strategic profiles and internet performance

8/3/2019 Strategic Profiles and Internet Performance

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strategic objectives and that this business-driven

approach included analyzing its external environment,

internal resources, core competencies, and fit between

the new initiative and organizational goals before

starting the new system development.

Organizations are realizing that use of the Internet

coupled with proven principles of business strategy canlead to a sustainable competitive advantage; they will

succeed if they use the Internet as a complement to their

current practices and strategy.

The use of the Internet is not a generic solution that

fits all organizations. Therefore, companies must

understand their role and strategic position in the

competitive environment, understand the level and type

of performance it will achieve, and deploy Internet

technologies to support and complement their business

strategy and processes.

2. Literature review and hypothesis development

2.1. Business strategies and profiles

Most IT and Internet literature has considered

investment to be an initial input. Using investment as

the key antecedent to performance infers that

technology is the precursor to success. However,

though the use of Internet technology can easily be

duplicated, integrating its use into the business

processes requires competitors to replicate the entirebusiness system instead of just the technology.

Therefore, by analyzing strategy and integrating the

use of the Internet into the fabric of business processes

and their structures, competitors would need to

replicate an entire business system instead of only a

technological process.

Business structures may categorize companies by

examining their strategic focus. For example, Min-

tzberg [35,36] defined five types of organizational

structures: simple, machine bureaucracy, professional

bureaucracy, divisionalized form, and adhocracy, with

each a unique combination of organizational design andcontextual factors. Porter [41] identified a typology

based on three generic strategies: cost leadership,

differentiation, and focus. These strategies have been

used extensively, but have been criticized for their

conceptual limitations, such as the assertions that each

type is mutually exclusive and that the three types are

exhaustive [30]. One of the more enduring typologies is

that of Miles and Snow [22]. They [33] developed a

dynamic and comprehensive framework that addresses

the alternative ways that organizations define and

approach their product and market domains and

construct structures and processes to achieve success

in them. The premise of their research has three pivotal

ideas: organizations act to create their environments,

managements strategic choices shape their structure

and process, and structure and process constrain

strategy.

Based on patterns of behavior in four differentindustries, four types of organizations resulted: Pro-

spectors, Analyzers, Defenders, and Reactors. Pro-

spectors continually seek to locate and exploit new

product and market opportunities. Defenders tend to be

the polar opposite of Prospectors. They attempt to seal

off a portion of a market and create a stable set of

products and customers. Analyzers tend to occupy an

intermediate position between Prospectors and Defen-

ders, by normally being second in a new product

market, while protecting a stable set of products.

Reactors do not have a consistent or stable strategy andthus cannot be categorized as one of the other types.

This typology has been used extensively to show that

a strategic focus will lead to better performance [51]. It

has also been used for strategic alignment with

functional strategies [44,49], and found that no specific

strategic profile is best, but that the closer a companys

fit to an ideal profile, the better their probability of

success [25].

2.2. Internet strategy and its use

Internet strategy is the policies and plans used to

achieve business goals when information exchange

facilitates execution of activities via value chains and

supports the decision-making underlying these activ-

ities. The Internet has only been used for business

applications since 1994, and strategies for using it have

not been developed as much as they have in older

organizational systems. Much research has concen-

trated on the marketing aspect of the Internet and has

lacked analysis of its impact on all functions of the

organization. Frameworks have been developed to show

key aspects of marketing and business in which theInternet had an impact [14,40]; Willcocks and Plant [54]

indicated that there are four drivers in Internet

marketing: technology, brand, service, and market

while other research identified processes, information

orientation, and systems integration [13].

The literature pertaining to integrated strategies is

conceptual and offers few overall frameworks that

identify items and constructs for Internet use. Many

authors have said that the Internet has and will continue

to change the way organizations should approach and

use strategy [21,52], with the Internet no longer an

C.H. Apigian et al. / Information & Management 43 (2006) 455468456


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afterthought but a cause and driver [27]. Shama [47]

developed a framework that includes key elements of an

Internet marketing strategy: target customers, product,

pricing, promotion, and distribution. Sadowski et al.

[45] indicated three factors of strategic use: commu-

nication requirements, intensity of competition, and

support and incentives. But though the literature hasdeveloped frameworks for Internet strategy and its use

[4], few have been empirically tested.

Gascoyne and Ozcubukco [17] indicated a need to

align Internet strategy with business goals; however,

their approach was a technology-driven approach.

Brush [7] took a business-driven approach and Robert

and Racine [42] suggested that the first imperative of an

Internet strategy was to clarify business strategies.

