Transcript Document
COMP7880: E-Business Strategies Strategy options in e-business market Dickson K.W. Chiu PhD, SMIEEE, SMACM, Life MHKCS Jelassi & Enders: Chapter 5 1 Our Roadmap Mobile e-commerce strategy E-business strategy Strategy Strategy formulation implementation 12 Strategic analysis 3 External analysis 9 5 Internal organisation Strategy options Opportunities/ threats Strengths/ weaknesses 4 Internal analysis 6 Sustaining competitive advantage 8 7 Exploring new market spaces Creating and capturing value 10 13 Interaction with suppliers Implementation 11 Interaction with users/customers COMP7880-SO-2 Differentiation & Price Strategies COMP7880-SO-3 The strategic triangle – Main drivers of competitive advantage 2 Customer 1 3 Price/ benefit Company Cost Price/ benefit Competitors 4 Cost Source: Adapted from H. Hungenberg (2006), p. 185. COMP7880-SO-4 Strategic triangle decision Is the price/benefit ratio (also called value for money) that 1 we offer better than the price/benefit ratio of our best competitor? • Is the value that we offer to our customers perceivable and 2 important to them? • Are our costs for making the product (or service) lower •3 than the costs that we incur? • 4 Is this advantageous position sustainable into the future? Source: See H. Hungenberg (2006). Impact of threshold features and critical success factors on consumer benefit Consumer benefit Critical success factors: Customer’s expectation Supplier offered threshold features Supplier Performance Source: Adapted from H. Hungenberg (2006), p. 185. 2 generic approaches of competitive advantage Unique product with price premium Goal of the companyBusiness strategy something Performance Provide that is valuable advantage unique to buyers Differentiation Competitive advantage Price advantage Similar product with lower price Provide a product with lowest price Cost leadership (Cost/price leadership) Become the cost leader in the industry Source: Adapted from H. Hungenberg (2006), p. 189. COMP7880-SO-7 Achieving cost leadership position Economies of scale The basic concept of economies of scale is that as a firm increases its product output, it decreases its unit production cost. Economies of scope While economies of scale can be realized by increasing the production of one product type, economies of scope result from expanding the variety of products sold using the same assets. Factor costs Learning effects Factor costs represent a crucial cost driver, especially for retailing companies that act as intermediaries. The ability to bargain down input prices, for instance, through bulk purchasing can be an effective lever for lowering costs. Learning effects can lower costs as a firm improves its efficiency over time, thereby reducing slack and wasteful activities. Discuss this for our running case: SME Computer … Economies of scale Price per unit As the cumulated production quantity increases, costs per unit decrease. Eventually, costs go up again when production capacities reach their constraints Average costs Economies of scale Dis-economies of scale Quantity COMP7880-SO-9 Tangible and intangible sources of differentiation Quality Customisation Tangible sources Convenience Speed of delivery Sources of differentiation Product range Intangible sources Brand Reputation COMP7880-SO-10 Perceived performance and relative price position determine a firm’s strategy Perceived performance High Differentiation Outpacing To achieve both: New technologies Scale economies Better management Eliminate wastage Optimization Learning effects BPR Low cost/ low price Low More expensive Cheaper Relative price urce: Adapted from H. Hungenberg (2006), p. 194. COMP7880-SO-11 Strategic gameboard for formulating consistent business strategies Where do we 2 want to achieve the competitive advantage? Market segment (niche) Whole market Performance Cost/ price New game Old game 3 How do we want to achieve the competitive advantage? 1 Which competitive advantage do we aim for? Source: Adapted from H. Hungenberg (2006), p. 251. COMP7880-SO-12 Chosen strategy fitting value chain Consistency between activities Activities throughout the value chain Image and reputation – also related to sustainability Strategy implementation Reinforcement of activities Optimization of efforts COMP7880-SO-13 E-business models COMP7880-SO-14 What is a Business Model? Six key questions How do we create value? For whom do we create value? What is our source of competence/ advantage? How do we differentiate ourselves? How do we make money (revenue model)? What are our time, scope, and size ambitions? 15 Atomic Business Models (Based on Weill and Vitale 2001, Straub 2004) 16 Atomic Business Models (2) (Based on Weill and Vitale 2001, Straub 2004) 17 Typical Business Models in EC Online direct marketing Electronic tendering systems (e.g., reverse auction) Name your own price Affiliate marketing Viral marketing Group purchasing Online auctions Product and service customization Electronic marketplaces and exchanges Value-chain integrators Value-chain service providers Information brokers Bartering Deep discounting Membership Supply chain improvers 18 Typical revenue models Tangible goods Web catalog revenue model Taking mail order catalog model to the Web Digital Content Revenue Models Advertising-Supported Revenue Models Subscription Revenue Models Advertising-Subscription Mixed Revenue Models Agency and Services Fee-for-Transaction Models Fee-for-Service Models COMP7880-SO-19 Revenue Strategy Issues Channel conflict (or cannibalization) Channel cooperation Giving customers access to the company’s products through a coordinated presence in all distribution channels (e.g., Staples, Eddie Bauer) Strategic alliance: when two or more companies join forces to undertake an activity over a long period of time Sales activities on a company’s Web site interfere with existing sales outlets (e.g., Levi Strauss) Account aggregation services Channel distribution managers (i.e., fulfillment managers): firms that take over the responsibility for a particular product line within a retail context 20