1. Strategy and E-Business
Dr. Ronan McIvor
2007.

2. The Internet and Corporate Strategy
Essential questions:
Who will capture the economic benefits that the Internet
creates?;
Will all the value end up going to customers?
Will companies be able to share the value?
How will the Internet impact industry structure?
Will it increase or reduce the profitability?
How will it impact business strategy?
Will the Internet support or erode the ability of companies to gain
sustainable competitive advantage?
Adapted from Porter,
2001

3. Three Levels of E-Business
Experimentation Integration Transformation
E-Business Strategy No E-business strategy E-business strategy supports E-business strategy supports
current corporate strategy breakout corporate strategy
Corporate Strategy E-business strategy not linked E-business strategy E-business strategy is a driver
to corporate strategy subservient to corporate of corporate strategy
strategy
Scope Department/Functional Cross-functional participation Cross enterprise involvement
orientation (interconnected customers,
suppliers & partners)
Payoffs Unclear Cost reduction, business New revenue streams, new
support & enhancement of business lines, improvements
existing business process in customer service and
practices, revenue satisfaction
enhancement
Levers Technological infrastructure & Business processes People, intellectual capital &
software applications relationships, co-operation
Role of information Secondary to technology Supports process efficiency Information asymmetries used
and effectiveness to create business
opportunities
Adapted from Hackbarth and Kettinger, 2000

4. E-Business Strategy Stages
Major Stages Initiate Diagnose Breakout Transition
Assess Current Environment Establish Strategic
Target
Industry Company
• Outline project • Industry • Identify current • Match current • Analyse difference
scope Competitive business business between breakout
• Identify project Assessment strategies strategies with and current
stakeholders • Benchmark E- • Assess customer SWOT; strategy;
• Determine business relationships • Evaluate • Assess change mgt.
project schedule technology • Assess supplier alternative E- & cost/benefit/risk
• Assess industry relationships business breakout analysis;
business • Assess e- strategies • Consider industry
partnerships business responses
technology • Plot out milestones
• Assess business for strategy
partnerships
Outputs Project Work Plan Opportunities and Strengths and E-business breakout E-business transition
Threats Weaknesses strategy strategy
Hackbarth and Kettinger, 2000

5. Stage I - Initiate
Outline project scope;
Identify stakeholders;
Determine schedule;
Project workplan.
Adapted Hackbarth and Kettinger, 2000

6. Stage II - Diagnose - Industry Analysis
Industry definition;
Identify major customers;
Identify major competitors and their capabilities;
Benchmark E-business technology;
Apply Porter’s 5 Forces.
Adapted Hackbarth and Kettinger, 2000

7. How the Internet Influences Industry Structure
Threat of Substitutes
(+) By making the overall industry more efficient, the
Internet can expand the size of the market
(-) The proliferation of Internet approaches creates
new substitution threats
Rivalry amongst
exisiting Competitors
Buyers
Bargaining Power (-) Reduces difference among
competitors as offerings are difficult to Bargaining Power Bargaining Power
over Suppliers of Channels of End-users
keep proprietary
(-) Migrates competition to price
(+/-) Procurement using the (-) Widens the geographic market, (+) Eliminates powerful (-) Shifts bargaining
Internet tends to raise bargaining increasing the number of competitors channels or improves power to end
power over suppliers, though it can bargaining power over consumers
also give suppliers access to more traditional channels (-) Reduces switching
customers costs
(-) The Internet provides a channel
for suppliers to reach end users,
reducing the leverage of intervening Barriers to
companies Entry
(-) Internet procurement and digital
markets tend to give all companies
equal access to suppliers, and (-) Reduces barriers to entry such as the need for a sales
gravitate procurement to standard force, access to channels, and physical assets - anything that
products that reduce differentiation Internet technology eliminates or makes easier to reduce
(-) Reduced barriers to entry and barriers to entry
proliferation of competitors (-) Internet applications are difficult to keep proprietary from
downstream shifts power to new entrants
suppliers (-) A flood of new entrants has come into many industries
Porter, 2001