Apigian et al. [2] developed measures of Business

Internet Use that were based on Internet-enhanced

processes and developed five dimensions of BusinessInternet Use: Internet-driven market channels, Internet-

enhanced distribution, supplier Internet interactions,

customer Internet interactions, and internal Internet

operations, with Internet Performance consisting of

revenue expansion, relationship enhancement, cost

reduction, and time reduction. These dimensions and

measurement for Internet Performance were used here,

since the measures give an indication of the specific

strategies that organizations will use to incorporate

Internet technologies.

Internet-driven market channels focus on theimportance placed on the organizations ability to

reach potential customers; this includes reaching new

geographical locations, customers, and markets, as well

as strategic market orientation.

Prospectors compete based on their ability to exploit

marketing opportunities that would benefit by using

the Internet. The ability to market new products and

scan for new market opportunities would enhance the

level of performance [43]. Defenders normally initiate

little or no product development and have a narrow

customer focus and therefore their use of the Internet is

not of high priority. For Analyzers, the ability toexploit marketing channels while maintaining a firm

core of traditional products and customers is vital to

the organization. Therefore, we hypothesized as

follows.

H1a. Internet-driven market channels will have a direct

positive relationship with a Prospectors Internet Per-

formance.

H1b. Internet-driven market channels will have a direct

positive relationship with an Analyzers Internet Per-

formance.

H1c. Internet-driven market channels will not have a

direct positive relationship with a Defenders Internet

Performance.

Internet-enhanced distribution includes the impor-

tance placed on providing and tracking products in an

efficient and cost effective manner. The Internet canfacilitate the integration of distributors, intermediaries,

and retailers. It can also facilitate tracking of product

distribution in real-time and in the selection of

distributors.

The ability to track and deliver products is vastly

improved through the use of the Internet. An Internet

strategy that incorporates integration of distribution will

enhance performance for both Prospectors and Analy-

zers [31]. For Defenders, this may not be as important,

since most have a narrow customer base. Therefore we

hypothesized as follows.

H2a. Internet-enhanced distribution will have a direct

positive relationship with a Prospectors Internet

Performance.

H2b. Internet-enhanced distribution will have a direct

positive relationship with an Analyzers Internet

Performance.

H2c. Internet-enhanced distribution will not have a

direct positive relationship with a Defenders Internet

Performance.

Customer Internet interactions is the strategic posi-

tioning and implementation of ways to improve relation-

ships with rapid response to current customers through

use of the Internet. A company may offer complementary

products, be the primary point of contact in their industry,

facilitate direct communication, optimize customize

services, or provide opportunities to clarify customer

needs andwants. Theuse of theInternet canalso facilitate

timely response to customer needs.

Hambrick [23] hypothesized that Prospectors are

more forward-integrated than Defenders, but found the

opposite to be true. He concluded that Defenders tend tohandle more of their own selling, thus interacting more

directly with customers, while Prospectors are reluctant

to become involved in forward-integration because their

offerings continually change. Although the levels of

forward-integration or customer relationships were

higher for Defenders, it was still considered important

for Prospectors. Analyzers were also found to work

closely with customers [50], which indicated that their

ability to develop Internet systems to enhance the

customer relationship would be important. Therefore,

we hypothesized as follows.

C.H. Apigian et al. / Information & Management 43 (2006) 455468 457


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H3a. Customer Internet interactions will have a direct


formance.

H3b. Customer Internet interactions will have a direct


formance.

H3c. Customer Internet interactions will have a direct

positive relationship with a Defenders Internet Perfor-

mance.

Supplier Internet interactions involves the impor-

tance of recognition, communication, and integration of

suppliers in everyday plans and processes.

Prospectors are normally reluctant to establish

permanent processes and systems and tend to stress

creativity and flexibility; thus they do not develop long-

term relationships with suppliers, limiting the need forintegration [34]. Since Analyzers tend to try to imitate

Prospectors ideas, a high level of supplier integration

would create higher performance. Defenders reliance

on suppliers includes receiving high quality raw

materials in a cost efficient manner; they will also

establish long-term relationships with their suppliers.

Therefore, we hypothesized as follows.

H4a. Supplier Internet interactions will not have a

direct positive relationship with a Prospectors Internet

Performance.

H4b. Supplier Internet interactions will have a direct


formance.

H4c. Supplier Internet interactions will have a direct


mance.

Internal Internet operations depend on the use of the

Internet to improve the internal operations of an

organization. Efficiency of internal operations involves

better order processing with reduction of adminis-

trative, materials, and order placement, and labor cost.

Jabnoun et al. [24] identified different quality

initiatives: for Prospectors, they defined a total qualitylearning approach to improve customer satisfaction; this

is externally focused. Analyzers should implement a

total quality management approach to satisfy customers

[10]. Defenders should utilize a quality assurance

system to provide conformance of products, services,

and processes [37] and also provide lower price, better

service, and a higher quality operations. Therefore, we

hypothesized as follows.

