Description
Strategy is also about attaining and maintaining a position of advantage over adversaries through the successive exploitation of known or emergent possibilities rather than committing to any specific fixed plan designed at the outset.
E-Business Strategies
Outline
?Why
the Internet ?E-business Strategy ??? ?Determining Competitive Advantage ?Implementing Strategy
Why the Internet?
?When history is written, the creation of the Internet may be ranked alongside Johann Gutenberg’s printing press and Marconi’s radio as among the major advancements in human communication.” Roanoke Times, March 1, 1997
What do these technologies have in common with the Internet?
? Printing
press ? Telephone ? Automobile ? Airplane ? Television
? Over-night
delivery ? Facsimile machine ? Cellular phone ? Personal computer
Printed Material
? Mass
reproduction ? Unknown audience ? Wider geographical area ? One-way communication
Telephone
? Immediate
communication ? Interactive two-way communication ? Customer prospecting ? Wider geographical area
Planes, Trains & Automobiles
? Personal
communication ? Wider geographical base ? Two-way communication ? Perception of aboveaverage service
Television
? Wide,
mass audience ? One-way communication ? 60 second sound bite ? First visual electronic medium
Over-night Delivery
? Provide
immediate service ? Create perception of customer care ? JIT management systems
Federal Express
FAX - iT
? Immediate
transfer of written information ? Above average service ? One-way promotion ? Closer to the customer
Cellular Phone
? Mobility
? Instant
access to customers ? Above average service ? 24 hour contact
Personal Computer
? Faster
service ? Customer information ? Data bases ? Instant communication
What do they have in Common?
? ? ?
?
?
?
Wider distribution of information Uniform information Assist in marketing function of company Many were interactive Allow for impression of above average service They all have become standards in the industry
Internet
Definitions
? Electronic
Commerce (EC) is where business transactions take place via telecommunications networks, especially the Internet.
? Electronic
commerce describes the buying and selling of products, services, and information via computer networks including the Internet. ? The infrastructure for EC is a networked computing environment in business, home, and government. ? E-Business describes the broadest definition of EC. It includes customer service and intrabusiness tasks. It is frequently used interchangeably with EC.
Electronic Commerce, 2000
What is an Intranet?
? When
internet technology is used to create a private network within a company an intranet is formed.
?
?
Allows for immediate transfer of technology between locations. Provides information such as product pricing, inventory lists, production schedules, and data bases for remote employees.
What is an Extranet?
? An
extranet is formed when the company allows outsiders into the intranet pages.
?
? ? ? ? ?
Customers can order on line. Reduces paperwork Minimizes errors Provides better customer services Shortens delivery times Support distributors
What’s Needed
?Designated computer ?Software to
communicate with Internet ?A connection into a network that accesses the Internet Or * Hire a commercial service and have a connection to the network
Cost
?$1500
computer ?$300 Software ?Home page design - $100/hr - ? ?Commercial Internet access - >$100/month
Current Users
? Average
age is 40 ? 45% female ? 45% married ? 1/3 computer field, 1/4 educational & 20% professional ? >40% have made purchase over $100
Source: www.gvu.gatech.edu/user_surveys/survey-1999
What’s Being Sold
? ? ? ? ?
?
? ?
Computer software Computer hardware Books Music Gifts Travel Clothes >$100 billion sold in 1999
What’s Being Sold?
Gifts 6% Computer Products 35%
Other 26%
Books/Music 7%
Travel 26%
Source: Forester Research Inc. 1998
Technology Update
(It took this many years to reach 50 million users)
?Radio
- 38 years ?Television - 13 years ?Internet - 4 years
Why an E-Commerce Strategy
The Benefits of Electronic Commerce
?Benefits to
?Expands
markets ?Decreases the cost of creating, processing, distributing, storing and retrieving paper-based information ?Allows reduced inventories and overhead by facilitating ?pull? type supply chain management ?The pull type processing allows for customization of products and services which provides competitive advantage to its implementers
Electronic Commerce, 2000
the marketplace to national and international
Organizations
Benefits to Organizations
?Reduces
the time between the outlay of capital and the receipt of products and services ?Supports business processes reengineering (BPR) efforts ?Lowers telecommunications cost - the Internet is much cheaper than value-added networks (VANs)
Electronic Commerce, 2000
Benefits to Customers
?Enables
customers to shop or do other transactions 24 hours a day, all year round from almost any location ?Provides customers with more choices ?Provides customers with less expensive products and services by allowing them to shop in many places and conduct quick comparisons ?Allows quick delivery of products and services in some cases, especially with digitized products
Electronic Commerce, 2000
Benefits to Customers
?Customers
can receive relevant and detailed information in seconds, rather than in days or weeks ?Makes it possible to participate in virtual auctions ?Allows customers to interact with other customers in electronic communities and exchange ideas as well as compare experiences ?Electronic commerce facilitates competition, which results in substantial discounts.