8. Stage II - Diagnose - Company Analysis
Identify current business strategies;
Assess company Customers;
Assess company Suppliers;
Assess company E-business technologies;
Use Value Chain to identify areas where IT can add value.
Output - SWOT Analysis.
Adapted Hackbarth and Kettinger, 2000

9. Internet Applications in the Value Chain
Firm Infrastructure Web-based, distributed financial and ERP systems
Self-service personnel and benefits administration
Human Resource
Web-based training
Management
Internet-based sharing and dissemination of company information
Electronic time and expense reporting
Technology Collaborative product design across locations and among value systems participants
Development Knowledge directories accessible from all parts of the organisation
Real-time access by R&D to on-line sales and service information
Internet-enabled demand planning; fulfilment
Procurement Other linkage of purchase, inventory, and forecasting systems with suppliers
Automated 'requisition to pay'
Direct and indirect procurement via marketplaces, exchanges, auctions, and buyer-seller matching
Inbound Logistics Operations Outbound Logistics Marketing After-Sales Service
Real time integrated Integrated information Transaction of orders whether Online sales channels inc. Customer service
scheduling, shipping, exchange, scheduling and initiated by consumer, a sales web sites and marketplaces through email,
warehouse management, decision making in in-house person, or channel partner Inside and outside access electronic billing
demand management and plants, contract assemblers, Automated customer-specific to customer information, etc.
planning, and advanced and components suppliers agreements and contract terms product catalogs etc. Customer self
planning and scheduling Customer and channel access Online product service via web sites
across the company and its to product development and configurators and customer
suppliers delivery status Push advertising profiling
Dissemination throughout the Collaborative integration with Customer feedback through Field servie access
company of real-time inbound customer forecasting systems web surveys and promotion to customer account
and in-progress inventory data Integrated channel response tracking. review, parts
management including availability and
information exchange, ordering etc.
warranty claims and contract
management
Porter, 2001

10. Stage III - E-Business Strategy
Strategic Priorities
Ranking
Company Opportunity/ SWOT Industry Strength/
Threat Rankings Assessment Weakness Rankings
Evaluate E-Business
Strategies
E-business
Strategy
Adapted Hackbarth and Kettinger, 2000

11. Stage IV - Transition
E-Business Minus Status Quo Equals Gap
Strategy Strategy
Factor in Change Factor in Cost/Benefit/
Readiness Assessment Risk Analysis
Analyse Gap Difference between E-business strategy & current strategy
Consider potential industry responses
Plot E-Business Transition Strategy including Recommended courses of
Action & Milestones
E-Business Transition Strategy
Adapted Hackbarth and Kettinger, 2000

12. Steps in e-Business Implementation
Optimisation
Next
Full e-Business generation e-
Business
Stepwise IT Implementation
Retail
Transactions
Launch & Growth
Integration with Web-enabled
Production Systems & Business
Business Customers Operations
Order Entry:
Sales & Service
via the ‘Net
Searchable
Pre-Launch
Dynamic Web
Site
Providing web-presence and
informational services
Static
Web-site
Stepwise Launch of Business Propositions
Morath, 2000

13. Change Readiness Assessment
Factor Question
Senior Management Commitment Is senior management support visibly removed or actively involved in EC implementation?
Manager's Willingness to Impact Are only modest impacts on people tolerable or is management willing to deal with the
People consequences of extreme impacts?
IT Resource Availability Are only minimal IT resources available to support EC projects or are they abundant?
In-house Expertise Availability Are personal skills complete unrelated to EC or are they easily related to new
technologies?
Structural Flexibility Is the organisational structure rigid or is it flexible to change and learning?
Acceptance of Radical Change Is the firm historically reactive or proactive?
Comfort level with New Is the firm slow to respond or quick to implement new technology?
Technologies
Cultural Capacity for Change Does the firm culture support the status quo or actively seek participatory change?
Cross-functional decision making Does the firm historically make a decision inter-departmentally or cross-functionally?
Value Chain Target Is the EC implication effort targeted at internal support processes or core processes?
Adapted Hackbarth and Kettinger, 2000

14. Evolution of Strategy Thinking
‘70s & early ’80s - industry structure considered to be primary
determinant of profit e.g. Porter (1980);
Late ‘80s & ‘90s - emphasis on resources internal to firm as principal
driver of profit and strategic advantage e.g. Barney (1986) & Prahalad &
Hamel (1990);
Recently - shift from focus on tangible resources to intangible resources
as a source of strategic advantage e.g. ‘knowledge’, ‘core competence’
and ‘learning’.

