instructor notes - week 3a - internet strategy

8/4/2019 Instructor Notes - Week 3a - Internet Strategy

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COMM 4313

INTERNET MARKETING COMMUNICATION

INTERNET STRATEGY

LORA LOUISE BROADY

Source: E-Marketing by Judy Strauss, Adel I. El-Ansary, and Raymond Frost

Chapter 2: Strategic E-Marketing


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Strategic Planning

SWOT Analysis

Strategic ObjectivesStrategy

Strategy to Electronic Strategy

Business Models to E-Business Models

E-Business Models

Value and RevenueStrategic E-Business Models

* Note: performance metrics will be discussed in Week 8

Overview


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Strategic Planning

Amazon uses strategic planning to get ready for aprofitable and sustainable business future.

Strategic planning = the managerial process ofdeveloping and maintaining a viable fit between theorganizations objectives, skills, and resources and itschanging market opportunities.

Two key elements of strategic planning are:

- The preparation of a SWOT analysis,

- The establishment of strategic objectives.


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SWOT AnalysisStrengths, Weaknesses, Opportunities, and Threats

It examines:

- The companys internal strengths and weaknesses with respect

to the environment,- The competition and looks at external opportunities and

threats.

Opportunities may help to define a target market or identifynew product opportunities, while threats are areas of exposure.


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Example

Strength A smart and talented team that stayed focused andlearned what it didnt know.

Weakness No experience in:

-Selling books

-Processing credit card transactions

-Boxing books for shipmentOpportunity To sell online.

Threat A full-scale push by one of the large bookstore chains toclaim the online market.

The Amazon story


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Bricks vs Clicks...

A companys strengths and weaknesses in the online world may

be somewhat different from its strengths and weaknesses in the

brick-and-mortar world.

Barnes & Noble has enormous strengths in the brick-and-mortar

world but these do not necessarily translate into strengths in the

online world:

Channel conflict = having to explain to channel partners why

customers can purchase for less online than in the store.


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Key Internal Capabilities for E-Business

Internal Capability Examples

Customer interactions E-commerce, customer service,distribution channels

Production and fulfillment SCM, production scheduling, inventorymanagement

People Culture, skills, knowledge management,leadership and commitment to e-business

Technology ERP systems, legacy applications,

networks, Web site, security, IT skills

Core infrastructure Financial systems, R&D, HR

Source: Adapted from Kalakota and Robinson (1999)


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Strategic Objectives

The firm sets objectives such as:

Growth. How much can the firm reasonably expect to grow in

terms of revenues, and how fast? Competitive position. How should the firm position itself

against other firms in the industry? Viable positions are:

- Industry leader (Microsoft),

- Price leader (Priceline.com),- Quality leader (Mercedes),

- Niche firm (Google.com),

- Best customer service (Dell.com).


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Strategic Objectives

Geographic scope.Where should the firm serve itscustomers on the continuum of local to multinational?

Other objectives. Companies often set objectives for the

number of industries they will enter, the range ofproducts they will offer, the core competencies they will

foster, and so on.


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Strategy

It is the means to achieve a goal.

It is concerned with how the firm will achieve its objectives,not what its goals are:

1. The firm sets its growth and other objectives,

2. It decides which strategies it will use to accomplish them,

3. The tactics are detailed plans to implement the strategies.

It is important to note that objectives, strategies, and tactics

can exist at many different levels in a firm.


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From Strategy to Electronic Strategy

E-business strategy:

The deployment of enterprise resources to capitalize on

technologies for reaching specified objectives that ultimatelyimprove performance and create sustainable competitiveadvantage.

Corporate-level business strategies including information

technology components (Internet, digital data, databases, and soforth) become e-business strategies.

E-Business Strategy = CorporateStrategy

+ Information Technology


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Marketing strategy becomes e-marketing strategy when

marketers use digital technology to implement the strategy:

E-marketing strategy = marketing strategy

+ Information technology


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Most strategic plans e plain the rationale for the chosen objectives

and strategies. There are four appropriate types of rationale:

1. Strategic justification shows how the strategy fits with thefirms overall mission and business objectives,

2. Operational justification identifies and quantifies the specific

process improvements that will result from the strategy,

3. Technical justification shows how the technology will fit andprovide synergy with current information technology

capabilities,

4. inancial justification e amines cost/benefit analysis and uses

standard measures (ROI, N V).


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From Business Models to E-Business Models

Business model: a method by which the organization sustains

itself in the long term, and includes its value proposition forpartners and customers as well as its revenue streams.