H5a. Internal Internet operations will not have a direct


formance.

H5b. Internal Internet operations will have a direct


formance.

H5c. Internal Internet operations will have a direct


mance.

With these five dimensions, organizations can

determine their best strategic fit. However, the

organization must decide on the level and type ofperformance they can achieve through the use of the

Internet (Table 1).

2.3. Internet Performance

There are three levels of economic impact: applica-

tion, function, and firm that can be addressed:


Table 1

Hypothesized relationships based on strategic profiles

Dimension of Business Internet Use (BIU) Strategic profiles

Prospectorsa Analyzersb Defendersc

Internet-driven market channels (H1) Significant Significant Not significant

Internet-enhanced distribution (H2) Significant Significant Not significant

Customer Internet interactions (H3) Significant Significant Significant

Supplier Internet interactions (H4) Not significant Significant Significant

Internal Internet operations (H5) Not significant Significant Significant

Note: Significant implies that the dimension of BIU has a direct positive relationship with Internet Performance; not significant implies that the

dimension of BIU does not has a direct positive relationship with Internet Performance. No hypotheses were derived for the Reactors strategic

profile.a Prospectors were hypothesized as an (a) for each of the five hypotheses (e.g. H5a).b Analyzers were hypothesized as a (b) for each of the five hypotheses (e.g. H5b).c

Defenders were hypothesized as a (c) for each of the five hypotheses (e.g. H5c).


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1. The application level deals with all end-users, both

employees and customers, and encompasses a

complex and wide array of analysis making it

difficult to define and collect reliable data. Torkzadeh

and Dhillon [53] identified factors that influence the

success of Internet commerce, such as shopping

errors, online payment, and other factors dependingon the experience of the end-user; the factors were re-

examined and confirmed [8]. Other studies have

added measures that relate to the design of websites,

such as transaction throughput, video and sound

quality, availability [26], time spent on activities

[39], and overall consistency [38]. However, success

does not directly imply good performance. An

organization can have a great website, with an

excellent approach to commerce, but without

adequate fulfillment capabilities or with poorly run

operations, an organization may not perform up tohigh levels. Therefore, Internet Performance should

be viewed at a different level of performance.

2. The function level of an organization measures the

success within a given function or area. For the

Internet, this infers that measures should be devel-

oped to identify how it has benefited the organization.

3. Firm performance involves financial measures, such

as sales growth, market value, sales per employee,

gross margin, and economic value-added. It attempts

to aggregate the impact of IT over many applications

from all activities of an organization. Also, it takes allaspects of an organization into account, and assumes

that each area contributes the same amount to the

bottom line. Most organizations have not, however,

been able to show financial success due to use of the

Internet, and performance at the firm level has been

unreliable [32].

According to Brown [6], there are four benefits of e-

commerce: hard, intangible, indirect, and strategic.

Hard benefits are measured at the application level,

indirect benefits are measured at the firm level, and

strategic and intangible benefits, as well as partial directand indirect benefits, are measured at the function level.

Therefore, in our study, Internet Performance was

viewed at the function or Internet level. Function-level

Internet Performance refers to the success of an

organization that can be directly attributed to the use

of the Internet. Garciano and Kaplan [16] identified

process/indirect improvements and marketplace bene-

fits as directly related to the Internet function, but their

research pertained to transaction costs only. Frohlich

[15] measured the percentage of sales and procurement

using the Internet, which is a usage rather than

performance measure. Zhu and Kraemer [56] identified

specific dimensions of Internet Performance (profit-

ability, cost reduction, and inventory efficiency), but

used firm level analysis to empirically test their theories.

Zhuang and Lederer [57] identified five business

benefits (back-end efficiency, market expansion, inven-

tory management, cost reduction, and customerservice), but only used the retailing industry as their

sample. Chang et al. [9] said that the Internet or

e-commerce could enhance both organizational effi-

ciency and effectiveness. Sawhney and Zabin [46]

proposed that all Internet initiatives are categorized in

four sets of performance measures: revenue expansion,

relationship enhancement, cost reduction, and time

reduction. Each of these encompassed a specific aspect

of function-level performance. Therefore, for our study,

the four sets of Internet initiatives were the basis for

Internet Performance (see Table 2).These dimensions encompass the four main areas of

performance at the function level and were used as a

framework in our study. Dimensions and items for this

construct pertained to the four dimensions of Internet

initiatives, and were used as an aggregate measure of

Internet success in order to test the hypotheses.

