Chapter 11
E-Commerce
Strategy
As you read the textbook and go through
this lesson, think about the following questions:
·
What are some key questions a company should ask
when formulating an e-strategy?
·
What forces can endanger a company's position in
a given industry?
·
What are the key steps of the strategic planning
process?
·
What is a business plan and why is it important?
·
What is cost benefit analysis? What is
return on investment (ROI)?
·
What are metrics?
·
Why might it be difficult to measure e-commerce
success?
·
What or who are the key players in e-commerce
success?
·
What are the benefits and barriers to global
e-commerce?
·
How can an e-commerce enterprise ensure that it
is in compliance with legal regulations?
·
What is intellectual property and how has the Internet
impacted this area of the law?
·
What are some typical ethical issues that have
arisen as a result of the Internet?
·
How has the Internet impacted our rights to
privacy and freedom of speech?
Upon
completion of this chapter, you will be able to:
1. Describe the strategic planning
process.
2. Describe the purpose and
content of a business plan and a business case.
3. Understand how e-commerce
impacts the strategic planning process.
4. Understand how to formulate,
justify, and prioritize EC applications.
5. Describe strategy
implementation and assessment, including the use of metrics.
6. Evaluate the issues involved in
global EC.
7. Analyze the impact of EC on
small and medium-sized business.
Answers
to Pause/Break Section Review Questions
Section 11.1
Review Questions
1. What is strategy?
A
strategy is a broad-based formula for how a business is going to compete, what
its goal should be, and what plans and policies will be needed to carry out
those goals. The elements of a strategy
include forecasting, resource allocation, core competency, environmental
analysis, company analysis, and business planning.
2. Describe the strategic planning process.
Strategic
planning is used to direct a company’s long term goals. The process is a cycle
of assessment, initiation, formulation, and implementation.
3. Describe the four phases of strategic
planning.
The four
phases include strategy initiation, strategy formulation, strategy
implementation, and strategy assessment.
Strategy initiation is the decision to implement at goal, while strategy
formulation provides the high-level steps to reach it. Strategy implementation is the operational
actions that execute the plan, and assessment evaluates how closely the end
product matches the goal, and how well it was executed.
§ Strategy
initiation - The initial phase
of strategic planning in which the organization examines itself and its
environment.
–
Specific outcomes:
· Value
proposition - The benefit that a company’s products or services are provided to a
company and its customers.
· Core competencies
· Forecasts
· Competitor
(industry) analysis
§ Strategy
formulation - The
development of strategies to exploit opportunities and manage threats in the business
environment in light of corporate strengths and weaknesses.
–
Specific activities and outcomes:
· Business
opportunities
· Cost-benefit
analysis
· Risk analysis,
assessment, and management
· Business plan
§ Strategy
implementation -The
development of detailed, short-term plans for carrying out the projects agreed
on in strategy formulation.
–
Specific activities and outcomes:
· Project planning
· Resource
allocation
· Project management
§ Strategy
assessment - The continuous evaluation of progress toward the organization’s
strategic goals, resulting in corrective action and, if necessary, strategy
reformulation.
4. Why is a cyclic approach to strategic
planning required?
It allows business decision makers to evaluate and
react to the success of past decisions.
5. Describe four
tools that can be used for strategic planning.
·
SWOT analysis
·
Competitor analysis
grid
·
Scenario planning
·
Return on investment
·
Balanced scorecard
6. What is a
strategy map and how does it help in the strategic planning process?
A tool that
delineates the relationships among the key organizational objectives for all
four BSC perspectives.
7. What is a
business case and how is it different from a business plan?
Business plan - A written document that identifies a
company’s goals and outlines how the company
intends to achieve the goals and at what cost.
Business case – A
business plan for a new initiative or large, new project inside an existing organization.
A business case
is different from a business plan in that it does not contain all of the
operational specifics.
Section 11.2
Review Questions
1. What is an E-Commerce strategy?
(EC
strategy)
The formulation and execution of a vision of how a
new or existing company intends to do business electronically.
2. Describe the process of deriving an EC strategy.
The process begins with a business strategy which gives
way to an IS strategy which includes the ICT strategy. The EC strategy is formed from both the IS
and ICT Strategies.
3. Describe the role of the Internet in setting EC strategy.
The
internet can be used in multiple ways as strategy is created. Most notably, it can be used for
competitive/market research as well as for analysis of potential solutions and
plans.
4. How should the Internet and EC be
considered by business strategic planners? By IS strategists? By ICT planners?
Strategic
planners need to understand the evolving and disruptive nature of the Internet
and EC – in ways that can help or hinder a company. Information systems
strategists need to consider the Internet as a tool for collecting and
distributing information to where it is required. ICT planners will need to
plan the integration of the Internet-based technologies into the existing ICT
infrastructure. Thinking about and planning for the Internet should be subsumed
into each of the three strategy levels (McKay and Marshall 2004).
Section 11.3
Review Questions
1. Describe the advantages, risks, and success factors that first
movers face.
First
movers have the advantage of being the first to a market and being able to
define it. At the same time, first
movers may spend a great deal of time and money advertising and defining the
market, to be beaten by a later entrant.
Successful first movers must understand their segment and its
possibilities in advance, and then have the ability to defend their position.
2. What are the advantages and
disadvantages of creating a separate online company?
Companies
may benefit from separate online firms if they need to create separation or
discipline within the online group.
Additionally, this may allow them to establish a separate, more appealing
brand. Conversely, creating a separate
company isolates the new firm from the benefits of the existing firm.
3. Why would an existing company want to
create a new brand for its e-commerce initiative?
It
will depend on the relative strength and positioning of the existing brand
versus the possibilities and costs of a new brand. A new brand may not have the connotations of
the old brand, or can protect the old brand by not associating it with the new
entrant.