A firm will select one or more business models as strategies to

accomplish enterprise goals.


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How does a firm select

the best business models?

Critical components:

Customer value. Does the model create value through its

product offerings that is differentiated in some way fromthat of competitors?

Scope. Which markets do the firm serve, and are they

growing? Are these markets currently served by the firm, or

will they be higher risk new markets?

Price. Are the firms products priced to appeal to markets

and also achieve company share and profit objectives?


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How does a firm select

the best business models?

Revenue sources. Where is the money coming from? Is it plentiful

enough to sustain growth and profit objectives over time?

Connectedactivities. What activities will the firm need to perform tocreate the value described in the model? Does the firm have these

capabilities?

Implementation. The company must have the ability to actually make

it happen.

Capabilities. Does the firm have the resources (financial, core

competencies, and so on) to make the selected models work?

Sustainability. The e-business model is particularly appropriate if it

will create a competitive advantage over time.


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E-Business Models

The direct connection with information technology makes a

business model an e-business model:

E-Busine

ss Model

= Busine

ss Model

+ Information Technology

E-business model: method by which the organization sustains

itself in the long term using information technology, whichincludes its value proposition for partners and customers as

well as its revenue streams. It can capitalize on digital data

collection and distribution techniques without using the

Internet.


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Value and Revenue

Whether online or offline, the value proposition involvesknowing what is important to the customer or partner anddelivering it better than other firms.

Value encompasses the customer's perceptions of theproducts benefits, specifically its attributes, brand name,and support services.

Subtracted from benefits are the costs involved inacquiring the product, such as monetary, time, energy, and

psychic.

Value = Benefits - Costs


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E-Marketing Contributes to the E-Business Model

E- arketi g I creases e efits

Online mass customization ersonalization24/7 convenience

el -service ordering and trackingO

ne-stop shoppingE- arketi g Decreases osts

Lo cost distribution o communication messagesLo cost distribution channel or digital productsLo ers costs or transaction processingLo ers costs or kno ledge acquisition

reates e iciencies in supply chainDecreases the cost o customer service

E- arketi g I creases Reve ues

Online transaction revenues such as product, in ormation, advertising, and subscriptionssales; or commission/ ee on a transaction or re erral

dd value to products/services and increase pricesIncrease customer base by reaching ne markets

uild customer relationships and thus increase current customer spending


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Menu of Strategic E-Business Models

A key element in setting strategic objectives is to take stock ofthe company's current situation and decide the level of

commitment to e-business in general and e-marketing in particular.

Questions prior to embarking on any e-business strategies:

.Are the business models likely to change in my industry?

.What does the answer to question 1 mean to my company?

.When do I need to be ready?

.How do I get there from here?


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Pure

Play

Enterprise

Business Process

Activity

Pure dot-com

(Amazon)

Click and Mortar

(eSchwab, most retailers)

Customer

RelationshipManagement

Brochureware

E-mail

evelofbusinessimp

act

Business transformation(competit ive advantage,

industry redefinition)

Effectiveness

(customer

retention)

Efficiency

(cost

reduction)

E hibit 2 - 1 evel of Commitment to E-business

Source: dapted rom .mohansa hney.com


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E-Business Models at Various Levels of

Commitment

Each level of the pyramid indicates a number of opportunities for

the firm to provide stakeholder value and generate revenue streamsusing information technology.

Because there is no single, comprehensive, ideal ta onomy of e-business models, we categorize the most commonly used modelsbased on the firm's level of commitment.


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Activity

LevelBusiness

Process LevelEnterprise

Level

y Order processing

y Online purchasingy E-mail

y Content publisher

y Business intelligence

(BI)

y Online advertising

y Online salespromotions

y Dynamic pricing

strategies online

Customer

relationshipmanagement

(CRM)

Knowledge

management

(KM)

Supply chainmanagement

(SCM)

Community

building online

Database marketing

Enterprise ResourcePlanning (ERP)

Mass-customization

y E-Commerce, direct

selling, contentsponsorship

y Portal

y Broker models

Online

e change, hub

Online auctiony Agent models

Manufacturers

agent

Catalog

aggregator

Metamediary Shopping agent

Reverse auction

Buyers

cooperative

Virtual mall

E hibit 2 - 1 E-Business Model Classification


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Activity Level E-Business Models

Online purchasing. Firms can use the Web to place orders with suppliers,thus automating the activity.

O

rder processing.T

his occurs when online retailers automate Internettransactions created by customers.