3. Research methodology

The questionnaire had two major parts: Business

Internet Use and Internet Performance, with descrip-tions of terms used in each. The questions for Business

Internet Use and Internet Performance were measured

on a 5-point Likert scale from 1 (strongly agree) to 5

(strongly disagree) with NA for not applicable.

Descriptions were given of the terms: Prospector,

Analyzer, Defender, and Reactor, based on material in

other studies [12]. Demographics were also captured on

the type of organizations.

Since response rates for mailed questionnaires have

proved poor, email and web-based survey techniques

were used. An initial e-mailing was sent to 5217 IT

professionals and managers in the United States throughan opt-in email list management service; it provided

basic demographics and the offered the opportunity for

potential respondents to give reasons for not respond-

ing. An opt-in or permission list included the names of

only those individuals that had given permission to use

their e-mail addresses; this ensured the integrity of the

list. The target respondents were IT managers and IT

professionals, and included a wide range of companies

and industries. The initial email gave a brief description

of the study and provided a link to a website that

allowed responders access to the online survey.



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Through three separate e-mailings, a total of 265

responses were received. Of these responses, 8 were

unusable due to incomplete information. This resulted in

a response from 257 individuals, a 4.9% response rate.

Although low this is considered normal for email surveys

[11].

The use of email and websites allowed us to reach abroader audience. Of the 257 respondents, 35.9% were

top-level management, 31.9% were mid-level manage-

ment, and the remainder had no supervisory role. The

companies were mainly in manufacturing (42.7%), with

some involved only in IT (22.3%). Other industries

included finance/insurance/real estate (5.5%), business

services (6.5%), wholesale/retail (12.5%), etc. The

majority of the companies had revenues of less than 5

million (52.6%); 21.6% had sales between $M5 and 25

per annum, 9.5% had sales between $M25 and 100,

6.6% had sales between $M250 and 500, and 9.7% had

sales of $M500 or more.A problem that arises in surveys is non-response

bias. To check for this, a time-trend test technique was

used [3]. This assumes that non-respondents resemble

later rather than early respondents. Respondents from

the first e-mailing were considered early respondents

and those from the second and third were the late ones.

x2-Tests were calculated for corporate position,

industry type, and company sales. Corporate position

had a x2 value of 3.63 (p-value = 0.457 with d.f. = 4),

industry type had a x2 value of 11.53 (p-value = 0.247

with d.f. = 9), and company sales had a x2

value of 2.79

(p-value = 0.733 with d.f. = 5). None of the demo-

graphics showed a significant difference between

samples, which indicates a lack of non-response bias.

To further ensure non-response bias, we also tested

for differences between early and late respondents

based on the means of the aggregated construct items.

For the five dimensions of Business Internet Use and thefour of Internet Performance, t-tests were conducted. In

each the results showed no significant difference,

further indicating a lack of non-response bias.

4. Construct validity and reliability

The next step was to assess the construct validity and

reliability of the two constructs. Gerbring and Anderson

[18] outlined a paradigm for assessing unidimension-

ality; this ensured that all items converged correctly on

their theoretically specified construct and did not factor

into other external constructs. Since the items weredeveloped specifically for each dimension and construct

and had previously been validated, our study utilized

factor analysis at the construct level.

For Business Internet Use, all five dimensions and

their items were factored using principle components

analysis with Varimax and an eigenvalue of 1 (see

Appendix A for a detailed list of the survey questions

and factor loadings). From the construct-level factor

analysis, three items (CUST5, CUST8, and MARK7)

did not have a loading of 0.50 or higher for any of the

five dimensions. Also, MARK8 had a cross-loading on


Table 2

Literature review summary of Internet Performance variables

Dimensionsa Description Relevant research

Internet

relationship

enhancement

The improvement of communication and relationships based

on the use of the Internet. This would include customer and

supplier lock-in and an easier mechanism for customers,

suppliers, employees, and the community to give feedback andcommunicate on a more frequent basis

Customer and supplier lock-in [19,48];

Improved customer service levels [20];

Impact on customer/supplier relationships [55]

Internet revenue

expansion

The increase in revenues or sales volume based on the use

of the Internet. This can be achieved by increasing the

customer base, becoming more visible and easily accessible

to current and new customers

Increased customer base [55]; Increased

sales volume [1,9,20,28,55]

Internet cost

reduction

A reduction in transactions costs between customers and

suppliers and a reduction in cost to communicate. The use

of Internet may also reduce internal costs with real time

information being readily available throughout an organization

Reduction in purchasing/coordination

costs [5,29]; reduced cost [1,19,20,55]

Internet time

reduction

A reduction in the time to place or receive orders, as well as the

reduction in the time to process orders, which is a by-product

of real-time transmission of data. Information can travel via the

Internet almost immediately

to any given destination; therefore an element of time is an

aspect of Internet Performance

Reduced cycle time [20,55]; order fulfillment

reduction [19]; transaction throughput [26]

a Internet Performance is based on the conceptual framework of Sawhney and Zabin [46].


