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Strategy and E-Business Dr. Ronan McIvor 2007.

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

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Strategy and E-Business Dr. Ronan McIvor 2007.

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  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 Adapted from Hackbarth and Kettinger, 2000

  4. E-Business Strategy Stages 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 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 Porter, 2001

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

  11. Stage IV - Transition Minus Equals E-Business Strategy Status Quo Strategy Gap Factor in Change Readiness Assessment Factor in Cost/Benefit/ 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 Next generation e-Business Full e-Business Optimisation Retail Transactions Web-enabled Business Operations Integration with Production Systems & Business Customers Launch & Growth Stepwise IT Implementation Order Entry: Sales & Service via the ‘Net Searchable Dynamic Web Site Providing web-presence and informational services Pre-Launch Static Web-site Stepwise Launch of Business Propositions Morath, 2000

  13. Change Readiness Assessment 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 Amit and Zott, 2001

  17. Value Creation in the Air Transport Offering McIvor et al., 2002

  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

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