Learn Secrets of How to Strategically Get Ahead with E-Commerce Solutions!
Before we get into the comlexities of this, we would like to take a moment to emphasize what we at
eCommerceDevelopment.com,
and most of the top business schools in the world view as being the foundation to all business,
commerce and/or trade.
The core foundatation of how to strategically get ahead with e-commerce solutions, no matter what market you are in, is by focusing on your
customer base. The key is to turn the
consumers within your market reach into
customers by focusing more of your
personal time and energy into carefully empathizing with them, so as to first and foremost understand
them and their needs and wants in order to best provide them with what they most want and need.
Strategic eCommerce is very significant to a rapidly increasing percentage of businesses
and corporations. Based on real-world experience, Strategic eCommerce today is vitally important to three kinds of enterprises.
First, and most often, are companies that depend upon suppliers, distributors, and other business partners in order to
deliver goods and services to customers. Secondly are those companies which sell readily understood and broadly marketed goods
to consumers. Third are those companies that have highly unusual goods or services and limited ability to expand traditional
forms of distribution.
Take advantage of this booming opportunity now by employing e-commerce solutions.
For your Customers: ease of shopping
with virtual "shopping cart" point and click technology, and purchasing using secure, real-time transactions with any payment method
they choose. For you: displaying prices in any currency, automatic transaction totals and invoices, and generation of sales
statistics. Orders are directed to you for fulfillment and payment is routed to your merchant account. It doesn't get any
easier than this.
If your company falls into any of these categories, then the ability to conduct secure business transactions across the
Internet can give you instant access to a new way to reach customers. By implementing electronic commerce solutions,
you can expand your market reach, increase revenue, lower operating costs and enhance customer satisfaction.
Taking strategic advantage of electronic commerce solutions can be a challenging process and requires a detailed understanding of the
world of e-commerce, Internet marketing issues and the underlying financial, technology and security systems involved.
Strategic eCommerce will deploy adapt e-commerce solutions to develop a comprehensive plan
and implement specific business goals and keep you ahead of the competition.
Strategy
A strategy is a plan of action designed to achieve a particular goal. The word strategy has military connotations, because it derives
from the Greek word for general. Strategy is different from tactics. In military terms, tactics is concerned with the conduct of an engagement
while strategy is concerned with how different engagements are linked. In other words, how a battle is fought is a matter of tactics: whether it
should be fought at all is a matter of strategy.
When it comes to e-Commerce, there are many very complex aspects to take into
account of how to strategically get ahead.
Porter's five forces analysis is a framework for the industry analysis and business strategy development developed by Michael E.
Porter of Harvard Business School in 1979. It uses concepts developed in Industrial Organization economics to derive five forces
which determine the competitive intensity and therefore attractiveness of a market. Attractiveness in this context refers to the overall
industry profitability. An "unattractive" industry is one where the combination of forces acts to drive down overall profitability.
A very unattractive industry would be one approaching "pure competition".
Porter referred to these forces as the micro environment, to contrast it with the more general term macro environment. They consist of those
forces close to a company that affect its ability to serve its customers and make a profit. A change in any of the forces normally requires
a company to re-assess the marketplace. The overall industry attractiveness does not imply that every firm in the industry will return the same
profitability. Firms are able to apply their core competences, business model or network to achieve a profit above the industry average. A clear
example of this is the airline industry. As an industry, profitability is low and yet individual companies, by applying unique business models have
been able to make a return in excess of the industry average.
Strategy consultants occasionally use Porter's five forces framework when making a qualitative evaluation of a firm's strategic planning for
business and e-commerce.
However, for most consultants, the framework is only a starting point or 'check-list' they might use. Like all general frameworks,
an analysis that uses it to the exclusion of specifics about a particular situation is considered naive.
Porter's five forces include three forces from 'horizontal' competition: threat of substitute products, the threat of established rivals,
and the threat of new entrants; and two forces from 'vertical' competition: the bargaining power of suppliers, bargaining power of customers.
According to Porter, the five forces model should be used at the industry level; it is not designed to be used at the industry group or
industry sector level. An industry is defined at a lower, more basic level: a market in which similar or closely related products and/or
services are sold to buyers. Firms that compete in a single industry should develop, at a minimum, one five forces analysis for its industry.