4. What
strategic benefits are associated with using social networks?
They allow a
business to better access customers for sales, feedback and research.
Section 11.4
Review Questions
1. Describe how a company should not select
EC applications.
EC
applications should not be decided without the benefit of analysis and
planning. Selecting applications based
on whims or individual options is not suggested.
2. Explain Tjan’s Internet portfolio map.
Tjan
(2001) adapted the Boston Consulting Group’s approach to create what he calls
an “Internet portfolio map.” Instead of trading off market potential and market
share, different EC projects are rated on both their applicability for the
company (fit) and their potential for success (viability), both of which can be
either low or high.
3. List four sources of business risk
in EC. What questions exemplify each source of risk?
Risk
is inherent in all business activities, and especially when organizations are
moving into new territory, as an e-commerce strategy inevitably implies.
Managing that risk is a process of analyzing the risk factors and then taking
the steps necessary to reduce the threat to the business from that risk. Examples of risks include:
Partner
risk – Can I succeed without my partner?
HR
risk – How dependant am I on personnel?
Security
– Can I protect my intellectual property?
Exchange
rate – Will changes in exchange rates hurt my margins?
4. Discuss three strategies for smarter pricing online.
Traditional
methods for determining price are the cost-plus and competitor models. Cost plus
means adding up all the costs involved—material, labor, rent, overheads,
and so forth—and adding a percentage mark-up as profit. The competitor model
determines price based on what competitors are charging for similar
products in the marketplace. Another strategy is to create multiple versions of
a product, and vary the pricing by channel (as opposed to product attributes).
INTELLECTUAL PROPERTY AND OTHER REGULATORY ISSUES
LAWS ARE SUBJECT TO INTERPRETATION
·
PERSONAL AND PROPERTY RIGHTS
– Civil
litigation - An adversarial proceeding in which a party (the plaintiff)
sues another party (the defendant) to get compensation for a wrong committed by
the defendant.
– Regulatory
compliance - Systems or departments in an organization whose job is
to ensure that personnel are aware of and take steps to comply with relevant
laws, standards, policies, and regulations.
– Compliance
data - All data belonging or pertaining to an enterprise
included in the law, which can be used for the purpose of implementing or validating
compliance.
·
Intellectual property - Creations of the mind, such
as inventions, literary and artistic works, and symbols, names, images, and
designs, used in commerce.
– Copyright - An exclusive right of the author or creator of a book, movie, musical
composition, or other artistic property to print, copy, sell, license,
distribute, transform to another medium, translate, record, perform, or
otherwise use.
– Infringement - Use of the work without permission or contracting for payment of a
royalty.
– Digital rights management (DRM)- An umbrella term for any of several arrangements that allow
a vendor of content in electronic form to
control the material
and restrict its usage.
• Fair use - The
use of copyrighted material for noncommercial purposes.
–
Patent
- A document that grants the holder exclusive rights to an
invention for a fixed number of years.
–
Trademark
- A symbol used by businesses to identify their goods and
services; government registration of the trademark confers exclusive legal right to its use.
– Ethics - The
branch of philosophy that deals with what is considered to be right and wrong.
– Business ethics - A form of applied ethics that examines ethical principles
and moral or ethical problems that arise in a
business environment.
EC ETHICAL ISSUES
–
Nonwork-Related Use of the Internet
–
Codes of Ethics
– Privacy - The right to be left alone and free of unreasonable personal intrusions
PRIVACY
RIGHTS AND PROTECTION
–
opt-out
- Business practice that gives consumers the copportunity to refuse sharing information about themselves.
–
opt-in -
Agreement that requires computer
users to take specific steps to allow the collection of personal information.
FREE
SPEECH ONLINE VERSUS PRIVACY PROTECTION
– Free Speech Online Versus Child Protection Debate
•
Children’s Internet Protection Act (CIPA) - U.S. law that mandates the use of filtering technologies in
schools and libraries that receive certain types of federal funding.
Section 11.5
Review Questions
1. Describe a Web (project) team and its
purpose.
A web
team is a formal or informal interdisciplinary group that is charged with the
execution of an EC project or role-out.
The team is usually lead by a defined team lead, but also requires a
project champion who can ensure that the team receives the organizational
support necessary to succeed. In creating a Web (project) team, the
organization should carefully define the roles and responsibilities of the team
leader, team members, Web master, and technical staff. The purpose of the Web team
is to align business goals and technology goals to implement a sound EC plan
with available resources.
2. What is the role of a project champion?
The
project champion is the person who ensures that the project gets the time,
attention, and resources required and defends the project from detractors at
all times. The project champion may be the Web team leader or a senior
executive.
3. What is the purpose of a pilot project?
Pilot
projects help uncover problems early, when the plan can easily be modified
before significant investments are made.
4. Discuss the major
strategy implementation issues of application development, partners’ strategy,
business alliances, and BPR.
Implementation
of an EC application requires access to the Web, construction of the Web site,
and integration of the site with the existing corporate information systems
(e.g., front end for order taking, back end for order processing).
Another
important issue is that many EC applications involve business partners—ASPs,
ERP vendors and consultants, and ISPs—with different organizational cultures
and their own EC strategies and profit motives.
At a
higher level of cooperation and trust than a partnership is a business
alliance. Specifically, the EC strategic planning process may identify a
strategic opportunity that is larger than the organization itself.
Business process reengineering (BPR) is
a methodology for conducting a comprehensive redesign of an enterprise’s
processes. Generally, BPR can help to create efficiencies to increase
productivity and/or save costs, but this is generally coupled with changes and
reorganizations that may be met with hostility.
5. Describe
BPM and the need for it in EC development.
Business
Process Management refers to management activities that help improve business
processes. It is important to EC because
more effective processes help make EC more efficient.