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customer Internet interactions and CUST9 loaded on

Internet-enhanced distribution only. Therefore these

five items were dropped and a final factor analysis

conducted to ensure discriminant validity. The final

construct factor analysis had each item loading

correctly on its respective dimension, with 81.1% of

the variance explained and a Cronbachs a of 0.978.The same analysis was conducted for Internet

Performance. Four items were dropped: REL3 did

not load on any factors; TRED1 loaded on time

reduction and cost reduction, and CRED1 and CRED2

cross-loaded only on time reduction. A final construct-

level factor analysis was conducted with all items

loading on their respective dimensions, with 79.2% of

the variance explained. Therefore, Internet Performance

was developed with four dimensions and a total of 16

items with a Cronbachs a of 0.965.

5. Results and discussion

With each dimension and construct indicating a high

level of unidimensionality, items for each of the

dimensions of Business Internet Use were aggregated

as five separate variables and all items for Internet

Performance were aggregated into one variable to test

each hypothesis. Of the 257 respondents, 63 indicated

that they were Prospectors, 67 were Analyzers, 90 were

Defenders, and 27 were Reactors.

5.1. Results for hypotheses

Based on regression analysis specific to Prospectors,

three of the five hypotheses were supported (H3a, H4a,

and H5a) (see Table 3). The two hypotheses that were not

supported did not have a significant relationship to

Internet Performance. Internet-driven market channels

(H1a) and Internet-enhanced distribution (H2a) are

normally found valid in a Prospector organization.

However, most Prospectors have a hard time establishing

in-depth relationships with customers due to their

continuous entry into other markets. Therefore, as

indicated by H3a, the Internet may improve customer

relations by improving communication, and thus enhan-cing Internet Performance. Supplier Internet interactions

(H4a) and internal Internet operations (H5a) were not

found to have a significant relationship to Internet

Performance.

Analyzers were expected to have a significant

relationship to all dimensions of a Business Internet

Use, due to their comprehensive approach to strategy.

However, only two of the five hypotheses were

supported: H2b and H5b. For the other three, the same

phenomena for Prospectors may occur with Analyzers.

Defenders have a narrow customer and product baseand try to provide a niche in the marketplace. Their

approach is internal and emphasizes perfecting what

they do at the best possible price; thus using the Internet

for marketing channels (H1c) is not of high importance.

Also, Defenders have their own distribution processes

and do not benefit from third-party or Internet-enhanced

distribution (H2c). However, they would place a high

level of importance on customer Internet interactions

(H3c), supplier Internet interactions (H4c), and internal

Internet operations (H5c). All five hypotheses for

Defenders were supported.

5.2. Dimension level analysis of Internet

Performance

Analyzers may only want to enhance revenue

expansion and the independent variables or Business

Internet Use dimensions may be different from the


Table 3

Regression analysis for hypotheses

Dimension of Business

Internet Use (BIU)

Mean and S.D. Regression coefficients of strategic profiles

Prospectorsa Analyzersb Defendersc Reactorsd

Internet-driven market channels (H1) 2.934, S.D. = 1.21 0.135e (0.278) 0.152e (0.258) 0.165f (0.125) 0.180 (0.429)

Internet-enhanced distribution (H2) 2.73, S.D. = 1.23 0.081e (0.461) 0.312f (0.008) 0.030f (0.777) 0.081 (0.727)

Customer Internet interactions (H3) 3.31, S.D. = 1.20 0.514f (


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results indicated by the aggregated Internet Perfor-

mance construct. Also Prospectors may strive to only

expand revenues and this would not be captured in an

aggregated measure. Defenders may only be interested

in using the Internet to improve relationships and

become more efficient, and not expand market

opportunities. To evaluate this, further analysis wasconducted for each of the four dimensions of Internet

Performance as the dependent variable (Table 4), which

also contains a regression analysis for each dimension

of Internet Performance for all the respondents.

For revenue expansion, each of the strategic profiles

indicated that customer Internet interactions (excluding

Reactors) and Internet-driven market channels are

significant for both Analyzers and Defenders. Prospec-

tors did not show a significant relationship between

Internet-driven market channels and revenue expansion

as the hypothesis suggested. For all organizations, these

two dimensions were found to be significant as well and

indicate a uniform approach to revenue expansion. Most

organizations, excluding Reactors, which try to expand

revenues with the Internet, should concentrate on

developing Internet applications that enhance thecustomer experience and exploit new marketing oppor-

tunities. Establishing increased internal operational

efficiency, better supplier relationships, and enhanced

distribution systems through the use of the Internet will

not significantly increase revenues.