Porter makes clear that for diversified companies, the first fundamental issue in corporate strategy is the selection of industries
(lines of business) in which the company should compete; and each line of business should develop its own, industry-specific,
five forces analysis. The average Global 1,000 company competes in approximately 52 industries (lines of business). This five forces analysis
is just one part of the complete Porter strategic models.
Porter's Five Forces
The threat of substitute products:
The existence of close substitute products increases the propensity of customers
to switch to alternatives in response to price increases (high elasticity of demand).
buyer propensity to substitute
relative price performance of substitutes
buyer switching costs
perceived level of product differentiation
The threat of the entry of new competitors:
Profitable markets that yield high returns will draw firms. This results in many new entrants, which will effectively decrease profitability. Unless the entry of new firms can be blocked by incumbents, the profit rate will fall towards a competitive level (perfect competition).
the existence of barriers to entry (patents, rights, etc.)
economies of product differences
brand equity
switching costs or sunk costs
capital requirements
access to distribution
absolute cost advantages
learning curve advantages
expected retaliation by incumbents
government policies
The intensity of competitive rivalry:
For most industries, this is the major determinant of the competitiveness of the industry. Sometimes rivals compete aggressively and sometimes rivals compete in non-price dimensions such as innovation, marketing, etc.
number of competitors
rate of industry growth
intermittent industry overcapacity
exit barriers
diversity of competitors
informational complexity and asymmetry
fixed cost allocation per value added
level of advertising expense
Economies of scale
Sustainable competitive advantage through improvisation
The bargaining power of customers:
Also described as the market of outputs. The ability of customers to put the firm under pressure and it also affects the customer's sensitivity to price changes.
buyer concentration to firm concentration ratio
degree of dependency upon existing channels of distribution
bargaining leverage, particularly in industries with high fixed costs
buyer volume
buyer switching costs relative to firm switching costs
buyer information availability
ability to backward integrate
availability of existing substitute products
buyer price sensitivity
differential advantage (uniqueness) of industry products
RFM Analysis
The bargaining power of suppliers:
Also described as market of inputs. Suppliers of raw materials, components, labor, and services (such as expertise) to the firm can be a source of power over the firm. Suppliers may refuse to work with the firm, or e.g. charge excessively high prices for unique resources.
supplier switching costs relative to firm switching costs
degree of differentiation of inputs
presence of substitute inputs
supplier concentration to firm concentration ratio
employee solidarity (e.g. labor unions)
threat of forward integration by suppliers relative to the threat of backward integration by firms
cost of inputs relative to selling price of the product.
The other elements are the value chain, generic strategies and Strategic Management. “Strategic management is an ongoing process that assesses
the electronic commerce (or e-commerce) business and the industries in which the company is involved;
assesses its competitors and sets goals and strategies to meet all existing and potential competitors; and then reassesses each strategy
annually or quarterly [i.e. regularly] to determine how it has been implemented and whether it has succeeded or needs replacement by a new
strategy to meet changed circumstances, new technology, new competitors, a new economic environment., or a new social, financial, or
political environment.” (Lamb, 1984:ix)
Strategic management is the art and science of formulating, implementing and evaluating cross-functional decisions that will enable an
organization to achieve its objectives. It is the process of specifying the organization's objectives, developing policies and plans to
achieve these objectives, and allocating resources to implement the policies and plans to achieve the organization's objectives. Strategic management,
therefore, combines the activities of the various functional areas of a business to achieve organizational objectives. It is the highest level of
managerial activity, usually formulated by the Board of directors and performed by the organization's Chief Executive Officer (CEO) and executive team.
Strategic management provides overall direction to the enterprise and is closely related to the field of Organization Studies. In the field of
business administration it is possible mention to the "strategic consistency." According to Arieu (2007), "there is strategic consistency when
the actions of an organization are consistent with the expectations of management, and these in turn are with the market and the context."
To develop good strategic eCommerce the eCommerce must
first be assesed and evaluated. Simply put, Electronic commerce, commonly known as e-commerce or
eCommerce, is the buying and selling of products or
services over electronic systems
such as the Internet and other computer networks. The amount of trade conducted electronically has grown tremendously from the development of
the Internet. A wide variety of commerce is carried out by spurring and drawing on innovations in electronic funds transfer, supply
chain management, Internet marketing, online transaction processing, electronic data interchange (EDI), inventory management systems,
and automated data collection systems. Modern electronic commerce typically uses the World Wide Web
at least at some point in the transaction's lifecycle, although it can encompass a wider range of technologies such as e-mail as well.