Section 11.6
Review Questions
1. Describe the need for assessment.
Strategy assessment includes both the
continual assessment of EC metrics and the periodic formal evaluation of
progress toward the organization’s strategic goals. Assessment is critical to understand the
effectiveness of operations so that future planning can be more accurate.
2. Define metrics and their contribution to strategic planning.
Each
company measures success or failure by a different set of standards. A metric
is a specific, measurable standard against which actual performance is
compared. By identifying and using metrics in planning, the firm can clearly
identify and track goals to be achieved.
3. Describe the corporate performance dashboard approach to strategy
assessment.
This
method seeks to identify and categorize several significant metrics across a
variety of operational areas. By
monitoring these metrics consistently (in a “dashboard”) upper management is
able to evaluate the overall health and progress within an organization quickly
and frequently.
4.
What is a balanced scorecard?
The balanced scorecard is both a performance measurement and a management methodology that helps an organization translate its financial, customer, internal process, learning, and growth objectives and targets into a set of actionable initiatives.
5. Define Web analytics.
The
analysis of click-stream data to understand visitor behavior on a Web site.
Section 11.7
Review Questions
1. Describe globalization in EC and the
advantages it presents.
Globalization
provides the opportunity for EC businesses to serve not only their traditional
geographic markets, but potentially the entire world.
2. Describe the major barriers to global EC
in each dimension of the CAGE framework.
·
Cultural
– language and cultural differences, preferences
·
Administrative
– legal issues, trade barriers, privacy protection
·
Geographical
– logistics, bandwidth
· Economic – taxation, regulation, payment
systems
3. What can companies practicing global
EC do to overcome the barriers to global EC?
There are
several possible ways to remove barriers to global EC some of them include:
valuing human touch, being strategic, knowing your audience, using Web
advantages, proper integration, flexible site design, and synchronized content.
4. Discuss the
pros and cons of a company offering its Web site in more than one language.
The company will
be able to address a larger market, but will have to maintain several Web site
versions and may confuse the primary market.
Global EC
• BENEFITS AND EXTENT OF OPERATIONS
– The major
advantage of EC is the ability to do business at any time, from anywhere, and
at a reasonable cost.
• BARRIERS TO GLOBAL EC
– Cultural
Issues and Language Translation
– Machine
Translation of Web Pages
– Administrative
and Legal Issues
– Geographic
Issues and Localization
– Economic and
Financial Issues
·
BREAKING DOWN THE BARRIERS TO GLOBAL EC
– Be strategic
– Know your
audience
– Localize
– Think
globally, act consistently
– Value the
human touch
– Clarify,
document, explain
– Offer services
that reduce barriers
Section 11.8
Review Questions
1. What are the advantages/benefits of EC for
small businesses?
There
are several potential advantages, the largest being flexibility and
mobility.
2. What are the disadvantages or risks of EC
for small businesses?
There
are several potential disadvantages, the largest being the inability to compete
at a large scale and potential high entry costs.
3.
What are the advantages and disadvantages for small businesses online?
Some of the
critical success factors include appropriate capital investment, low inventory
levels, secure electronic payments, flexible payment methods, appropriate
logistical services, search engine placement, membership in online mall, and
proper Web site design.
4. How can
social networks help SMEs become more competitive?
Social
networking sites are a particularly good fit for smaller businesses because
SMEs often do not have a peer group nearby with which to discuss relevant
topics. On the Internet, SMEs would turn to a community site catering to small
businesses that provides them with access to peers, information on starting up,
and advice.
Small-Medium Sized Business Enterprises
· Some of the first companies to take
advantage of Web-based electronic commerce were SMEs
· SMEs consider the Internet to be a valuable business tool
STRATEGY
AND THE WEB ENVIRONMENT
– Porter’s
Competitive Forces Model and Strategies
1. Threat of
entry of new competitors
2. Bargaining
power of suppliers
3. Bargaining
power of customers or buyers
4. Threat of
substitute products or services
5. Rivalry among
existing firms in the industry
JUSTIFICATION AND COST-BENEFIT ANALYSIS
Companies need
to justify their EC investments as part of strategy
formulation in order to achieve the optimal level of investment
· OTHER REASONS WHY EC JUSTIFICATION IS
NEEDED
– EC is not necessarily the
solution to all problems
– Formal evaluation of requests
for funding mandated
– Need to assess the success of
EC projects after completion
– Success of EC projects assessed
in order to pay bonuses
– Pressure from top management
– Large amount of money
– Weak business conditions exist
•
EC INVESTMENT CATEGORIES AND BENEFITS
•
HOW IS AN EC INVESTMENT JUSTIFIED?
– cost-benefit analysis - A
comparison of the costs of a project against the benefits.
•
WHAT NEEDS TO BE JUSTIFIED? WHEN SHOULD JUSTIFICATION
TAKE PLACE?
·
USING METRICS IN EC JUSTIFICATION
– Metric - A specific, measurable
standard against which actual performance is compared.
– Key
performance indicators (KPIs) - The quantitative expression of critically important
metrics.
DIFFICULTIES IN MEASURING PRODUCTIVITY AND PERFORMANCE
GAINS
– Data and
Analysis Issues
– EC
Productivity Gains May Be Offset by Losses in Other Areas
– Incorrectly
Defining What Is Measured
– Other
Difficulties
DETERMINING E-COMMERCE SUCCESS
– Product Characteristics
– Industry Characteristics
– Seller Characteristics
– Consumer Characteristics
EC
Application Case 11.1: FOCUSING ON
QUALITY OVER QUANTITY AT WARNER MUSIC GROUP
Questions
1. Why did WMG’s strategy shift to quality?
It allows for greater control over partners and the
types of arrangements implemented.
2. Why did it develop a deal with YouTube? Is this a strategic
alliance?
