eb strategies internet
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E-Business Strategies
Bob SmithAssociate Professor/Extension Specialist
Dept. of Wood Science and Forest Products
Virginia Tech
E-Commerce: Impacting the Way We do Business
October 1-2, 2001, Nashville TN
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Why the Internet?
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Printed Material
Mass reproductionUnknownaudienceWider
geographical areaOne-waycommunication
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Telephone
Immediatecommunication
Interactive two-waycommunicationCustomerprospectingWidergeographical area
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Planes, Trains &
AutomobilesPersonalcommunication
Widergeographical base
Two-waycommunicationPerception of above- averageservice
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Television
Wide, massaudience
One-waycommunication60 second soundbiteFirst visualelectronicmedium
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Over-night DeliveryProvide immediate service
Create perception of customer care JIT management systems
Federal ExpressFederal Express
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FAX - iT
Immediate transferof written
informationAbove averageserviceOne-way promotionCloser to thecustomer
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Cellular Phone
MobilityInstant access tocustomersAbove averageservice
24 hour contact
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Personal Computer
Faster serviceCustomer
informationData basesInstant
communication
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What do they have in Common?
Wider distribution of informationUniform informationAssist in marketingfunction of companyMany were interactive
Allow for impression of above average service They all have becomestandards in theindustry
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InternetInternet
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Definitions
Electronic Commerce (EC) is where businesstransactions take place viatelecommunications networks, especially the
Internet. Electronic commerce describes the buying and
selling of products, services, and information viacomputer networks including the Internet.
The infrastructure for EC is a networkedcomputing environment in business, home, andgovernment.
E-Business describes the broadest definition of EC. Itincludes customer service and intrabusiness tasks.
It is frequently used interchangeably with EC. Electronic Commerce, 2000
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What is an Intranet? When internet
technology is usedto create a private
network within acompany anintranet is formed.
Allows forimmediate transferof technology
between locations. Provides
information suchas product pricing,inventory lists,productionschedules, anddata bases forremote employees.
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Whats Needed
Designated computerSoftware to communicate withInternetA connection into a network thataccesses the InternetOrOr
* Hire a commercial service and* Hire a commercial service andhave a connection to the networkhave a connection to the network
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Cost$1500 computer
$300 SoftwareHome page design - $100/hr - ?Commercial Internet access -
>$100/month
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Whats Being SoldComputer softwareComputer hardwareBooks
MusicGifts
TravelClothes
>$100 billion sold in1999
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Whats Being Sold?
Source: Forester Research Inc. 1998Source: Forester Research Inc. 1998
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Technology Update(It took this many years to reach 50
million users)
Radio - 38 years Television - 13 years Internet - 4 years
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Why an E-Commerce
Strategy
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The Benefits of Electronic Commerce
Expands the marketplace to nationaland international markets
Decreases the cost of creating,processing, distributing, storing andretrieving paper-based information
Allows reduced inventories andoverhead by facilitating pull typesupply chain management
The pull type processing allows forcustomization of products and serviceswhich provides competitive advantage
Benefits to Organizations
Electronic Commerce, 2000
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Benefits to Organizations Reduces the time between the outlay
of capital and the receipt of productsand services Supports business processes
reengineering (BPR) efforts Lowers telecommunications cost - the
Internet is much cheaper than value-added networks (VANs)
Electronic Commerce, 2000
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Benefits to Customers Enables customers to shop or do other
transactions 24 hours a day, all yearround from almost any location
Provides customers with more choices Provides customers with less expensiveproducts and services by allowing themto shop in many places and conduct
quick comparisons Allows quick delivery of products andservices in some cases, especially withdigitized products
Electronic Commerce, 2000
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Benefits to Customers Customers can receive relevant and
detailed information in seconds, ratherthan in days or weeks
Makes it possible to participate in virtualauctions
Allows customers to interact with othercustomers in electronic communitiesand exchange ideas as well as compareexperiences
Electronic commerce facilitates
competition, which results in substantialElectronic Commerce, 2000
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Benefits to Society Enables more individuals to work at home, and
to do less traveling for shopping, resulting inless traffic on the roads, and lower air pollution
Allows some merchandise to be sold at lowerprices benefiting the poor ones
Enables people in Third World countries andrural areas to enjoy products and services whichotherwise are not available to them
Facilitates delivery of public services at areduced cost, increases effectiveness, and/orimproves quality
Electronic Commerce, 2000
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Why?
Works 24 hours a day Offers 2 way communication Unlimited access Interactive advertising Supports current business efforts
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A market is a network of interactionsand relationships where information,products, services, and payments areexchanged. The market handles all thenecessary transactions.
An electronic market is a place where
shoppers and sellers meetelectronically.