15. Implications of the Internet
Rapid change in technology;
More powerful and sophisticated customer;
Blurring of industry boundaries - i.e. industry convergence;
Reaction to change a source of strategic advantage;
Worst case - impact of Internet challenges the value of strategy thinking
such as industry analysis etc.

16. Sources of Value Creation in E-Business
Novelty
- New transaction structures
- New transactional content
- New participants etc.
Efficiency Lock-in
- Search costs
- Selection range Value
- Symmetric information
- Simplicity - Switching costs
- Speed - Loyalty programmes
- Scale economies etc. - Dominant design
- Trust
- Customisation etc.
- Positive network
externalities
Complementarities - Direct
- Indirect
- Between products and services for
customers (vertical and horizontal)
- Between on-line and off-line assets
- Between technologies
- Between activities
Amit and Zott, 2001

17. Value Creation in the Air Transport Offering
Source of Value (Amit and Zott, 2001) Key Findings in Aviation Context
Efficiency: 1. Real-time decision-making
mechanisms
(e.g. Search costs; Selection range; 2. Up-to-date information for buyers and
Symmetric information; Simplicity; Speed; sellers
Scale economies) 3. Reductions in customers' s search and
transaction costs
4. Reductions in the communication and
transaction costs of the seller
Complementarities: 1. Bundling products and services through
vertical and horizontal collaboration/
(e.g. Between products and services for /partnerships/alliances to form more
customers; Between on and off-line assets; valuable holistic travel package
Between technologies; Between activities) 2. Offering additional services not directly
related to the core travel offering (e.g.
financial services)
3. Reducing communication and
promotion costs
4. Taking equity stakes in on-line
agencies
Lock-in: 1. Offering low(er) prices/discounted
fares (e.g. for on-line bookings only, or
(e.g. Switching costs - loyalty programmes, relationship-based pricing)
dominant design, trust, customisation; 2. Customising offerings to suit individual
Positive network externalities- direct and customer needs
indirect) 3. Amalgamating rewards/bonuses for
loyal customers within business
networks
4. Building consumer trust
Novelty: 1. New transaction structures play integral
role in lowering transaction costs for
(e.g. New transaction structures; New airlines and customers
transactional content; New participants) 2. Disintermediation and re-
intermediation of the travel agent
3. Emergence of novel retail partners (e.g. McIvor et al., 2002
internet cafés)

18. Implications of the Internet for the Business Network
Value chains will fragment into multiple businesses;
Some businesses will benefit from network economies of scale;
New opportunities will arise for purely physical businesses;
Value proposition underlying brand identity will change;
New branding opportunities for third parties that neither produce
a product or deliver a primary service;
Shifts in bargaining power;
Customer switching costs will be reduced;
Incumbents - ‘victims of their obsolete physical infrastructures
and their own psychology’.
Evans and Wurster, 1997

19. Misconceptions associated with the Internet
Overestimating first-mover advantage;
Unintentionally diluting fit in the pursuit of reach;
Unintentionally sacrificing focus in the desire to offer ‘customer
solutions’;
Ignoring Internet-sector differences;
Relying unguardedly on partner leverage;
Going global prematurely; and
Treating technology as strategy.
Rangan and Adner, 2001

20. Advantages and Challenges for Clicks-and-Bricks Firms
Advantages:
Brand recognition, reputation and credibility;
Can offer product returns via physical storefronts;
Higher performance via combining online and offline activities;
Cost reduction e.g. online order processing and bulk deliveries
to local inventory locations; and
In many cases, the Internet is a source of product and service
information.
Challenges:
Difficulties of integrating online and physical activities; and
‘Old economy’ firms have difficulties with Internet strategies.
Kim et al., 2004