It is a strategic alliance. WMG benefits from
YouTube’s userbase, and YouTube gains access to additional content.
3. Why did WMG start its digital-oriented strategy?
The company needed to adapt to changes in
technology.
4. Explore the ad arrangement with Outrigger. Does it make sense?
Why?
Student research will vary. Currently internal ads at http://www.outrigger.com/ are arranged
vertically on the right of the homepage.
It seems to make sense and is part of the overall site design.
EC Application Case 11.2: Measuring Profit on the Web
Questions
1. List
four areas in which Axon is demonstrating increased profitability through the
use of the Web.
·
Selling costs were reduced by 40 percent for
each dollar of margin generated
·
Call volume to sales support increased at less
than 50 percent of the traditional rate
·
Warehouse space was reduced by 40 percent, while
volume increased by 40 percent
·
Obsolete stock write-offs as percentage of
revenue were reduced by 93 percent
2. Describe the characteristics of the
metrics listed here (e.g., financial, customer service, quantitative, time
based).
Of
the metrics listed, all seem to show progress in each tangible area. For example:
·
Cost Avoidance – selling costs were reduced by
40 percent for each dollar of margin generated
·
Customer Service – Average days to delivery were
reduced by 20 percent over 2 years
·
New Markets – Product revenue increased over 40
percent in first 12 months of full operation
·
New
Media – Cost per item for e-mail is less than 1 percent of the cost per item
for postal mail
3. What other metrics
might apply (Hint: Consult Chapter 14)?
Student responses will vary.
Answers to Discussion Questions
1. How would you identify
competitors for a small business that wants to launch an EC project?
The business would have to define the
industry it is currently in and then begin to evaluate other firms that are
part of that industry.
2. How would you apply Porter’s five forces and Internet impacts in
Exhibit 12.3 to the Internet search industry, as described in the opening case?
Student answers will vary. Students will have different opinions on the
relative strengths in the industry.
3. Why must e-businesses consider strategic planning to be a cyclical
process?
Because
the plan must be continually revisited during the business cycle.
4.
How would you apply the SWOT approach to a small, local bank evaluating its
e-banking services?
The bank would have to examine the four points of the
model including its strengths, weaknesses, opportunities, and threats in the
e-banking area.
5. Offer some practical suggestions as to how a company can include
the impact of the Internet in all levels of planning.
Student responses will vary. Students will have different opinions based
on their experiences.
6.
Amazon.com decided not to open physical stores, whereas First Network Security
Bank (FNSB), which was the first online bank, opened its first physical bank in
1999. Compare and discuss the two strategies.
Student answers will vary. Answers may center on the benefits of pure
electronic commerce and the benefits of click-and-mortar operations. Additionally, the expectations of these two
different industries may be considered.
7.
Discuss the pros and cons of going global with a physical product.
The major advantage of global sales is the
expanded potential market. The
disadvantages include global logistics and potential localization of the
product.
8. For each part of the CAGE framework, briefly discuss one barrier
that may negatively impact e-commerce companies doing business globally.
Student responses will vary based on their
opinions of the barriers.
9.
Find some SME EC success stories and identify the common elements in them.
Students answers will vary based on the story
selected.
10. Submit three questions regarding EC strategy for small
business to the Small Business Expert (free) at
smallbusinessanswers.yahoo.com/?fr=bps737888. Summarize your experience.
Student research and results will vary.
11. After viewing the video “FiftyOne Global Ecommerce Demo”
(youtube.com/watch?v=2YazivwAm2o&feature=related) consider the following:
“Fifty-One” claims to address all the issues associated with currency
conversion, fraud screening, payment processing, customer brokering,
international freight forwarding, destination country delivery, and in-country
returns management.
a. Discuss how a company embarking on
global e-commerce would approach each of these challenges without the
assistance of a company like Fifty-One.
b. Would these challenges be
insurmountable? For each challenge, explain why or why not.
c. Would the type or size of a business
affect whether it could successfully navigate these challenges to global
e-commerce? Explain your conclusions.
Student research and results will
vary. This is an interesting video with details that students will
respond to differently.
Topics for Class Discussion and
Debates
1. Has the availability of EC affected the way we assess industry
attractiveness? Consider whether Porter’s five forces still apply in an EC
setting and develop new criteria for assessing the attractiveness of online
industries.
Student research and opinions will vary. Students opinions on the strength of
companies will be addressed.
2. Consider the challenges of a brick-and-mortar company manager
who wants to create an integrated (online/offline) business. Discuss the
challenges that he or she will face.
Student research and opinions will vary. The discussion will focus on the advantages
of a larger operation versus the operations needed to sustain it.
3. As the principles in a small business that already has an
effective Web presence, you are considering taking your company global. Discuss
the main issues that you will have to consider in making this strategic
decision.
Student research and opinions will vary. The discussion will focus on issues such as
localization and logistics.
4. Examine the seven strategies of Facebook and Twitter at
socialmediatoday.com/christinegallagher/165536/top-7-facebook-and-twitter-strategies
and comment on them.
Student research and opinions will vary.
The seven listed strategies are:
1. Find your peeps.
2. Concentrate on conversing and building
relationships, instead of broadcasting and selling.
3. Use a Facebook personal profile AND a Facebook
business page TOGETHER.
4. Cross-post and cross promote.
5. Use a social media dashboard like Hootsuite and
other productivity tools to accomplish more in less time.
6. Get them on the list..
7. Measure and track your social media results.
5. Debate: Is Google Translate good for the translation of Web
sites?
Student research and opinions will vary based on their experiences
with the software. Perceived effectiveness will depend on the
language (Spanish is good, Japanese is poor) and the accurately desired by the
user.
6. Is Amazon eBay’s biggest challenge? (See Ackerman 2008.) What
about Walmart.com?
Student research and opinions will vary based on personal
perceptions.