In electronic markets, sellers andbuyers negotiate, submit bids, agree onan order, and finish the execution on- or
Electronic Markets
Electronic Commerce, 2000
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Major Business PressuresMarket and
economic pressures
Strong competition
Global economyRegional trade agreements (e.g. NAFTA)Extremely low labor cost in some countriesFrequent and significant changes in marketsIncreased power of consumers
Societal andenvironmental pressures
Changing nature of workforceGovernment deregulation of banking and other servicesShrinking government budgets subsidesIncreased importance of ethical and legal issuesIncreased social responsibility of organizations
Rapid political changes
Technological pressures Rapid technological obsolescenceIncrease innovations and new technologiesInformation overloadRapid decline in technology cost vs. performance ratio
Electronic Commerce, 2000
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Competition in Electronic
Commerce Impacts on competition
Lower buyers search cost Speedy comparisons Differentiation Lower price Customer service Digital products lack normal
wear and tear
Electronic Commerce, 2000
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Competition in ElectronicCommerce
Perfect competition Enable many buyers and sellers to enter the
market at little or no cost (no barriers to entry)
Not allowing any buyers and sellers toindividually influence the market Make certain products homogeneous (no
product differentiation)
Supply buyers and sellers with perfectinformation about the products and the marketparticipants and conditions
Electronic Commerce, 2000
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Competition in ElectronicCommerce
Observations regardingcompetitiveness
There will be many new entrants The bargaining power of buyers is likely to
increase
There will be more substitute products andservices The bargaining power of suppliers may
decrease The number of industry competitors in oneElectronic Commerce, 2000
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What is Strategy
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Strategy is the roadmap tosuccess. Strategy answers the question
what business are you in? Strategy determines how you
compete within the market you arein.
Strategy focuses the company in aunified direction.
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The goal is to develop asustainable competitiveadvantage. There are generallytwo forms of competition,Operating effectiveness
(production) or Competitive position (marketing)
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Competitive Advantage CanBe Achieved By: Concentrating on particular market
segments (niche markets) Offering products which differ from
the competition (productdifferentiation)
Using alternative distribution
channels and manufacturingprocesses Employing selective pricing and
fundamentally different coststructures
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Generic Strategies
Porter gives us a little more help in strategyformulation by providing three generic
strategies which, if successfully implemented,can allow a firm to stake out a defended position in the marketplace. These strategiesare:
Overall cost leadership Differentiation Focus
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Overall Cost Leadership
Efficient scale facilities
Vigorous cost reductions
Cost control Overhead control Avoid marginal
accounts Minimize R&D Minimize service Minimize
advertisin
Differentiation
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Differentiation
Key idea: Create something about yourproduct that is perceived industry wide asbeing unique
Bases for Differentiation: Quality Delivery Credit and Terms Service Training
Reputation /Brand Image
Tech. Information The Actual
Product Price
Etc.
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Differentiation can provideinsulation against competitors
because of brand loyalty bycustomers and a resulting lower
sensitivity to price
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Focus
Key Idea: Focus on aparticular buyer group,segment of the product line,or geographic market
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This strategy is built around serving a particular target market very well. The premise is that a firm is able to serve itsnarrow strategic target more effectively or efficiently than competitors who are
competing more broadly
By effectively implementing this strategy a
firm can achieve differentiation by better meeting the market needs or lower coststhrough specialization, or both
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Focus your message
Pick your theme to say something special/uniqueabout your firm, and stick to it.
Unique product Speedy Delivery Super Service ? ? Stay Committed!
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Generic Strategies
Summary
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For Successful StrategicCompetition, Select Arenas That Are:
Sheltered fromchanges in thebusinessenvironment
Advantaged to
provide protectionfrom intenseglobalcompetition
Electronic Commerce, 2000
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Determining Competitive
Advantage
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Strategic PlanningIndustry andcompetitive
analysis
Strategyformulation
Strategyreassessment
Implement-ationplan
Electronic Commerce, 2000
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Company and Competitive Analysis Monitoring, evaluating, disseminating
of information from the external andinternal environments
SWOT Analysis
Strengths Weaknesses
OpportunitiesThreats
Electronic Commerce, 2000
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SWOT Strengths those factors of the company that
provide for its success. A good reputation,quality products or low cost producer.
Weaknesses those factors that are a
disadvantage for the company. A high costproducer, a high employee turnover, or muchcompetition.
Opportunities those factors that are outsidethe companys control, but are areas in whichthey could capitalize. A changing demographicprofile, competition closing plants or e-businessallowing for wider distribution of products.
Threats those items outside the control of the
company and that may hinder it. Items such asnew laws, a recession or increased com etition.
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Strengths (S) Weaknesses (W)INTERNALFACTORS
Company Analysis
Production
Marketing
Electronic Commerce, 2000
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Opportunities (O)
Threats (T)
EXTERNALFACTORS
Competitive Analysis
Production Marketing
Electronic Commerce, 2000
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Strengths (S) Weaknesses (W)
Opportunities (O)
Threats (T)
INTERNALFACTORSEXTERNAL
FACTORSSO Strategies
Generate strategieshere that use
strengths to takeadvantages of opportunities
WO Strategies
Generate strategieshere that takeadvantage of
opportunities byovercomingweaknesses
ST StrategiesGenerate strategies
here that usestrengths to avoid
threats
WT StrategiesGenerate strategieshere that minimize
weaknesses and avoidthreats
Company and Competitive Analysis
Electronic Commerce, 2000
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Strategic Questions The Company
What is your uniqueness? Where are you vulnerable? Why are you losing existing customers? Where is the greatest value created in
the company? What are the most common objections
you hear from customers?