E-mail. When organizations send e-mail communications to stakeholders,they save printing and mailing costs.

Content publisher. Companies create valuable content or services on theirWeb sites, draw lots of traffic, and sell advertising. Another type ofcontent publishing, the firm posts information about its offerings on a Website, thus saving printing costs = brochureware.


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Activity Level E-Business Models

Business intelligence (BI). This refers to the gathering of secondary andprimary information about competitors, markets, customers, and more.

Online advertising. As an activity, the firm buys advertising on someone elsese-mail or Web site.

Online sales promotions. Companies use the Internet to send samples ofdigital products (e.g., music or software), or electronic coupons, among other

tactics.

Pricing strategies. With dynamic pricing, a firm presents different prices tovarious groups of customers, even at the individual level.


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Business Process Level E-Business Models

Customer relationship management (CRM) = retaining + growing business /

individual customers through strategies that ensure their satisfaction with the firm and

its products = keep customers for the long term + increase the number and

frequency of their transactions.

Knowledge management (KM) = combination of a firms database contents + thetechnology used to create the system + the transformation of data into useful

information and knowledge.

Supply chain management (SCM) = coordination of the distribution channel to

deliver products more effectively and efficiently to customers.

With community building, firms build Web sites to draw groups of special-interestusers. Firms invite users to chat / post e-mail on their Web sites to attract potential

customers to the site.


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Business Process Level E-Business Models

Affiliate programs = when firms put a link to someone elses retailWeb site and earn a commission on all purchases by referred customers.

Database marketing = collecting, analyzing, and disseminatingelectronic information about customers, prospects, and products toincrease profits.

Enterprise resource planning (ERP) = a back-office system for order

entry, purchasing, invoicing, and inventory control.

Mass customization = Internets unique ability to customize marketing

mixes electronically and automatically to the individual level.


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Enterprise Level E-Business Models

E-commerce refers to online transactions: selling goods and services onthe Internet, either in one transaction or over time with an ongoingsubscription.

Direct selling refers to a type of e-commerce in which manufacturers selldirectly to consumers, eliminating intermediaries such as retailers.

Content sponsorship online is a form of e-commerce in which companies

sell advertising either on their Web sites or in their e-mail.

A portal is point of entry to the Internet, such as the Yahoo! and AOLWeb sites. They are portals because they provide many services inaddition to search capabilities.


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A portal is point of entry to the Internet, such as the Yahoo! and AOLWeb sites. They are portals because they provide many services inaddition to search capabilities.

Online brokers are intermediaries that assist in the purchasenegotiations without actually representing either buyers or sellers. Therevenue stream in these models is commission or fee-based:

The brokerage model are E*Trade (online exchange), and eBay (onlineauction),

A B2B exchange is a special place because it allows buyers and sellers in aspecific industry to quickly connect.


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Online agents represent either the buyer or the seller and earn acommission for their work.

Selling agents help a seller move product.

Manufacturers agents represent manufacturing firms that sellcomplementary products to avoid conflicts of interest.

The catalog aggregator, brings together many catalog companies tocreate a new searchable database of products for buyers.

A special type of agent = the metamediary, it represents a cluster ofmanufacturers, online retailers, and content providers organizedaround a life event or major asset purchase


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Pure Play

Pure plays = businesses that began on the Internet, even if theysubsequently added a brick-and-mortar presence.

E.g. E*Trade is a pure play, beginning with only online trading

Pure plays face significant challenges: They must compete as newbrands and take customers away from established brick-and-

mortar businesses.

One way to change the rules is to invent a new e-business model,as Yahoo! and eBay did.


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An Optimized System of E-Business Models

E-business is the continuous optimization of a firms business activities throughdigital technology.

Firms usually combine traditional business and e-business models. E.g. Schwab=combined its online and offline brokerages in a unified system.

The challenge: customers expect a high degree of coordination betweenonline and offline operations.

The danger: the established corporate culture might squash e-commerceinitiatives or slow them down with the best of intentions.

The solution: Many businesses have spun off their e-commerce operations aswholly owned subsidiaries or pure plays so they can compete without theweight of the parent business.


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An Optimized System of E-Business Models

A fully optimized e-business that uses the Internet to

sell is the sum of multiple e-business activities andprocesses: E-commerce, business intelligence,customer relationship management, supply chainmanagement, and enterprise resource planning asrepresented in the following equation:

EB = EC + BI + CRM + SCM + ERP

instructor notes - week 3a - internet strategy

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