7. Debate whether you think that the Internet has changed (or will
change) the strategy of organizations that deliver distance education. Discuss
the new value that is created for them by EC. How can organizations offering e-learning
opportunities capture this value? Develop a list of examples.
Student research and opinions will vary based on personal
perceptions.
8. Debate whether group members think that the customer gains more
value from EC than the company. Discuss both sides of the issue of whether
companies profit by the use of EC to the same extent that customers do. Support
your side of the debate by providing some examples.
Student research and opinions will vary. The debate will focus on the relative
benefits to consumers and businesses. Consumers
benefit from selection and possibly deals, companies access larger markets and
are not tied to geographic locations.
9. Debate: Will Facebook Places crush Foursquare in the
location-based competition? Why or why not?
Student research and opinions will vary. The debate will focus on current and possible
future features, and how the market will respond to them.
Internet Exercises
(Note: URLs may change over time; please
check the Internet Exercises on the Turban Web site for possible updates: www.pearsonhighered.com/turban.)
1. Survey several online travel
agencies (e.g., travelocity. com, orbitz.com, cheaptickets.com, priceline.com,
expedia.com, bestfares.com, and so on) and compare their business strategies.
How do they compete against physical travel agencies? (See Chapter 18.)
Student reports will vary based on the sites
selected. Generally these sites can
provide self-service at a lower cost, but cannot match the service and possibly
knowledge of agents.
2.
Enter digitalenterprise.org and
find Web metrics. Read the material on metrics and prepare a report on the use
of metrics for measuring advertising success.
Student reports will vary based on the types
of metrics selected. In general,
different metrics can be used to track the success of marketing. Some metrics may include views,
click-throughs and sales.
3. Check the music CD companies on the Internet (e.g., cduniverse.com, musica.co.uk). Do any companies focus
on specialized niche markets as a strategy?
Student reports will vary based on the time
of report and sites selected.
4. Enter ibm.com/procurement and
go to the e-procurement section. Prepare a report on how IBM’s Supplier
Integration Strategy can assist companies in implementing an EC strategy.
Student reports will vary based on the time
of report.
5.
Compare the following search engines: google.com,
search.yahoo.com, search.ask.com, and mooter.com. Conduct a comparative
search (i.e., search for the same term at each site), learn more about how each
search engine works (e.g., click on “about us” or similar link), and look for
comparative articles at Web sites such as searchenginewatch.com. Consider the strengths and weaknesses of
each site, when would one be more useful than another, and what special
features distinguish it in the search engine marketspace. Prepare a report
based on your findings.
Student reports will vary based on the
services evaluated.
6.
One of the most global companies is Amazon (amazon.com). Find stories about its global strategies and
activities (try google.com and
forbes.com). What are the most important lessons you learned?
Student reports will vary based on the
content researched.
7. Visit business.com/guides/startup and find some of the EC opportunities
available to small businesses. Also, visit the Web site of the Small Business
Administration (SBA) office in your area. Summarize recent EC-related topics
for SMEs.
Student reports will vary based on the time
of report.
8. Enter
alloy.com and bolt.com. Compare the sites on
functionality, ease of use, message boards, homepage layout, and so on. Prepare
a report based on your findings.
Student reports will vary based on the
services evaluated. Alloy.com is teen
fashion and gossip site with a variety of content, as well as social
interaction. As of November 2011,
bolt.com was inactive.
9.
Find out how Web sites such as tradecard.com
facilitate the conduct of international trade over the Internet. Prepare a
report on your findings.
Student reports will vary based on the time
of report. In general this service can
be used to rate the integrity of a business, and facilitate a transfer (and
conversion) of funds.
10. Conduct research on small businesses
and their use of the Internet for EC. Visit
sites such as microsoft.com/smallbusiness/hub.mspx
and uschamber.org. Also, enter google.com or yahoo.com and
type “small businesses +
electronic commerce.” Use your findings to write a report on current small
business EC issues.
Student reports will vary based on the time
of the report and companies used.
11. Enter businesscase.com and review their products. What are the benefits
of CaseBuilder to people conducting e-commerce strategy development?
Student reports will vary based on their
perception of the product.
12. Enter
languageweaver.com and find the
product they have for language translation.
Student reports will vary based on the
services evaluated.
13. Enter compete.com and identify all the services it provides, all
lists, ranking, marketing performance, and competitive intelligence reports it
provides. Prepare a list of the services and comment on their value to the
merchants.
Student reports will vary based on the time
of the report.
Team Assignments and Role
Playing
1. Assignment for the Opening Case
Read the opening case and answer the
following questions.
a. List and discuss the factors that
are driving Travelocity to change its e-strategy.
·
Commissions – as airlines reduce
commissions it affects revenues
·
Competition – other entrants competing for
customers
b. Considering the 14 dashboards that
Travelocity has already created, come up with two or three other dashboards
that would be useful.
Student
opinions will vary based on individual preference.
c. Share your experiences of using
Travelocity with the group and discuss the extent to which its e-strategy meets
your personal needs.
Student
opinions will vary based on the student’s experience.
2. Have three teams represent
the following units of one click-and-mortar company: (1) an off-line division,
(2) an online division, and (3) top management. Each team member represents a
different functional area within the division. The teams will develop a
strategy in a specific industry (a group of three teams will represent a
company in one industry). Teams will present their strategies to the class.
Student reports will vary based on the
companies used.
3.
The relationship between manufacturers and their distributors regarding sales
on the Web can be very strained. Direct sales may cut into the distributors’ business.
Review some of the strategies available to handle such channel conflicts. Each
team member should be assigned to a company in a different industry. Study the
strategies, compare and contrast them, and derive a proposed generic strategy.
Student reports will vary based on research
and opinions.
4.