The results for relationship enhancement show that

each strategic profile should be different in its approach

to Internet use with each of the three strategic profiles

significantly related to different Internet use variables,


Table 4

Regression coefficients for each dimension of Internet Performance

Dimensions of Business

Internet Use (BIU)

Dimensions of Internet Performance

Revenue expansion Relationship enhancement Cost reduction Time reduction

Prospectors (r2 = 0.724; p < 0.001)

Internet-driven market channels 0.073 0.430a 0.334b 0.269c

Internet-enhanced distribution 0.078 0.189 0.092 0.269b

Customer Internet interactions 0.636a 0.437a 0.335b 0.531a

Supplier Internet interactions 0.085 0.380a 0.016 0.242b

Internal Internet operations 0.054 0.161 0.163 0.207c

Analyzers (r2 = 0.479; p < 0.001)

Internet-driven market channels 0.320b 0.165

0.116 0.186Internet-enhanced distribution 0.153 0.245c 0.336a 0.331a

Customer Internet interactions 0.467a 0.187 0.062 0.001

Supplier Internet interactions 0.182 0.106 0.084 0.164

Internal Internet operations 0.024 0.168 0.5461 0.292a

Defenders (r2 = 0.627; p < 0.001)

Internet-driven market channels 0.420a 0.066 0.070 0.027

Internet-enhanced distribution 0.093 0.085 0.102 0.204c

Customer Internet interactions 0.436a 0.160 0.049 0.221c

Supplier Internet interactions 0.109 0.622a 0.394a 0.313a

Internal Internet operations 0.010 0.176 0.278b 0.506a

Reactors (r2 = 0.442; p = 0.018)

Internet-driven market channels 0.211 0.405 0.056 0.142

Internet-enhanced distribution 0.078 0.090 0.207 0.059

Customer Internet interactions 0.122 0.456c 0.044 0.119

Supplier Internet interactions 0.524 0.888a 0.220 0.442c

Internal Internet operations 0.244 0.515c 0.221 0.620a

All organizations (r2 = 0.579; p < 0.001)

Internet-driven market channels 0.252a 0.184b 0.114 0.052

Internet-enhanced distribution 0.084 0.082 0.184a 0.105

Customer Internet interactions 0.462a 0.163b 0.088 0.149b

Supplier Internet interactions 0.023 0.290a 0.174a 0.253a

Internal Internet operations 0.059 0.055 0.319a 0.359a

a p < 0.01.b p < 0.05.c

p < 0.10.


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with the exception of supplier Internet interactions.

Prospectors that look to enhance relationships should

seek to improve communication by developing systems

that will incorporate marketing channels and improve

customer and supplier interactions. Prospectors have a

lot to gain in this aspect of performance, since in normal

circumstances they have a hard time establishing strongrelationships with customers, due to their broad and

changing customer base. For example, an organization

such as 3M Corporation, which is categorized as a

Prospector, offers products that are applicable for any

type of consumer. However, in most cases they tend to

have a distant relationship with the individuals who are

using their products. By publicizing on the web and by

offering real time information to consumers, they not

only can let their customers know more about their

organization, but they allow consumers to learn and

understand more about the wide variety of products andservices offered.

The Internet can be used in unique and different ways

for organizations that tend to have a better relationship

with their customers (Analyzers and Defenders). For

Analyzers, the only significant relationship found

between relationship enhancement and its Business

Internet Use dimensions was Internet-enhanced dis-

tribution. Defenders tend to have a superior relationship

with their customers due to their narrow customer base

and their ability to concentrate on their needs. There-

fore, enhancement through Internet applications may bemore subtle; with supplier Internet interactions is the

only dimension that was significantly related to

relationship enhancement. This offers Defenders a

better opportunity to respond quickly to questions or

concerns that should be answered by suppliers and have

a better idea of production times and capabilities.

Cost reduction also showed unique antecedents to

Internet Performance for each of the strategic profiles.

For Prospectors, not reaching their full market potential

is more disconcerting than achieving lower costs. As

shown by the analysis in Table 4, Prospectors should

look to incorporate Internet applications that stressInternet-driven market channels and customer Internet

interactions which are more indicative of not failing to

be first to market, than of controlling costs.

Analyzers and Defenders look to control processes

and standardize systems in order to become the most

efficient and effective possible. Analyzers try to

maintain a stable set of products, but also look to

attain some flexibility to exploit new market opportu-

nities, which blurs an Analyzers vision between cost

efficiency and market effectiveness. For reducing costs

through the use of the Internet, Internet-enhanced

distribution and internal Internet operations were the

only antecedents to cost reduction. Internal Internet

operations and Internet-enhanced distributions signifi-

cance can be explained by the dual role that an Analyzer

plays within its markets, and by alleviating itself of

everyday distribution and internal problems and using

Internet enabled distributors and operations, costsavings may be attained.