Electronic Commerce, 2000
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Strategic Questions The competition
Who are the top 3competitors?
What are theirstrengths?
Where are theyvulnerable?
Where can you
attack? How do you
compare on price,service, quality, etc?
The market What are 3
important trends? How is the industry
changing? How many market
segments do youserve?
Where is thegreatest growthpotential?
Which of yourcustomers are doingwell and why?Electronic Commerce, 2000
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Competitive Strategies
Defensive strategies takes place inthe firms own current market positionas a defense against possible attack by
a rival Lower the probability of attack Divert attacks to less threatening
avenues Lessen the intensity of an attack Make competitive advantage more
sustainable Electronic Commerce, 2000
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Strategic Summary Focus your efforts! Define your competitive advantage! Have a clear strategy! Do it!
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Questions
Objectives
Benefits tocustomersCurrent business
SavingsCompetitiveadvantagePresentation
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Questions What are you producing and selling? How are you unique? Why should the customer buy from
you? How are you going to reach the
customer? Whats success?
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Current Customers
BenefitsEasier access toinformationShippingschedulesDiscounts
InvoicingInventories
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Marketing Mix
Promotional ToolAds, publicity,sales tool
PricingProductInformation
Distribution
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Home Page
KISS Keep it simple, stupid
1. Decide what information you want to share1. Decide what information you want to share
2. Grab their attention quickly2. Grab their attention quickly3. Present information in simple, logical fashion3. Present information in simple, logical fashion
4. Do not put lots of graphics on first page4. Do not put lots of graphics on first page
5. Should be pleasant to the eye5. Should be pleasant to the eye6. Each page should have company name, logo, e-6. Each page should have company name, logo, e-
mail address and toll-free phone number mail address and toll-free phone number
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Promoting Your E-business
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Why Do You Need
Promotion? Just because you build it, doesntmean they will come.
You are competing against not onlyyour market area, but the entireworld.
Your current and future customersneed to be able to find you.
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HOW? List homepage
address on allcurrentadvertising.
Put on all publicity newsletters letterhead business cards billing statements fax cover sheets
Register withsearch engines.
Link to other sites
and yourassociation sites. Advertise on the
web.
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Link to?
Your trade associations Suppliers Customers Complementary
products
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Advertising on the Web To build
awareness
Developprospects Meet customer
needs Generate orders Build customer
relations
Test market
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Good Internet AdvertisingIncludes:
Clear message and identificationon 1st page.
Facilitates easy access to furtherinformation. The advertisement downloads
quickly. Provides the right information.
Product description, payment options,and contact information.
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Common Search Engines Submit it - www.submit-it.com Yahoo - www.yahoo.com Webcrawler - www.webcrawler.com Infoseek - www.infoseek.go.com Lycos - www.lycos.com
Google - http://www.google.com/
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The Advantage for Small
BusinessesInexpensive source of informationInexpensive way of advertising
Inexpensive way of conducting marketresearchInexpensive way to build (or rent) a
storefrontLower transaction cost
Electronic Commerce, 2000
The Advantage for Small
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The Advantage for SmallBusinesses
Niche market, specialty products(cigars, wines, sauces) are the bestImage and public recognition can beaccumulated fastInexpensive way of providingcatalogsInexpensive way to reach worldwidecustomers
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The Risks and Disadvantages
for Small Businesses
$ Lack of expertise in legal issues,advertisement$ Lack of resources to fully exploit the
Web$ Less risk tolerance than a largecompany
Electronic Commerce, 2000
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Success Factors for SmallBusinesses
Niche products Small volume Capital investment must be small Inventory should be minimal or non-
existent Electronic payments schema exist Payment methods must be flexible
Electronic Commerce, 2000
Success Factors for Small
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Success Factors for SmallBusinesses
Logistical services must be quick andreliable
The Web site should be submitted todirectory-based search engineservices like Yahoo in a correct way
Join an online service or mall and dobanner exchange Design a Web site that is functional
and provides all needed services to Electronic Commerce, 2000
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Summary Successful firms will integrate the E-
business into their companysstrategy.
Used properly, E-business will be onemore method of increasing incomeand profits.
It is just a matter of time before itwill be as common as the fax, cell-phone and digital camera.
f
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References Electronic Commerce: A Managerial
Perspective. 2000. By Efraim Turban, JaeLee, David King, and H. Michael Chung.Prentice Hall, Upper Saddle Rivern New
Jersey. (slides are marketed). E-Business Revolution. 2000. By Daniel
Amor. Prentice Hall,Upper Saddle RivernNew Jersey.
Strategic Internet Marketing. 1996. TomVassos. MacMillan Computer Publishing,Indianapolis, IN.