Each team must find the latest information on one global EC issue (e.g.,
cultural, administrative, geographical, economical). Each team will offer a
report based on their findings.
Student reports will vary by the issue
selected.
5. Enter stassmann.com and find 10 entries related to e-strategy (including
videos). Prepare summaries of them relating to this chapter.
Student reports will vary based on the issues
used.
6. Compare the services provided by Yahoo!,
Microsoft, and Web site Pros Inc. to SMEs in the e-commerce area. Each team
should take one company and make a presentation.
Student reports will vary based on the time
of the report.
7. Enter
buzzle.com/editorials/9-21-2004-59556.asp and execute the three exercises
related to strategic e-commerce.
Student opinions and answers will vary based
on the exercises used.
End-of-Chapter Real-World Case Questions: Pierre Lang
Expands Into Eastern Europe
1. What were the drivers for Jorgenden’s e-strategy?
Reduced
business and a smaller supply of goods
2. What makes the e-commerce strategy at Portland Fish Exchange
effective?
It
increases efficiency through automation, and allows more customers to
participate.
3. Which strategic tools might have been used when formulating his
e-business solution?
He may have
used a strategy map, business case and business plan.
4. In implementing the e-strategy, what issues needed to be
considered?
Some
examples include the needs of the stakeholders, the abilities of technology,
the preferences of buyers and relationships with sellers.
5. What risks might have been involved in setting up the online
auctions at Portland Fish Exchange?
Some
examples include technical risks and market adoption risks.
Glossary
Balanced
scorecard:
A management tool that assesses organizational progress
toward strategic goals by measuring performance in a number of different areas
Business
case: A business plan
for a new initiative or large, new project inside an existing organization
Business
plan:
A written document that identifies a company's goals
and outlines how the company intends to achieve the goals and at what cost
Business
process management (BPM): Method for business restructuring that combines workflow systems and
redesign methods; covers three process categories—people-to-people,
systems-to-systems, and systems-to-people interactions
Business
process reengineering (BPR): methodology for conducting a comprehensive redesign of an
enterprise's processes
Competitor
analysis grid: A
strategic planning tool that highlights points of differentiation between
competitors and the target firm
Corporate
performance management: advanced performance measuring and analysis approach that embraces
planning and strategy, balanced Scorecards
Cost-plus: Adding up all the costs involved, such
as material, labor, rent, overhead, etc., and adding a percentage mark-up as
profit
Disintermediation: The process by which the consumer
bypasses the services of an intermediary or intermediaries in the chain of
distribution to purchase products directly from those who supply or produce
them
Key
performance indicator (KPI): quantifiable measurement, agreed to beforehand, that reflects the
critical success factors of a company, department or project
Metric: A specific, measurable standard
against which actual performance is compared
Project
champion: person who
ensures the EC project gets the time, attention, and resources required and
defends the project from detractors at all times
Scenario
planning: A strategic
planning methodology that generates plausible alternative futures to help
decision makers identify actions that can be taken today to ensure success in
the future
Strategy
assessment: #4 monitor performance, compare,
assess, improve, or adjust
Strategy
formulation: #2
planning, cost-benefit, budget, risk analysis, business plan
Strategy
implementation: #3
project plan, resource allocation, scheduling teams (what, who, when, where)
Strategy
initiation: #1 company
analysis, value proposition, competition, mission, objectives, opportunities
Strategy
map: A tool that
delineates the relationships among the key organizational objectives for all
four BSC perspectives
Versioning: Selling the same good, but with
different selection and delivery characteristics
Web analytics: analysis of clickstream data to
understand visitor behavior on a website
Practice Test
1. For ________
companies, it may be even more important to change strategies quickly.
A) retail
B) traditional
C) service
D) pure play
2. A broad-based
formula for how a business is going to accomplish its mission, what its goals
should be, and what plans and policies will be needed to carry out those goals
best defines:
A) business case.
B) strategy.
C) business objective.
D) business focus.
3. The
formulation and execution of a vision of how a new or existing company intends
to do business electronically best defines:
A) e-commerce policy.
B) e-commerce case.
C) e-commerce strategy.
D) e-commerce focus.
4. General
strategies for competitive advantage include each of the following except:
A) entry barriers.
B) stabilization.
C) growth.
D) customer or supplier
lock-in.
5. Technological
e-commerce challenges include each of the following except:
A) integration.
B) cost.
C) distrust.
D) software standards.
6. A process for
developing a strategy and plans for aligning information systems with the
organization's business strategies best defines:
A) strategic information systems planning.
B) strategic alignment.
C) business planning.
D) business case.
7. The initial
phase of strategic planning in which the organization examines itself and its
environment best defines:
A) feasibility study.
B) strategic alignment.
C) strategy initiation.
D) value proposition.
8. Each of the
following about the strategic planning process is true except:
A) the strategic planning
process forces corporate executives, a company's general manager, or a small
business owner to assess the current position of the firm, where it should be,
and how to achieve objectives.
B) the process of developing a
strategy may be even more important than the strategy.
C) the strategic planning
process is cyclical and continuous.
D) the strategic planning process begins with strategy formulation.
9. A specific
outcome of the strategy initiation phase is the ________, which includes the
vision, mission, value proposition, goals, capabilities, constraints,
strengths, and weaknesses of the company.
A) company analysis
B) functional strategy
C) core competency
D) value proposition
10. Specific
outcomes from the strategy initiation phase include each of the following
except:
A) day-to-day operations.
B) forecasts.
C) competitor analysis.
D) company analysis.
11. A specific
outcome of the strategy initiation phase is a clear statement of the company's
________, which summarizes the customer segment, competitor target, and the
core differentiation of one's product from the offerings of competitors.
A) core competency
B) company analysis
C) value proposition
D) functional strategy
12. The unique combination of resources, experiences, and
expertise within a particular firm is called their:
A) functional strategy.