Electronic Commerce, 2000
Benefits to Society
? Enables
more individuals to work at home, and to do less traveling for shopping, resulting in less traffic on the roads, and lower air pollution ? Allows some merchandise to be sold at lower prices benefiting the poor ones ? Enables people in Third World countries and rural areas to enjoy products and services which otherwise are not available to them ? Facilitates delivery of public services at a reduced cost, increases effectiveness, and/or improves quality
Electronic Commerce, 2000
Why?
?Works 24
hours a day ?Offers 2 way communication ?Unlimited access ?Interactive advertising ?Supports current business efforts
Electronic Markets
?A
market is a network of interactions and relationships where information, products, services, and payments are exchanged. The market handles all the necessary transactions. ?An electronic market is a place where shoppers and sellers meet electronically. ?In electronic markets, sellers and buyers negotiate, submit bids, agree on an order, and finish the execution on- or off-line.
Electronic Commerce, 2000
Electronic Commerce is Interdisciplinary
?Marketing ?Computer ?Management
sciences ?Consumer behavior and psychology ?Finance ?Economic ?Production/Logistic
information systems ?Accounting and auditing ?Management ?Business law and ethics
Electronic Commerce, 2000
Major Business Pressures
Market and economic pressures Strong competition Global economy Regional trade agreements (e.g. NAFTA) Extremely low labor cost in some countries Frequent and significant changes in markets Increased power of consumers Changing nature of workforce Government deregulation of banking and other services Shrinking government budgets subsides Increased importance of ethical and legal issues Increased social responsibility of organizations Rapid political changes Rapid technological obsolescence Increase innovations and new technologies Information overload Rapid decline in technology cost vs. performance ratio
Electronic Commerce, 2000
Societal and environmental pressures
Technological pressures
Competition in Electronic Commerce
?Impacts
?Lower
on competition
buyers’ search cost ?Speedy comparisons ?Differentiation ?Lower price ?Customer service ?Digital products lack normal wear and tear
Electronic Commerce, 2000
Competition in Electronic Commerce
? Perfect
competition
? Enable
many buyers and sellers to enter the market at little or no cost (no barriers to entry) ? Not allowing any buyers and sellers to individually influence the market ? Make certain products homogeneous (no product differentiation) ? Supply buyers and sellers with perfect information about the products and the market participants and conditions
Electronic Commerce, 2000
Competition in Electronic Commerce
?Observations regarding competitiveness
?There
will be many new entrants ?The bargaining power of buyers is likely to increase ?There will be more substitute products and services ?The bargaining power of suppliers may decrease ?The number of industry competitors in one location will increase
Electronic Commerce, 2000
What is Strategy
?Strategy is
the roadmap to success. ?Strategy answers the question what business are you in? ?Strategy determines how you compete within the market you are in. ?Strategy focuses the company in a unified direction.
The goal is to develop a sustainable competitive advantage. There are generally two forms of competition, Operating effectiveness (production) or Competitive position (marketing)
Competitive Advantage Can Be Achieved By:
?Concentrating on
(niche markets) ?Offering products which differ from the competition (product differentiation) ?Using alternative distribution channels and manufacturing processes ?Employing selective pricing and fundamentally different cost structures
particular market segments
Generic Strategies
Porter gives us a little more help in strategy formulation by providing three generic strategies which, if successfully implemented, can allow a firm to stake out a defended position in the marketplace. These strategies are: ? Overall cost leadership
? Differentiation
? Focus
Overall Cost Leadership
Efficient scale facilities Vigorous cost reductions
? Cost
control ? Overhead control ? Avoid marginal accounts ? Minimize R&D ? Minimize service ? Minimize advertising
Differentiation
Key idea: Create something about your product that is perceived industry wide as being unique Bases for Differentiation:
? Quality ? Delivery ? Credit ? Reputation
and Terms ? Service ? Training
/ Brand Image ? Tech. Information ? The Actual Product ? Price ? Etc.
