisation
Network externalities Network externalities
Improved costomer One-to-one customer
17
knowledge service
 Use of the Internet
% %
Check e-mail 92 Play games 48
Product information 87 Bank online 45
Surfing/browsing 83 Look for jobs 42
Look up facts 78 School material 40
Plan travel 77 Download videos 33
Buy online 74 Listen to radio 33
Local information 66 Chat 26
News 61 Genealogy 21
Instant messaging 56 Distance learning 21
Download music 51 Read blogs 17

18
 Key People
• Tim Berners Lee
• Marc andreeson
• Bill gates
• Michael Dell
• Jerry Yang
• Pierre Omidyar
• Jeff Bezos

19
Key Business Decisions
• Product
– What type of product should be
produced?
• Production
– How should the product be produced?
• Promotion
– How should the product be promoted?
• Financing
– How should the company obtain funds
to finance the cost of producing the
product? 20
Business Decisions

21
 Key Stakeholders
• Owners
– Entrepreneurs
– Co-owners
– Stockholders
• Creditors
• Employees
– Managers
• Suppliers
• Customers
22
Interaction among Owners, Employees,
Customers, Suppliers, and Creditors

23
Exhibit 1.1
 Creating a Business
Idea
• Identify a competitive advantage.
• Differentiate the product or
service from competitors.
• Determine necessary resources.
• Assess feasibility of the idea.

24
business online

e-business
25
 Success Stories
• Domino’s Pizza
– Managhans bought bankrupt pizza parlor
– Started with little funding
– Now generates sales of $1 billion per year
• Jeremy’s Micro Batch Ice Cream
– Applied microbrewery concept to ice cream
– Makes ice cream in small batches, sold in
limited editions
• Glow Dog, Inc.
– Sells light-reflective clothing for pets
– After two years, average annual sales of $1
million 26
 Lessons to Remember
• Successful businesses do not
require a great invention.
– Many focus on making life more
convenient for customers.
• Some business ideas will fail—
but entrepreneurs can learn from
failures and make revisions.

27
 Impact of Technology
• Technology defined
– Knowledge or tools used to produce
products and services
• Information technology
– Represents over 1/3 of the growth in
U.S. output
– Reduces cost of producing products
– Workers in technology industries
earn more than workers in other
industries. 28
 Impact of Technology
• E-business or e-commerce
– Use electronic communications to
produce or sell products and
services
• Sales to individual customers
• B2B e-business: transactions between
a business and its suppliers
• Generates $301 billion in revenue and
creates 1.2 million jobs each year

29
 Successful E-
Businesses
• Started out small
• Created to sell a product or service that
was not offered by competitors
• Transformed how traditional firms
conducted business
– Improved communication with customers
– Improved information flow
– Improved efficiency
– Complemented traditional business
operations
30
 E-Business Examples
• Amazon
– Online seller of books, music and other
products
– Low overhead costs allow price discounting
• Yahoo!
– Internet search engine and the most visited
site on the Web
– Offers variety of services - free email, web
page hosting, custom-designed start-up
pages
– Generates revenue by selling advertising
• eBay
31
– Online auction service
 Key Functions of
Business
• Management
– Means by which employees and other
resources are used by the firm
• Marketing
– Means by which products and services
are developed, priced, distributed, and
promoted to customers
• Finance
– Means by which firms obtain and use
funds for their business operations
32
 Key Functions of
Business
• Accounting
– Summary and analysis of the firm’s
financial condition
– Used to make various business
decisions
• Information systems
– Information technology, people,
and procedures that provide
appropriate information to make
effective decisions
33
How Business Decisions
Affect a Firm’s Earnings

34
Exhibit 1.4
 Common Business
Decisions
• Management Decisions
– What equipment is needed?
– How many employees should be
hired?
– How can employees be motivated
to perform well?

35
 Common Business
Decisions
• Marketing Decisions
– What price should be charged?
– Should the product be changed to
be more appealing to customers?
– Should the firm use advertising or
some other strategy to promote its
product?

36
 Common Business
Decisions
• Finance Decisions
– Should financial support come from
the sale of stock or from borrowing
money or some combination?
– Should the firm attempt to obtain
borrowed funds for a short-term or
long-term period?
– Should the firm invest funds in a
new business project?
37
Which is more important for
developing an e-presence: the agility
of a pure click company, or the well
defined and readily identifiable
resources of a traditional
brick and mortar
company?

38
 A Business Plan
• Detailed description of the
proposed business
– Description of the product or
service
– Types of customers the business
would attract
– Competition
– Facilities needed for production

39
 Developing a Business
Plan
• Assess the Business
Environment
– Economic environment
– Industry environment
– Global environment
• Develop Management Plan
– Organizational Structure
– Production
– Human Resources
40
 Developing a Business
Plan
• Marketing Plan
– Target Market
– Product
Characteristics
– Pricing
– Distribution
– Promotion
• Financial Plan
– Financing
– Feasibility
41
 Online Resources
• Advice and basic information
– Yahoo’s Small Business site
– American Express
– Small Business Administration
• Financing Options
– Quicken Small Business
– Garage.com
– The Elevator
• Business Planning Software
42
 Assessing a Business
Plan
• Potential revenue
• Potential demand for product or
service
• Potential expenses
• Profit potential

43
Expected Monthly Expenses
of CHC

44
Exhibit 1.6
Expected Performance of CHC
in the First Year

45
Exhibit 1.7