B) corporate strategy.
C) competitive advantage.
D) core competencies.
13. Projections
of the business technological, political, economic, and other environments are
called:
A) forecasts.
B) competitive
intelligence.
C) SWOT analysis.
D) value propositions.
14. The
development of strategies to exploit opportunities and manage threats in the
business environment in light of corporate strengths and weaknesses best
defines:
A) strategy initiation.
B) strategy completion.
C) strategy formulation.
D) strategy alignment.
15. Which of the
following involves scanning the business environment to collect and interpret
relevant information about direct competitors, indirect competitors, and
potential competitors?
A) competitor analysis
B) competitor evaluation
C) environmental evaluation
D) corporate espionage
16. Specific
activities and outcomes from strategy formulation include each of the following
except:
A) business plan.
B) project plan.
C) cost-benefit analysis.
D) risk analysis, assessment,
and management.
17. Google's
________ is its expertise in information search technology.
A) company analysis
B) functional strategy
C) value proposition
D) core competency
18. Many of the
outcomes from the first two phases of the strategic planning process, such as a
determination of goals, competitor analysis, strategic opportunities, and risk
analysis come together in a ________.
A) business plan
B) value proposition
C) SWOT plan
D) technology audit
19. ________ is
the process of making the selected applications and projects a reality by
hiring staff; purchasing equipment; licensing, purchasing, or writing software;
and contracting vendors.
A) Project planning
B) Strategy assessment
C) Resource allocation
D) Project management
20. ________ is
the continuous evaluation of progress toward the organization's strategic
goals, resulting in corrective action and, if necessary, strategy
reformulation.
A) Strategy assessment
B) SWOT analysis
C) Scenario planning
D) Competitor analysis grid
21. Specific
activities and outcomes from strategy implementation include:
A) company analysis.
B) resource allocation.
C) identifying business
opportunities.
D) creating a business
plan.
22. A tool that
delineates the relationships among the key organizational objectives for all
four BSC perspectives defines:
A) strategy map.
B) competitor analysis.
C) business plan.
D) SWOT analysis.
23. An analytical
tool in which a company looks for points of differentiation between competitors
and itself is called:
A) SWOT analysis.
B) scenario planning.
C) competitor analysis grid.
D) strategy assessment.
24. A methodology
that surveys external opportunities and threats and relates them to internal
strengths and weaknesses best defines:
A) competitor analysis
grid.
B) business plan.
C) business case.
D) SWOT analysis.
25. A strategic
planning methodology that generates plausible alternative futures to help
decision makers identify actions that can be taken today to ensure success in
the future best defines:
A) business case.
B) scenario planning.
C) communications matrix.
D) information systems
planning.
26. A management
tool that assesses organizational progress toward strategic goals by measuring
performance in a number of different areas is:
A) balanced scorecard.
B) BCG growth-share matrix.
C) Web analytics.
D) SWOT analysis.
27. After four
years in business, a magazine publisher decides to add the online distribution
of its magazine to its existing traditional publishing business. The company
would need to develop a:
A) business plan.
B) business strategy.
C) business metric.
D) business case.
28. The risks of
being a first mover include each of the following except:
A) the chance that a second wave
of competitors will eliminate a first mover's lead through lower cost and
innovation.
B) the high cost of pioneering
EC initiatives.
C) the risk that the move will be too late.
D) over the long run, first movers
being substantially less profitable than followers.
29. Factors that
determine whether a first mover succeeds or fails in the EC marketplace include
each of the following except:
A) the speed of market entry.
B) the nature of the
product.
C) the size of the opportunity.
D) whether the company can be
the best in the market.
30. Separating a
company's online operations into a new company makes sense in each of the
following situations except:
A) when the subsidiary can be
created without dependence on current operations and legacy systems.
B) when the company is unable to form new alliances, attract new
talent, or raise additional funding.
C) when a new business model
needs to be developed apart from the constraints of current operation.
D) when the volume of
anticipated e-business is large.
31. When planning
a successful online EC strategy that includes social media, an important issue
to consider is:
A) effectively market to
existing customers.
B) develop a consistent online
and offline brand strategy.
C) sell globally as well as
locally.
D) all of the above.
32. Which of the
following can occur when a company waits to see what competitors in the
industry do?
A) technology-driven
strategy
B) competitor-driven
strategy
C) market-driven strategy
D) second-mover strategy
33. The most
dangerous risk to a company engaged in e-commerce is:
A) customer and business partner
risk.
B) business risk.
C) threats posed by
hackers.
D) negligent loss of data.
34. The likelihood
that a negative outcome will occur in the course of developing and operating an
electronic commerce strategy best defines:
A) competitor risk.
B) business risk.
C) technology risk.
D) e-commerce risk.
35. Security
issues that need to be considered when setting an EC strategy include:
A) liability for damage to a
third-party's computer system.
B) accidental alterations to or
destruction of electronic information and records.
C) costs to mitigate a covered
loss.
D) all of the above.
36. The ________
pricing strategy means adding up all the costs involved, such as material,
labor, rent, overhead, and so forth, and adding a percentage mark-up as
profit.
A) price percentage
B) revenue markup
C) competitor model
D) cost-plus
37. Selling the
same goods, but with different selection and delivery characteristics best
defines:
A) versioning.
B) selective distribution.
C) channel marketing.
D) cost-plus marketing.
38. Internet
technologies can provide consumers with easier access to pricing information,
which increases their bargaining power. To remain competitive and profitable,
sellers need smarter pricing strategies, which include each of the following
strategies except:
A) greater precision in setting
prices.
B) new ways of customer
segmentation for differentiated pricing.
C) reducing prices.
D) more adaptability in changing
prices.
39. The person
who ensures the EC project gets the time, attention, and resources required and
defends the project from detractors at all times best defines:
A) project referee.