Differentiation can provide insulation against competitors because of brand loyalty by customers and a resulting lower sensitivity to price
Focus Key Idea: Focus on a particular buyer group, segment of the product line, or geographic market
This strategy is built around serving a particular target market very well. The premise is that a firm is able to serve its narrow strategic target more effectively or efficiently than competitors who are competing more broadly
By effectively implementing this strategy a firm can achieve differentiation by better meeting the market needs or lower costs through specialization, or both
Focus your message
Pick your theme to say something special/unique about your firm, and stick to it.
? Unique
product ? Speedy Delivery ? Super Service ?? ?? ? Stay Committed!
Generic Strategies Summary
For Successful Strategic Competition, Select Arenas That Are:
? Sheltered
from changes in the business environment ? Advantaged to provide protection from intense global competition
Electronic Commerce, 2000
Determining Competitive Advantage
Strategic Planning
Industry and competitive analysis
Strategy formulation Implementation plan Strategy reassessment
Electronic Commerce, 2000
Company and Competitive Analysis
?Monitoring, evaluating, disseminating of
information from the external and internal environments ?SWOT Analysis
Strengths Opportunities Weaknesses
Threats
Electronic Commerce, 2000
SWOT
? Strengths
– those factors of the company that provide for its success. A good reputation, quality products or low cost producer. ? Weaknesses – those factors that are a disadvantage for the company. A high cost producer, a high employee turnover, or much competition. ? Opportunities – those factors that are outside the company’s control, but are areas in which they could capitalize. A changing demographic profile, competition closing plants or e-business allowing for wider distribution of products. ? Threats – those items outside the control of the company and that may hinder it. Items such as new laws, a recession or increased competition.
Company Analysis
INTERNAL FACTORS
Strengths (S)
Weaknesses (W)
Production
Marketing
Electronic Commerce, 2000
Competitive Analysis
EXTERNAL FACTORS
Production
Marketing
Opportunities (O)
Threats (T)
Electronic Commerce, 2000
Company and Competitive Analysis
INTERNAL EXTERNAL FACTORS FACTORS
Strengths (S)
SO Strategies Generate strategies here that use strengths to take advantages of opportunities ST Strategies Generate strategies here that use strengths to avoid threats
Weaknesses (W)
WO Strategies Generate strategies here that take advantage of opportunities by overcoming weaknesses
Opportunities (O)
Threats (T)
WT Strategies Generate strategies here that minimize weaknesses and avoid threats
Electronic Commerce, 2000
Strategic Questions
?The Company
?What
is your uniqueness? ?Where are you vulnerable? ?Why are you losing existing customers? ?Where is the greatest value created in the company? ?What are the most common objections you hear from customers?
Electronic Commerce, 2000
Strategic Questions
?
The competition
? ? ? ? ?
?
The market
? ? ? ? ?
Who are the top 3 competitors? What are their strengths? Where are they vulnerable? Where can you attack? How do you compare on price, service, quality, etc?
What are 3 important trends? How is the industry changing? How many market segments do you serve? Where is the greatest growth potential? Which of your customers are doing well and why?
Electronic Commerce, 2000
Competitive Strategies
?
Offensive strategy— usually takes place in an established competitor’s market ? Frontal Assault— attacker must have superior resources and willingness to persevere ? Flanking Maneuver— attack a part of the market where the competitor is weak ? Bypass Attack— cut the market out from under an established defender by offering a new type of product that makes the competitor’s product unnecessary ? Encirclement— greater product variety and/or serves more markets ? Guerrilla Warfare— use of small, intermittent assaults on different market segments held by the competitor
Electronic Commerce, 2000
Competitive Strategies
?
Defensive strategies— takes place in the firm’s own current market position as a defense against possible attack by a rival
?
? ? ?
Lower the probability of attack
Divert attacks to less threatening avenues Lessen the intensity of an attack Make competitive advantage more sustainable
Electronic Commerce, 2000
Competitive Strategies
Cooperative Strategies
?
?
?
?
Collusion— active cooperation of firms within an industry to reduce output and increase prices in order to get around the normal economic law of supply and demand (illegal) Strategic Alliance— partnership of two or more corporations or business units to achieve strategically significant objectives that are mutually beneficial Joint Venture— a way to temporarily combine the different strengths of partners to achieve an outcome of value to both Value-Chain Partnership— a strong and close alliance in which one company or unit forms a long-term arrangement with a key supplier or distributor for mutual advantage
Electronic Commerce, 2000
Strategic Summary
?Focus your
efforts! ?Define your competitive advantage! ?Have a clear strategy! ?Do it!