An important measure for Defenders is cost

efficiency, which is more attainable due to a relatively

stable product-market domain. According to Table 4,

internal Internet operations and supplier Internet

interactions are ways that will reduce costs. A stronger

supplier relationship reduces search costs, enables long-

term contracts at reduced prices, and produces a level of

trust in design and production capabilities that allow

Defenders to concentrate on its core competencies.

The last dimension of Internet Performance that wasanalyzed was time reduction. All of the Business

Internet Use dimensions were significantly related to

time reduction, but Internet-driven market channels was

negatively related. These significant relationships typify

a Prospectors strategy and by enhancing distribution

channels, supplier and customer interactions, as well as

internal efficiencies, they would be able to streamline

and create a more responsive value chain, thus

decreasing time to process, time to market, and time

to respond or service products. The negative relation-

ship to Internet-driven market channels may beexplained by the nature of the cannibalization of other

marketing channels, which are more readily developed.

For Prospectors to venture into new ways of marketing

their products with which they are unfamiliar, the time

invested will naturally increase with development.

For Analyzers and Defenders, similar strategies for

cost reduction are needed for time reduction. Internet-

enhanced distribution and internal Internet operations

were found to be significant to time reduction for

Analyzers. Internal Internet operations, supplier Internet

interactions, and also customer Internet interactions were

found to be significant for Defenders. With the use of theInternet to communicate in a more effective manner,

organizations are able to attain real-time information,

which reduces the time to exchange information.

6. Practical implications for strategic Internet

systems

Our research indicated that organizations and

organizational structures should not all take the same

path in using the Internet. Each structure has distinct

advantages and organizations should capitalize on prior



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successes, realizing that they must make tradeoffs in

determining the use of the Internet their organization.

6.1. A Prospectors Internet use

Prospectors establish close ties to their customers.

Their Internet initiative should emphasize strongercustomer relations, such as customized services,

provision of real time information on products or

services and easy feedback. An example of a Prospector

that has taken customer relationship to a different level

is Amazon.com, which started as an online seller of

books and exploited its success by moving into other

areas such as electronics, music, and apparel. They now

have such items as musical instruments, sporting goods,

and outdoor living. Their recent success can be

attributed to their ability to enhance the customer

experience. For example, a customer will find aspecialized webpage with recommendations based on

past purchasing and viewing trends.

6.2. An Analyzers Internet use

For Analyzers, Internet use may be more complex.

An example of a successful Analyzer that has a unique

and effective distribution system is Dell. They started by

selling computers and have developed that business into

a stable market with loyal customers. Dell has added

other product lines, such as TVs, printers, PDAs, MP3players, etc., and has penetrated new markets. They

have not been first to market, but have revolutionized

the direct to consumer computer industry and continue

to perfect their distribution system.

6.3. A Defenders Internet use

In most cases, Defenders try to become more

efficient and retain customers. Therefore, revenue

expansion may not be as important as relationship

enhancement, cost reduction, or time reduction. An

example of a company that exemplifies this is Visteon

Corporation, a supplier of automotive systems, mod-

ules, and components to global vehicle manufacturers,

mainly Ford Motor Company which spun off Visteon in

2000. As part of their Internet strategy they have

incorporated numerous supplier relationship initiatives.

VSP allows suppliers to access general information,

account information, and more accessibility to potentialcustomers and markets.

Thus Defenders can add value to their organization

by developing an Internet strategy that integrates their

suppliers into the processes and systems of their

business practices. Also, internal Internet operations

can be used by them to reduce costs and time to receive,

place, and process orders.

7. Conclusion

Our research identified and developed measures forBusiness Internet Use and Internet Performance. A

survey was used to test hypotheses for significant

relationships between each dimension of Business

Internet Use and Internet Performance, based on

strategic profiles. Results confirm that Internet strate-

gies should differ based on an organizations strategic

profile and the type of performance they wish to pursue.

The study had limitations. First, the use of the

Internet may be premature in measuring the benefits of

Internet Performance. Second, only one respondent was

used per organization and since the target market was ITmanagers, the respondents may be biased. However, the

measures were revalidated and seem to be a good

framework for identifying the key aspects of Business

Internet Use and Internet Performance.

From a practical standpoint, companies may decide

that an Internet strategy is not needed and continue to

question the relevance of IT and the Internet in the

business environment. However, they should implement

an Internet strategy that correctly determines its

strategic profile, understands the level and type of

performance it needs to succeed, and then develop the

system that adds value to the business and processes.


