COMP7880：E-Business Strategies Internal organization of e-business activities

COMP7880: E-Business Strategies Internal organization of e-business activities Dickson Kw chiu PhD, smieee sAcm life MhCs Jelassi Enders: Chapter 9

1 Dickson K.W. Chiu PhD, SMIEEE, SMACM, Life MHKCS Jelassi & Enders: Chapter 9 COMP7880: E-Business Strategies Internal organization of e-business activities

Our roadmap 12 Mobile e-commerce strateg F-h usiness strategy Strategic Strategy formulation Strate analysis implementation External analys options organisation Opportunities/ threats Strengths/ Sustaining Exploring Interaction with weaknesses competitive new market Implementation advantage suppliers spaces Internal analysIs Creating and Interaction with capturing value users/customers COMP7880-I0-2

Strategy options External analysis Internal analysis Sustaining competitive advantage Internal organisation Implementation Exploring new market spaces Interaction with suppliers Interaction with users/customers Creating and capturing value Strategic analysis Strategy implementation 3 4 5 6 7 8 9 10 11 13 E-business strategy 12 Mobile e-commerce strategy Opportunities/ threats Strengths/ weaknesses Our Roadmap Strategy formulation COMP7880-IO-2

PC industry(1990s)became increasingly fragmented IBM- Micro processors Integrated Operati ication Integ tware cIrcu ems value nemory chain (1985) Compaq Retail Microsoft Windows Unbundled Intel Office Megastore value Apple Netscape Online chain Motorolar UNIX Adobe Post orde 1999) OS Mac c Direct LInux rce: Adapted from D. Heuskel (1999)

IBM￾Integrated value chain (1985) Micro processors, integrated circuits, memory chips PCs Operating systems Application software Marketing, sales and distribution Retail Megastores Online Post order Unbundled value chain (1999) Intel Motorola AMD Cyrix Compaq Dell Apple IBM Windows UNIX Mac OSOS/2 Microsoft Office Netscape Adobe Linux Direct sales Source: Adapted from D. Heuskel (1999), p. 53. PC industry (1990s) became increasingly fragmented

Variety of options for making a product or service Market entail the purchase from an external provider on transactions an individual one-by-one contractual basis ong-term entail the purchase from an external provider on a contracts contractual basis spanning over an extended period of time entail the close co-operation of two separate Alliances firms that join up in the production of a certain product or service. Parent entail the setting up of a distinct firm that subsidiary operates separately from yet under the auspices of, the parent company internal entails a process that is managed completely production internally, without any outsourcing to external providers

Variety of options for making a product or service. Market transactions Long-term contracts Alliances entail the purchase from an external provider on a contractual basis, spanning over an extended period of time. entail the close co-operation of two separate firms that join up in the production of a certain product or service. entail the purchase from an external provider on an individual one-by-one contractual basis. Parent/ subsidiary Internal production entail the setting up of a distinct firm that operates separately from, yet under the auspices of, the parent company. entails a process that is managed completely internally, without any outsourcing to external providers

Reasons favoring make or buy decisions uring Reasons, fa make decisions ouring decisions Strong linkage between High economies of scale activities High capital requirements Confidentiality of information Specialized know-how High transaction costs Higher efficiency of the open markets Think, how does lr impacts?

Reasons favoring ‘make’ or ‘buy’ decisions Reasons favouring ‘make’ decisions Strong linkage between activities Confidentiality of information High transaction costs High economies of scale High capital requirements Specialized know-how Higher efficiency of the open markets Reasons favouring ‘buy’ decisions Think: how does IT impacts?