A large percentage of electronic commerce is conducted entirely electronically for virtual items such
as access to premium content on a website, but most electronic commerce involves the transportation
of physical items in some way. Online retailers are sometimes known as e-tailers and online retail is sometimes known as e-tail. Almost all big retailers have
electronic commerce presence on the World Wide Web.
Electronic commerce that is conducted between businesses is referred to as Business-to-business or B2B. B2B can be open to all
interested parties (e.g. commodity exchange) or limited to specific, pre-qualified participants (private electronic market).
Electronic commerce is generally considered to be the sales aspect of
e-business. It also consists of the exchange of data to
facilitate the financing and payment aspects of the business transactions.
Strategy formulation:
Performing a situation analysis, self-evaluation and competitor analysis: both internal and external; both micro-environmental and macro-environmental.
Concurrent with this assessment, objectives are set. These objectives should be parallel to a timeline; some are in the short-term and others on the
long-term. This involves crafting vision statements (long term view of a possible future), mission statements (the role that the organization gives
itself in society), overall corporate objectives (both financial and strategic), strategic business unit objectives (both financial and strategic),
and tactical objectives.
These objectives should, in the light of the situation analysis, suggest a strategic plan. The plan provides the details of how to achieve these
objectives.
This three-step strategy formulation process is sometimes referred to as determining where you are now, determining where you want to go, and
then determining how to get there. These three questions are the essence of strategic planning. SWOT Analysis: I/O Economics for the external
factors and RBV for the internal factors.
Strategy implementation:
Allocation and management of sufficient resources (financial, personnel, time, technology support)
Establishing a chain of command or some alternative structure (such as cross functional teams)
Assigning responsibility of specific tasks or processes to specific individuals or groups
It also involves managing the process. This includes monitoring results, comparing to benchmarks and best practices,
evaluating the efficacy and efficiency of the process, controlling for variances, and making adjustments to the process as necessary.
When implementing specific programs, this involves acquiring the requisite resources, developing the process, training,
process testing, documentation, and integration with (and/or conversion from) legacy processes.
Strategy evaluation:
Measuring the effectiveness of the organizational strategy. It's extremely important to conduct a SWOT analysis to figure out the strengths, weaknesses, opportunities and threats (both internal and external) of the entity in question. This may require to take certain precautionary measures or even to change the entire strategy.
In corporate strategy, Johnson and Scholes present a model in which strategic options are evaluated against three key success criteria:
Suitability (would it work?)
Feasibility (can it be made to work?)
Acceptability (will they work it?)
Feasibility:
Feasibility is concerned with the resources required to implement the strategy are available, can be developed or obtained. Resources include funding, people, time and information.
Tools that can be used to evaluate feasibility include:
cash flow analysis and forecasting
break-even analysis
resource deployment analysis
Gaining competitive advantage:
The Japanese challenge shook the confidence of the western business elite, but detailed comparisons of the two management styles and examinations
of successful businesses convinced westerners that they could overcome the challenge. The 1980s and early 1990s saw a plethora of theories
explaining exactly how this could be done. They cannot all be detailed here, but some of the more important strategic advances of the decade
are explained below.
Gary Hamel and C. K. Prahalad declared that strategy needs to be more active and interactive; less “arm-chair planning” was needed. They
introduced terms like strategic intent and strategic architecture. Their most well known advance was the idea of core competency.
They showed how important it was to know the one or two key things that your company does better than the competition.
Active strategic management required active information gathering and active problem solving. In the early days of Hewlett-Packard (H-P),
Dave Packard and Bill Hewlett devised an active management style that they called Management By Walking Around (MBWA). Senior H-P managers
were seldom at their desks. They spent most of their days visiting employees, customers, and suppliers. This direct contact with key people
provided them with a solid grounding from which viable strategies could be crafted. The MBWA concept was popularized in 1985 by a book by
Tom Peters and Nancy Austin. Japanese managers employ a similar system, which originated at Honda, and is sometimes called the 3 G's
(Genba, Genbutsu, and Genjitsu, which translate into “actual place”, “actual thing”, and “actual situation”).