Implementing Strategy
Questions
? Objectives ? Benefits
? Savings
? Competitive
to customers ? Current business
advantage ? Presentation
Questions
?What are
you producing and selling? ?How are you unique? ?Why should the customer buy from you? ?How are you going to reach the customer? ?What’s success?
Objectives
Introduce new product or service ?Advertising existing business ?Supplement existing business program ?Reach broader customer base ?Provide better service ?Information exchange ?Reduce transaction costs
?
Current Customers
? Benefits
?Easier
access to information ?Shipping schedules ?Discounts ?Invoicing ?Inventories
Marketing Mix
?Promotional Tool
?Ads, publicity, sales tool
?Pricing ?Product Information ?Distribution
Savings
? Support
time ? Order entry ? Promotion response ? E-mail ? Shipping and invoicing information ? Customer lists
$
Home Page
? KISS
? Keep
it simple, stupid
1. Decide what information you want to share 2. Grab their attention quickly 3. Present information in simple, logical fashion 4. Do not put lots of graphics on first page 5. Should be pleasant to the eye
6. Each page should have company name, logo, email address and toll-free phone number
Promoting Your E-business
Why Do You Need Promotion?
?Just because you
build it, doesn’t mean they will
come. ?You are competing against not only your market area, but the entire world. ?Your current and future customers need to be able to find you.
HOW?
? List
homepage address on all current advertising. ? Put on all publicity
? newsletters ? letterhead ? business
? Register
with search
engines. ? Link to other sites and your association sites. ? Advertise on the web.
cards ? billing statements ? fax cover sheets
Link to?
?Your
trade associations ?Suppliers ?Customers ?Complementary products
Advertising on the Web
? To
build awareness ? Develop prospects ? Meet customer needs ? Generate orders ? Build customer relations ? Test market
Good Internet Advertising Includes:
Clear message and identification on 1st page. ? Facilitates easy access to further information. ? The advertisement downloads quickly. ? Provides the right information.
?
?
Product description, payment options, and contact information.
Common Search Engines
?Submit
it - www.submit-it.com ?Yahoo - www.yahoo.com ?Webcrawler - www.webcrawler.com ?Infoseek - www.infoseek.go.com ?Lycos - www.lycos.com ?Google - http://www.google.com/
The Advantage for Small Businesses
? ? ? ?
?
Inexpensive source of information Inexpensive way of advertising Inexpensive way of conducting market research Inexpensive way to build (or rent) a storefront Lower transaction cost
Electronic Commerce, 2000
The Advantage for Small Businesses
?Niche
market, specialty products (cigars, wines, sauces) are the best ?Image and public recognition can be accumulated fast ?Inexpensive way of providing catalogs ?Inexpensive way to reach worldwide customers
Electronic Commerce, 2000
The Risks and Disadvantages for Small Businesses
?Disadvantage when
(for example, CDs) ?No more personal contact which is a strong point of a small business ?No advantage being in a local community
a commodity is the product
Electronic Commerce, 2000
The Risks and Disadvantages for Small Businesses
?
?
?
Lack of expertise in legal issues, advertisement Lack of resources to fully exploit the Web Less risk tolerance than a large company
Electronic Commerce, 2000
Success Factors for Small Businesses
?
? ?
?
? ?
Niche products Small volume Capital investment must be small Inventory should be minimal or non-existent Electronic payments schema exist Payment methods must be flexible
Electronic Commerce, 2000
Success Factors for Small Businesses
? Logistical services
must be quick and reliable ? The Web site should be submitted to directory-based search engine services like Yahoo in a correct way ? Join an online service or mall and do banner exchange ? Design a Web site that is functional and provides all needed services to consumers
Electronic Commerce, 2000
Summary
Successful firms will integrate the E-business into their company’s strategy. ? Used properly, E-business will be one more method of increasing income and profits. ? It is just a matter of time before it will be as common as the fax, cell-phone and digital camera.
?
References
? Electronic
Commerce: A Managerial Perspective. 2000. By Efraim Turban, Jae Lee, David King, and H. Michael Chung. Prentice Hall, Upper Saddle Rivern New Jersey. (slides are marketed). ? E-Business Revolution. 2000. By Daniel Amor. Prentice Hall,Upper Saddle Rivern New Jersey. ? Strategic Internet Marketing. 1996. Tom Vassos. MacMillan Computer Publishing, Indianapolis, IN. ? E-Business Readiness. 2001. By James Craig and Dawn Jutla. Anderson-Wesley. Upper Saddle Rivern New Jersey.
doc_281950576.ppt
Strategy is also about attaining and maintaining a position of advantage over adversaries through the successive exploitation of known or emergent possibilities rather than committing to any specific fixed plan designed at the outset.