B) project champion.
C) project gladiator.
D) project manager.
40. A methodology
for conducting a comprehensive redesign of an enterprise's processes best
defines:
A) corporate makeover.
B) business case.
C) redesign strategy.
D) business process reengineering.
41. The most
important objectives of strategic assessment include each of the following
except:
A) identify what competitors are doing to avoid head-on competition.
B) determine if the EC strategy
and projects are still viable in the current environment.
C) measure the extent to which
the EC strategy and ensuing projects are delivering what they were supposed to
deliver.
D) reassess the initial strategy
in order to learn from mistakes and improve future planning.
42. A
quantifiable measurement, agreed to beforehand, that reflects the critical
success factors of a company, department or project best defines:
A) spot check.
B) key performance indicator.
C) splog.
D) dashboard measurement.
43. Advanced
performance measuring and analysis approach that embraces planning and strategy
best defines:
A) dashboard.
B) key performance
indicator.
C) metric.
D) corporate performance management.
44. With the balanced
scorecard approach, the term balance arises because the combined set of
measures is supposed to encompass indicators that are each of the following
except:
A) core and non-core.
B) financial and
nonfinancial.
C) quantitative and qualitative.
D) leading and lagging.
45. The analysis
of clickstream data to understand visitor behavior on a website best
defines:
A) splogging.
B) clickstream tracking.
C) cookies.
D) web analytics.
Chapter Test
1. A searchable
database of computer hardware that meets a strict set of environmental criteria
best describes:
A)
Environmental
Protection Computing Resource.
B)
One Step To Green
Computing.
C)
Electronic Product Environmental Assessment Tool.
D)
Information Technology
Assessment Tool.
2. Productivity
benefits from using EC are difficult to measure because:
A)
qualitative benefits
do not count.
B)
the payoffs are too
short.
C)
there is no time lag
in EC gains.
D)
EC gains in certain areas of the company may be offset by
losses in other areas.
3. For ________
companies, it may be even more important to change strategies quickly.
A)
retail
B)
service
C)
pure-play
D)
traditional
4. ________ is an umbrella term for any of
several arrangements that allow a vendor of content in electronic form to
control the material and restrict its usage.
A)
Digital rights management
B)
Fair use
C)
Patent management
D)
Intellectual property
management
5. Metrics are
used to describe each of the following except:
A)
costs.
B)
standards.
C)
benefits.
D)
ratio of costs to
benefits.
6. The study and
practice of ecofriendly computing resources, and it is now a key concern of
businesses in all industries best describes:
A)
blue computing.
B)
green computing.
C)
energy efficient
computing.
D)
natural computing.
7. Worldwide
purchases of EPEAT-registered products result in each of the following except:
A)
reduced use of toxic
waste materials.
B)
reduced use of primary
materials.
C)
reduced staffing requirements.
D)
avoiding the disposal
of tons of hazardous waste.
8. Google and
eBay have similar core competencies.
A)
True
B)
False
9. Blue computing
is the study and practice of ecofriendly computing resources.
A)
True
B)
False
10. In the
strategy implementation phase, general long-term plans are continuously
evaluated.
A)
True
B)
False
11. Project
management is the process of making the selected applications and projects a
reality, including hiring staff; purchasing equipment; and licensing,
purchasing, or writing software.
A)
True
B)
False
12. Trends that
may slow EC and Web 2.0, and even cripple the Internet include:
A)
copyright complaints.
B)
security concerns.
C)
lack of net
neutrality.
D)
all of the above.
13. Internet
capabilities that make it more difficult for companies to capture profits
include each of the following except:
A)
The Internet allows
buyers and sellers to find and transact business with one another more easily.
B)
The Internet makes
information widely available.
C)
The Internet reduces
the difficulty of purchasing, marketing, and distribution.
D)
The Internet makes it easier to make secure payments.
14. Google's
________ is its expertise in information search technology.
A)
value proposition
B)
company analysis
C)
core competency
D)
SWOT
15. Which U.S.
law mandates the use of filtering technologies in schools and libraries that
receive certain types of federal funding?
A)
Computer Fraud and
Abuse Act
B)
Children's Internet Protection Act
C)
Homeland Security Act
D)
Privacy Protection Act
16. Many
companies use different names, colors, sizes, and packaging for their overseas products
and services. This practice is referred to as:
A)
geo-focus.
B)
world trade.
C)
specialization.
D)
localization.
17. The threat of
substitute products or services is a major force that can endanger a company's
position in a given industry.
A)
True
B)
False
18. Ethics is the
branch of philosophy that deals with what is considered to be right and wrong.
A)
True
B)
False
19. Forecasting
means identifying business, technological, political, economic, and other
relevant trends that are currently affecting the business or that have the
potential to do so in the future.
A)
True
B)
False
20. An agreement
that requires computer users to take specific steps to allow the collection of
personal information is called:
A)
opt-in.
B)
user acceptance
agreement.
C)
informed consent.
D)
opt-out.
21. The legal
term for the use of the work without permission or contracting for payment of a
royalty is
A)
theft of digital
rights.
B)
infringement.
C)
copyright violation.
D)
theft of intellectual
property.
22. In law, fair
use refers to the use of copyrighted material for ________ purposes.
A)
educational
B)
entertainment
C)
commercial
D)
noncommercial
23. Intangible
metrics in the model for IT project justification include each of the following
except:
A)
services to society.
B)
growth enabler.
C)
lead-time.
D)
competitive advantage.
24. Traditional
methods for evaluating EC investments include all of the following EXCEPT:
A)
ROI
B)
Break-even or payback
period
C)
Discount rate
D)
NPV
25. Justifying an
EC investment by comparing the costs of each project against its benefits is known
as a cost-benefit analysis.
A)
True
B)
False
.
