Similar questions

Megamart.com wishes to formulate strategy for e-business. Identify the strategic decisions faced by management team developing the e-Business strategy.

The key strategic decisions faced by a management team developing e-Business strategy are as follows:

E-Business Channel Priorities:

a. The e-Business strategy must be directed according to the priority of different strategic objectives.

b. For a B2B company that is well known in its marketplace worldwide and cannot offer products to new products to the new markets, an initial investment on buy side channel upstream channel e-commerce and value chain management may be appropriate.

c. The strategic e-commerce alternatives for companies should be selected according to the percentage of target market who can be persuaded to migrate to the use of e-channel and the benefits to the company of encouraging migration in terms of anticipated sales volumes and cost for initial customer acquisition and retention.

d. Internet-only businesses, particularly start-ups, are sometimes referred to as ‘Internet pureplays.’

e. Although the switch fully alternative may seem unlikely for many businesses, companies are moving along the curve in this direction.

f. Right channelling: Please refer chapter 5 for right channelling.

g. Typical opportunities for Internet marketing strategy for an organization which has a brochure ware site might be:

• Online catalogue facility
• E-CRM system: lead generation system
• E-CRM system: customer service management
• E-CRM system: personalization of content for users
• Partner relationship management for distributors/agents.
• Transactional e-commerce facility.

h. The following metrics must be considered for assessing the viability of Internet applications:

• Alignment with core capabilities
• Alignment with other company initiatives
• Fit with organizational structure
• Fit with company’s culture and value
• Ease of technical implementations.

• Organizational restructuring and capabilities:

  a. Closely related to Decision 1 is a decision on how the company should restructure or change its capabilities in order to achieve set for e-business.

  b. A continuum of approaches to be used for integration to separation are as follows:

  • In house division (integration): For example, the RS Components Internet Trading Channel.
  • Joint venture (mixed): The Company creates an online presence in association with another player.
  • Strategic partnership (mixed): This may also be achieved through purchase of existing dot-coms.
  • Spin-off (separation): For example, the bank Egg is a spin-off from Prudential financial services company.

  c The in-house division or joint venture will be typical for the clicks and mortar approach while the strategic partnership or spin-off is more likely to be used to create a clicks-only operation.

  d. The advantages of the integration approaches are able to use existing brands, being able to share information and economies of scale.

  e. Spin-off approach gives better focus, more flexibility and innovation and the possibility of funding through flotation.

  f. Separation is preferable in situations where:

  • A different customer segment or product mix will be offered online
  • Different pricing is required between online and offline
  • There is a major channel conflict
  • The internet threatens the current business model
  • Additional funding or specialist staff needs to be attracted.

  • Business, Service and revenue models:

    a. A further aspect of Internet strategy formulation closely related to product development options is the review of opportunities from new business and revenue models.

    b. As well as new business and revenue models, constantly reviewing innovation in services to improve the quality of experience offered is important for e-business.

    c. Evaluating new models and approaches is important since if companies do not review opportunities to innovate then competitors and new entrants certainly will.

    d. To sound a note of caution, flexibility in the business model should not be to the company’s detriment through losing focus on core business.

    e. So, with all strategy options, the manager should also consider the ‘do-nothing option’.

    f. Here a company will not risk a new business model, but will adopt a ‘wait-and-see’ or ‘fast-follower’ approach to see how competitors perform and respond rapidly if the new business model proves sustainable.

    • Marketplace restructuring:

      a. A related issue to reviewing new business and revenue models is to consider the options created through disintermediation ad reintermediation (please refer chapter 2 for these concepts).

      b. For all options, tactics will be needed to manage the channel conflicts that may occur as a result of restructuring.

Market and product development strategies:

a. Deciding on which markets to target is a key strategic consideration for Internet marketing strategy in the same way as it is key to marketing strategy.

b. Managers of e-Business strategy have to decide whether to use new technologies to change the scope of their business to address new markets and new products.

c. The various strategies involved in decision making are as follows:

1. Market penetration: This strategy involves using digital channels to sell more existing products into existing markets. Some of the ways in which Internet can be used for market penetration are as follows:
2. Market share growth: Companies can compete more effectively online if they have web sites that are efficient at converting visitors to sale and mastery of the online marketing communications.
3. Customer loyalty improvement: Companies can increase their value to customers and so increase loyalty by migrating existing customers online.
4. Customer value improvement: The value delivered by customers to company can be increased by increasing customer profitability by decreasing cost to serve and at the same time increasing purchase or usage frequency and quantity.
5. Market development: Here, online channels are used to sell into new markets, taking advantage of the low cost of advertising internationally without the necessity for a supporting sales infrastructure in the customers’ country .Existing products can be sold to new market segments or different types of customer.
6. Product development: The website can be used to add value to or extend products for many companies. New products or services that can be delivered by the Internet only apply for some types of products. These are typically digital media of information products.
7. Diversification: In this sector, new products are developed which are sold into new markets. The Internet alone cannot facilitate these high risk business strategies, but it can facilitate them at lower costs than have previously been possible. The options include:
8. Diversification into related business
9. Diversification into unrelated business
10. Upstream integration with suppliers
11. Downstream integration with in intermediaries

12. Positioning and differentiation strategies: Companies can position their products relative to competitors according to four main variables: product quality, service quality, price and fulfilment. It is useful to review these through equation:

           Customer value (brand perception) = Product quality * Service Quality
    
           Price * Fulfilment time
    

The four options for strategic focus to position a company in the online marketplace are as follows:

• Product performance excellence
• Price performance excellence
• Transactional excellence
• Relationship excellence