E-Business Strategies
Outline
?Why
the Internet ?E-business Strategy ??? ?Determining Competitive Advantage ?Implementing Strategy
Why the Internet?
?When history is written, the creation of the Internet may be ranked alongside Johann Gutenberg’s printing press and Marconi’s radio as among the major advancements in human communication.” Roanoke Times, March 1, 1997
What do these technologies have in common with the Internet?
? Printing
press ? Telephone ? Automobile ? Airplane ? Television
? Over-night
delivery ? Facsimile machine ? Cellular phone ? Personal computer
Printed Material
? Mass
reproduction ? Unknown audience ? Wider geographical area ? One-way communication
Telephone
? Immediate
communication ? Interactive two-way communication ? Customer prospecting ? Wider geographical area
Planes, Trains & Automobiles
? Personal
communication ? Wider geographical base ? Two-way communication ? Perception of aboveaverage service
Television
? Wide,
mass audience ? One-way communication ? 60 second sound bite ? First visual electronic medium
Over-night Delivery
? Provide
immediate service ? Create perception of customer care ? JIT management systems
Federal Express
FAX - iT
? Immediate
transfer of written information ? Above average service ? One-way promotion ? Closer to the customer
Cellular Phone
? Mobility
? Instant
access to customers ? Above average service ? 24 hour contact
Personal Computer
? Faster
service ? Customer information ? Data bases ? Instant communication
What do they have in Common?
? ? ?
?
?
?
Wider distribution of information Uniform information Assist in marketing function of company Many were interactive Allow for impression of above average service They all have become standards in the industry
Internet
Definitions
? Electronic
Commerce (EC) is where business transactions take place via telecommunications networks, especially the Internet.
? Electronic
commerce describes the buying and selling of products, services, and information via computer networks including the Internet. ? The infrastructure for EC is a networked computing environment in business, home, and government. ? E-Business describes the broadest definition of EC. It includes customer service and intrabusiness tasks. It is frequently used interchangeably with EC.
Electronic Commerce, 2000
What is an Intranet?
? When
internet technology is used to create a private network within a company an intranet is formed.
?
?
Allows for immediate transfer of technology between locations. Provides information such as product pricing, inventory lists, production schedules, and data bases for remote employees.
What is an Extranet?
? An
extranet is formed when the company allows outsiders into the intranet pages.
?
? ? ? ? ?
Customers can order on line. Reduces paperwork Minimizes errors Provides better customer services Shortens delivery times Support distributors
What’s Needed
?Designated computer ?Software to
communicate with Internet ?A connection into a network that accesses the Internet Or * Hire a commercial service and have a connection to the network
Cost
?$1500
computer ?$300 Software ?Home page design - $100/hr - ? ?Commercial Internet access - >$100/month
Current Users
? Average
age is 40 ? 45% female ? 45% married ? 1/3 computer field, 1/4 educational & 20% professional ? >40% have made purchase over $100
Source: www.gvu.gatech.edu/user_surveys/survey-1999
What’s Being Sold
? ? ? ? ?
?
? ?
Computer software Computer hardware Books Music Gifts Travel Clothes >$100 billion sold in 1999
What’s Being Sold?
Gifts 6% Computer Products 35%
Other 26%
Books/Music 7%
Travel 26%
Source: Forester Research Inc. 1998
Technology Update
(It took this many years to reach 50 million users)
?Radio
- 38 years ?Television - 13 years ?Internet - 4 years
Why an E-Commerce Strategy
The Benefits of Electronic Commerce
?Benefits to
?Expands
markets ?Decreases the cost of creating, processing, distributing, storing and retrieving paper-based information ?Allows reduced inventories and overhead by facilitating ?pull? type supply chain management ?The pull type processing allows for customization of products and services which provides competitive advantage to its implementers
Electronic Commerce, 2000
the marketplace to national and international
Organizations
Benefits to Organizations
?Reduces
the time between the outlay of capital and the receipt of products and services ?Supports business processes reengineering (BPR) efforts ?Lowers telecommunications cost - the Internet is much cheaper than value-added networks (VANs)
Electronic Commerce, 2000
Benefits to Customers
?Enables
customers to shop or do other transactions 24 hours a day, all year round from almost any location ?Provides customers with more choices ?Provides customers with less expensive products and services by allowing them to shop in many places and conduct quick comparisons ?Allows quick delivery of products and services in some cases, especially with digitized products
Electronic Commerce, 2000
Benefits to Customers
?Customers
can receive relevant and detailed information in seconds, rather than in days or weeks ?Makes it possible to participate in virtual auctions ?Allows customers to interact with other customers in electronic communities and exchange ideas as well as compare experiences ?Electronic commerce facilitates competition, which results in substantial discounts.