Appendix A. Survey items for final constructs

A.1. Business Internet Use

Item Survey items Factor

coefficient

Internet-driven market channels (MARK), a = 0.941

MARK1 The importance your organization currently places on the use of Internet to reach new customers directly 0.79

MARK2 The importance your organization currently places on the use of Internet to reach new markets directly 0.79

MARK3 The importance your organization currently places on the use of Internet to reach new geographical

locations directly

0.61


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Appendix A. (Continued)


coefficient

MARK4 The importance your organization currently places on the use of Internet to reach new customers

through intermediaries

0.72

MARK5 The importance your organization currently places on the use of Internet to reach new markets

through intermediaries

0.80

MARK6 The importance your organization currently places on the use of Internet to reach new geographical

locations through intermediaries

0.76

MARK7 The importance your organization currently places on the use of Internet to provide

information to potential customers

a


pricing to potential customers

a


personalized marketing based on demographics of potential customers

0.57

Internet-enhanced distribution (DIS), a = 0.945

DIS1 The importance your organization currently places on the use of Internet to

improve integration of intermediaries

0.66


improve integration of distributors

0.80


improve integration of retailers

0.76


improve existing distribution channels

0.76


improve tracking of the distribution of your product

0.67

Internal Internet operations (IIP), a = 0.944

IIP1 The importance your organization currently places on the use of Internet to reduce time to process orders 0.79

IIP2 The importance your organization currently places on the use of Internet to reduce cost to process orders 0.81

IIP3 The importance your organization currently places on the use of Internet to reduce administrative costs 0.80

IIP4 The importance your organization currently places on the use of Internet to reduce time to fulfill orders 0.80

IIP5 The importance your organization currently places on the use of Internet to reduce time to place orders 0.78

IIP6 The importance your organization currently places on the use of Internet to reduce cost in placing orders 0.79

IIP7 The importance your organization currently places on the use of Internet to reduce cost of materials 0.74

IIP8 The importance your organization currently places on the use of Internet to reduce cost of doing business 0.76

Customer Internet interactions (CUST), a = 0.973

CUST1 The importance your organization currently places on the use of Internet

with customers to improve feedback

0.81


with customers to improve relationships

0.85


with customers to respond quicker to their needs

0.81


with customers to understand their wants and needs

0.77


with customers to offer complementary products within your industry

a


with customers to be the primary point of contact for your industry

0.61


with customers to provide expert information

0.64


with customers to provide dynamic pricing based on their current demand

a


with customers to allow them to track status of orders

a

Supplier Internet interactions (SUPP), a = 0.953

SUPP1 The importance your organization currently places on the use of Internet

with suppliers to share information

0.80


with suppliers to integrate planning systems

0.84


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CRED3 The Internet has help our organization reduce operation costs 0.72

CRED4 The Internet has help our organization reduce the cost to market products/services 0.65

CRED5 The Internet has help our organization reduce the cost to communicate with suppliers 0.81

a Item was deleted during factor analysis. Cronbachs alphas (a) are given for each construct.


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Charles H. Apigian is Assistant Professor

of Information Systems and Quantitative

Methods at Middle Tennessee State Uni-

versity. He received a Ph.D. in Manufactur-

ing Management and Engineering at The

University of Toledo. He has published in

OMEGA: International Journal of Manage-

ment Science, Journal of Computer Infor-

mation Systems, Journal of Electronic

Commerce Research, International Journal

of Innovative Management, and Journal of Statistics Education. Priorto pursuing an academic career, he held the position of Vice President

for an automotive supplier, with experience in quality systems,

information technology, and corporate strategy.

Bhanu Ragu-Nathan is Professor of

Accounting in the College of Business

Administration at the University of Toledo.

She holds a Ph.D. from the University of

Pittsburgh. She has published in Informa-

tion Systems Research, Decision Sciences,

OMEGA: International Journal of Manage-

ment Science, Journal of MIS, Research in

Accounting Regulation, Accounting Hori-

zons, and Journal of Strategic Information

Systems. Her current research interests are in information systems

strategy, ethical issues in information systems, and behavioral issues

in managerial accounting and control systems.

T.S. Ragu-Nathan is Professor of Infor-

mation Systems and Operations Manage-

ment in the College of Business

Administration at the University ofToledo. He holds a Ph.D. in Management

Information Systems from the University

of Pittsburgh. Has published in several

journals including Information Systems

Research, Decision Sciences, OMEGA:

International Journal of Management

Science, Journal of MIS, Journal of Information Systems, and

Journal of Strategic Information Systems. His current research

interests are in information systems strategy, quality issues in

information systems, and use of information technology in manu-

facturing and supply chain management.


strategic profiles and internet performance

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