Clicks-and-mortar spectrum spans from integration to separation of activities Clicks-and-mortar spectrum Independent Strategic In-house business alllance venture dIvision spin-off (e.g. Amazon. com (e.g. KB Toys (e.g, Tesco. com) e.g. BOL. de) and Borders and brain Play. com) Integratjon Separation blished brand shared information ore flexi erage ace o venture capItal for funding distribution efficiencies shared customer services Source: Adapted fromR. Gulati and J Garino(2000)

Source: Adapted from R. Gulati and J. Garino (2000). Clicks-and-mortar spectrum spans from integration to separation of activities Integration • established brand • shared information • purchasing leverage • cross-promotion • distribution efficiencies • shared customer services Independent business/ spin-off (e.g. BOL.de) Strategic alliance (e.g. Amazon.com and Borders) Joint venture (e.g. KB Toys and Brain￾Play.com) In-house division (e.g,Tesco.com) Clicks-and-mortar spectrum Separation • greater focus • more flexibility • access to venture capital for funding

Separation vs integration Separate organization Integrated organization ● Greater focus Established and trusted brand · More flexibility and faster· Shared information decisions ● cross- promotion Entrepreneurial culture ● Purchasing leverage Access to venture capital Distribution efficiencies Source: R. Gulati and J. Garino(2000), pp. 107-114 Shared customer service Think, how does lr impacts?

• Established and trusted brand • Shared information • Cross-promotion • Purchasing leverage • Distribution efficiencies • Shared customer service Separate organization Integrated organization Source: R. Gulati and J. Garino (2000), pp. 107-114 Separation vs integration • Greater focus • More flexibility and faster decisions • Entrepreneurial culture • Access to venture capital Think: how does IT impacts?

Traditional corporation can be unbundled into 3 distinct businesses ome management 鹞pWt stomers Product Infrastructure innovation management Conceive attractive new strive d commercialise them operationa tasks ource: Adapted from J. Hagel and M. Singer(1999)

Product innovation Conceive attractive new products and services and commercialise them Customer relationship management Identify, attract, and build relationships with customers Infrastructure management Build and manage facilities for high￾volume, repetitive operational tasks Source: Adapted from J. Hagel and M. Singer (1999). Traditional corporation can be unbundled into 3 distinct businesses

Different imperatives regarding economics, culture, and competition Businesses Product Customer relationship Infrastructure innovation management management Early market High cost of ustomer High fixed costs entry allows for acquisition makes it make large a premium prIce volumes essential Economics and a large imperative to gain to achieving low m market share arge shares o speed is the key wallet, economies unit costs, p of scope are the economies of key scale are the key Employee Highly service Cost focused centered a Culture oriented; stress on coddling the customer standardization creative ' stars comes first predictability efficien Battle for talent ow barriers to Battle for scope Battle for scale id consolidatio rap entry many Competition small players a few big players consolidation;a thrive dominate few big players dominate urce: Adapted from J. Hagel and M. Singer(1999)

Product innovation Customer relationship management Infrastructure management Economics Early market entry allows for a premium price and a large market share; speed is the key High cost of customer acquisition makes it imperative to gain large shares of wallet; economies of scope are the key High fixed costs make large volumes essential to achieving low unit costs; economies of scale are the key Culture Employee centered; coddling the creative ‘stars’ Highly service oriented; ‘customer comes first’ Cost focused; stress on standardization, predictability, efficiency Competition Battle for talent; low barriers to entry; many small players thrive Battle for scope; rapid consolidation; a few big players dominate Battle for scale; rapid consolidation; a few big players dominate I m p e r a t i v e s Businesses Source: Adapted from J. Hagel and M. Singer (1999). Different imperatives regarding economics, culture, and competition

Channel conflict matrix analyses how to resolve different channel conflicts Relative importance of threatened channel Higl LOW High Address channel conflict threatened channel orde Traditional retailer Conf Internet ct 4 Reassure LOW embers of neatened iothers Ignore channe Source: Adapted fromC. Bucklin, P. Thomas-Graham and E Webster, ' Channel conffict: w hen is it dangerous?', McKinsey Quarterly, 1997, No. 3, pp 36-43

Relative importance of threatened channel Risk of conflict between different channels Low High Low Reassure members of threatened channel Address channel conflict Accept the decline of threatened channel Ignore 1 2 3 4 Traditional retailer Internet M a i l o r d e r O t h e r s Conf lict Source: Adapted from C. Bucklin, P. Thomas-Graham and E. Webster, ‘Channel conflict: w hen is it dangerous?’, McKinsey Quarterly, 1997, No. 3, pp. 36–43. Channel conflict matrix analyses how to resolve different channel conflicts High