Electronic Commerce, 2000
Benefits to Society
? Enables
more individuals to work at home, and to do less traveling for shopping, resulting in less traffic on the roads, and lower air pollution ? Allows some merchandise to be sold at lower prices benefiting the poor ones ? Enables people in Third World countries and rural areas to enjoy products and services which otherwise are not available to them ? Facilitates delivery of public services at a reduced cost, increases effectiveness, and/or improves quality
Electronic Commerce, 2000
Why?
?Works 24
hours a day ?Offers 2 way communication ?Unlimited access ?Interactive advertising ?Supports current business efforts
Electronic Markets
?A
market is a network of interactions and relationships where information, products, services, and payments are exchanged. The market handles all the necessary transactions. ?An electronic market is a place where shoppers and sellers meet electronically. ?In electronic markets, sellers and buyers negotiate, submit bids, agree on an order, and finish the execution on- or off-line.
Electronic Commerce, 2000
Electronic Commerce is Interdisciplinary
?Marketing ?Computer ?Management
sciences ?Consumer behavior and psychology ?Finance ?Economic ?Production/Logistic
information systems ?Accounting and auditing ?Management ?Business law and ethics
Electronic Commerce, 2000
Major Business Pressures
Market and economic pressures Strong competition Global economy Regional trade agreements (e.g. NAFTA) Extremely low labor cost in some countries Frequent and significant changes in markets Increased power of consumers Changing nature of workforce Government deregulation of banking and other services Shrinking government budgets subsides Increased importance of ethical and legal issues Increased social responsibility of organizations Rapid political changes Rapid technological obsolescence Increase innovations and new technologies Information overload Rapid decline in technology cost vs. performance ratio
Electronic Commerce, 2000
Societal and environmental pressures
Technological pressures
Competition in Electronic Commerce
?Impacts
?Lower
on competition
buyers’ search cost ?Speedy comparisons ?Differentiation ?Lower price ?Customer service ?Digital products lack normal wear and tear
Electronic Commerce, 2000
Competition in Electronic Commerce
? Perfect
competition
? Enable
many buyers and sellers to enter the market at little or no cost (no barriers to entry) ? Not allowing any buyers and sellers to individually influence the market ? Make certain products homogeneous (no product differentiation) ? Supply buyers and sellers with perfect information about the products and the market participants and conditions
Electronic Commerce, 2000
Competition in Electronic Commerce
?Observations regarding competitiveness
?There
will be many new entrants ?The bargaining power of buyers is likely to increase ?There will be more substitute products and services ?The bargaining power of suppliers may decrease ?The number of industry competitors in one location will increase
Electronic Commerce, 2000
What is Strategy
?Strategy is
the roadmap to success. ?Strategy answers the question what business are you in? ?Strategy determines how you compete within the market you are in. ?Strategy focuses the company in a unified direction.
The goal is to develop a sustainable competitive advantage. There are generally two forms of competition, Operating effectiveness (production) or Competitive position (marketing)
Competitive Advantage Can Be Achieved By:
?Concentrating on
(niche markets) ?Offering products which differ from the competition (product differentiation) ?Using alternative distribution channels and manufacturing processes ?Employing selective pricing and fundamentally different cost structures
particular market segments
Generic Strategies
Porter gives us a little more help in strategy formulation by providing three generic strategies which, if successfully implemented, can allow a firm to stake out a defended position in the marketplace. These strategies are: ? Overall cost leadership
? Differentiation
? Focus
Overall Cost Leadership
Efficient scale facilities Vigorous cost reductions
? Cost
control ? Overhead control ? Avoid marginal accounts ? Minimize R&D ? Minimize service ? Minimize advertising
Differentiation
Key idea: Create something about your product that is perceived industry wide as being unique Bases for Differentiation:
? Quality ? Delivery ? Credit ? Reputation
and Terms ? Service ? Training
/ Brand Image ? Tech. Information ? The Actual Product ? Price ? Etc.
Differentiation can provide insulation against competitors because of brand loyalty by customers and a resulting lower sensitivity to price
Focus Key Idea: Focus on a particular buyer group, segment of the product line, or geographic market
This strategy is built around serving a particular target market very well. The premise is that a firm is able to serve its narrow strategic target more effectively or efficiently than competitors who are competing more broadly
By effectively implementing this strategy a firm can achieve differentiation by better meeting the market needs or lower costs through specialization, or both
Focus your message
Pick your theme to say something special/unique about your firm, and stick to it.
? Unique
product ? Speedy Delivery ? Super Service ?? ?? ? Stay Committed!
Generic Strategies Summary
For Successful Strategic Competition, Select Arenas That Are:
? Sheltered
from changes in the business environment ? Advantaged to provide protection from intense global competition
Electronic Commerce, 2000
Determining Competitive Advantage
Strategic Planning
Industry and competitive analysis
Strategy formulation Implementation plan Strategy reassessment
Electronic Commerce, 2000
Company and Competitive Analysis
?Monitoring, evaluating, disseminating of
information from the external and internal environments ?SWOT Analysis
Strengths Opportunities Weaknesses
Threats
Electronic Commerce, 2000
SWOT
? Strengths
– those factors of the company that provide for its success. A good reputation, quality products or low cost producer. ? Weaknesses – those factors that are a disadvantage for the company. A high cost producer, a high employee turnover, or much competition. ? Opportunities – those factors that are outside the company’s control, but are areas in which they could capitalize. A changing demographic profile, competition closing plants or e-business allowing for wider distribution of products. ? Threats – those items outside the control of the company and that may hinder it. Items such as new laws, a recession or increased competition.
Company Analysis
INTERNAL FACTORS
Strengths (S)
Weaknesses (W)
Production
Marketing
Electronic Commerce, 2000
Competitive Analysis
EXTERNAL FACTORS
Production
Marketing
Opportunities (O)
Threats (T)
Electronic Commerce, 2000
Company and Competitive Analysis
INTERNAL EXTERNAL FACTORS FACTORS
Strengths (S)
SO Strategies Generate strategies here that use strengths to take advantages of opportunities ST Strategies Generate strategies here that use strengths to avoid threats
Weaknesses (W)
WO Strategies Generate strategies here that take advantage of opportunities by overcoming weaknesses
Opportunities (O)
Threats (T)
WT Strategies Generate strategies here that minimize weaknesses and avoid threats
Electronic Commerce, 2000
Strategic Questions
?The Company
?What
is your uniqueness? ?Where are you vulnerable? ?Why are you losing existing customers? ?Where is the greatest value created in the company? ?What are the most common objections you hear from customers?
Electronic Commerce, 2000
Strategic Questions
?
The competition
? ? ? ? ?
?
The market
? ? ? ? ?
Who are the top 3 competitors? What are their strengths? Where are they vulnerable? Where can you attack? How do you compare on price, service, quality, etc?
What are 3 important trends? How is the industry changing? How many market segments do you serve? Where is the greatest growth potential? Which of your customers are doing well and why?
Electronic Commerce, 2000
Competitive Strategies
?
Offensive strategy— usually takes place in an established competitor’s market ? Frontal Assault— attacker must have superior resources and willingness to persevere ? Flanking Maneuver— attack a part of the market where the competitor is weak ? Bypass Attack— cut the market out from under an established defender by offering a new type of product that makes the competitor’s product unnecessary ? Encirclement— greater product variety and/or serves more markets ? Guerrilla Warfare— use of small, intermittent assaults on different market segments held by the competitor
Electronic Commerce, 2000
Competitive Strategies
?
Defensive strategies— takes place in the firm’s own current market position as a defense against possible attack by a rival
?
? ? ?
Lower the probability of attack
Divert attacks to less threatening avenues Lessen the intensity of an attack Make competitive advantage more sustainable
Electronic Commerce, 2000
Competitive Strategies
Cooperative Strategies
?
?
?
?
Collusion— active cooperation of firms within an industry to reduce output and increase prices in order to get around the normal economic law of supply and demand (illegal) Strategic Alliance— partnership of two or more corporations or business units to achieve strategically significant objectives that are mutually beneficial Joint Venture— a way to temporarily combine the different strengths of partners to achieve an outcome of value to both Value-Chain Partnership— a strong and close alliance in which one company or unit forms a long-term arrangement with a key supplier or distributor for mutual advantage
Electronic Commerce, 2000
Strategic Summary
?Focus your
efforts! ?Define your competitive advantage! ?Have a clear strategy! ?Do it!
Implementing Strategy
Questions
? Objectives ? Benefits
? Savings
? Competitive
to customers ? Current business
advantage ? Presentation
Questions
?What are
you producing and selling? ?How are you unique? ?Why should the customer buy from you? ?How are you going to reach the customer? ?What’s success?
Objectives
Introduce new product or service ?Advertising existing business ?Supplement existing business program ?Reach broader customer base ?Provide better service ?Information exchange ?Reduce transaction costs
?
Current Customers
? Benefits
?Easier
access to information ?Shipping schedules ?Discounts ?Invoicing ?Inventories
Marketing Mix
?Promotional Tool
?Ads, publicity, sales tool
?Pricing ?Product Information ?Distribution
Savings
? Support
time ? Order entry ? Promotion response ? E-mail ? Shipping and invoicing information ? Customer lists
$
Home Page
? KISS
? Keep
it simple, stupid
1. Decide what information you want to share 2. Grab their attention quickly 3. Present information in simple, logical fashion 4. Do not put lots of graphics on first page 5. Should be pleasant to the eye
6. Each page should have company name, logo, email address and toll-free phone number
Promoting Your E-business
Why Do You Need Promotion?
?Just because you
build it, doesn’t mean they will
come. ?You are competing against not only your market area, but the entire world. ?Your current and future customers need to be able to find you.
HOW?
? List
homepage address on all current advertising. ? Put on all publicity
? newsletters ? letterhead ? business
? Register
with search
engines. ? Link to other sites and your association sites. ? Advertise on the web.
cards ? billing statements ? fax cover sheets
Link to?
?Your
trade associations ?Suppliers ?Customers ?Complementary products
Advertising on the Web
? To
build awareness ? Develop prospects ? Meet customer needs ? Generate orders ? Build customer relations ? Test market
Good Internet Advertising Includes:
Clear message and identification on 1st page. ? Facilitates easy access to further information. ? The advertisement downloads quickly. ? Provides the right information.
?
?
Product description, payment options, and contact information.
Common Search Engines
?Submit
it - www.submit-it.com ?Yahoo - www.yahoo.com ?Webcrawler - www.webcrawler.com ?Infoseek - www.infoseek.go.com ?Lycos - www.lycos.com ?Google - http://www.google.com/
The Advantage for Small Businesses
? ? ? ?
?
Inexpensive source of information Inexpensive way of advertising Inexpensive way of conducting market research Inexpensive way to build (or rent) a storefront Lower transaction cost
Electronic Commerce, 2000
The Advantage for Small Businesses
?Niche
market, specialty products (cigars, wines, sauces) are the best ?Image and public recognition can be accumulated fast ?Inexpensive way of providing catalogs ?Inexpensive way to reach worldwide customers
Electronic Commerce, 2000
The Risks and Disadvantages for Small Businesses
?Disadvantage when
(for example, CDs) ?No more personal contact which is a strong point of a small business ?No advantage being in a local community
a commodity is the product
Electronic Commerce, 2000
The Risks and Disadvantages for Small Businesses
?
?
?
Lack of expertise in legal issues, advertisement Lack of resources to fully exploit the Web Less risk tolerance than a large company
Electronic Commerce, 2000
Success Factors for Small Businesses
?
? ?
?
? ?
Niche products Small volume Capital investment must be small Inventory should be minimal or non-existent Electronic payments schema exist Payment methods must be flexible
Electronic Commerce, 2000
Success Factors for Small Businesses
? Logistical services
must be quick and reliable ? The Web site should be submitted to directory-based search engine services like Yahoo in a correct way ? Join an online service or mall and do banner exchange ? Design a Web site that is functional and provides all needed services to consumers
Electronic Commerce, 2000
Summary
Successful firms will integrate the E-business into their company’s strategy. ? Used properly, E-business will be one more method of increasing income and profits. ? It is just a matter of time before it will be as common as the fax, cell-phone and digital camera.
?
References
? Electronic
Commerce: A Managerial Perspective. 2000. By Efraim Turban, Jae Lee, David King, and H. Michael Chung. Prentice Hall, Upper Saddle Rivern New Jersey. (slides are marketed). ? E-Business Revolution. 2000. By Daniel Amor. Prentice Hall,Upper Saddle Rivern New Jersey. ? Strategic Internet Marketing. 1996. Tom Vassos. MacMillan Computer Publishing, Indianapolis, IN. ? E-Business Readiness. 2001. By James Craig and Dawn Jutla. Anderson-Wesley. Upper Saddle Rivern New Jersey.
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