Chapter 12: Planning for Electronic Commerce Electronic Commerce, Seventh Annual Edition.
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Transcript of Chapter 12: Planning for Electronic Commerce Electronic Commerce, Seventh Annual Edition.
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Chapter 12:Planning for Electronic Commerce
Electronic Commerce, Seventh Annual
Edition
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Objectives
In this chapter, you will learn about:
• Planning electronic commerce initiatives
• Strategies for developing electronic commerce Web sites
• Managing electronic commerce implementations
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Planning Electronic Commerce Initiatives
• Objectives of electronic commerce:– Increasing sales in existing markets– Opening new markets– Serving existing customers better– Identifying new vendors– Coordinating more efficiently with existing vendors– Recruiting employees more effectively
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Linking Objectives to Business Strategies
• Downstream strategies
– Used to improve the value that the business provides to its customers
• Upstream strategies
– Focus on reducing costs or generating value
• Work with suppliers or inbound shipping and freight service providers
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Linking Objectives to Business Strategies (continued)
• Electronic commerce opportunities can inspire businesses to undertake activities such as:– Building brands– Enhancing existing marketing programs– Selling products and services– Selling advertising– Developing a better understanding of customer
needs
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Measuring Benefits
• Tangible benefits of electronic commerce initiatives include:
– Increased sales
– Reduced costs
• Intangible benefits of electronic commerce initiatives include:
– Increased customer satisfaction
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Managing Costs
• Total cost of ownership
– Includes costs of hardware, software, design work outsourced, and salaries
• Change management
– Process of helping employees cope with changes
• Opportunity costs
– Lost benefits from an action not taken
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Web Site Costs• International Data Corporation and Gartner,
Inc. estimate that the cost for a large company to build and implement an entry-level electronic commerce site is about $1 million
• 79 percent of cost is labor related
• 10 percent is the cost of software
• 11 percent is the cost of hardware
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Web Site Costs (continued)
• Experts agree that the annual cost to maintain and improve a site will be between 50 and 200 percent of the initial cost
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Comparing Benefits to Costs
• Capital projects (capital investments)
– Major investments in equipment, personnel, and other assets
• Key part of creating a business plan for electronic commerce initiatives includes:
– Identifying potential benefits
– Identifying costs required to generate benefits
– Evaluating whether benefits exceed costs
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Return on Investment (ROI)
• Return on investment techniques provide a quantitative expression of a comfortable benefit-to-cost margin
• Built-in biases that can lead managers to make poor decisions:– ROI requires that all costs and benefits be stated
in dollars
– Focus is on benefits that can be predicted
– Tends to emphasize short-run benefits over long-run benefits
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Strategies for Developing Electronic Commerce Web Sites
• Typical early Web site
– Static brochure not updated frequently
– Seldom had any capabilities for helping the company’s customers
• Today’s Web site includes:
– Transaction-processing tools
– Automated homes for business processes of all kinds
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Internal Development vs. Outsourcing
• Outsourcing– Hiring another company to provide outside support
for all or part of a project
• Internal team– Should include people with enough knowledge
about the Internet and its technologies– Should be creative thinkers
• Measuring achievements of internal team is very important
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Early Outsourcing
• Outsource the initial site design and development to launch a project quickly
• Outsourcing team trains the company’s information systems professionals in the new technology
• It is best to have the company’s own information systems people working closely with the outsourcing team
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Late Outsourcing
• Information systems professionals– Do initial design and development work
– Implement the system
– Operate the system until it becomes a stable part of the business operation
• Once a company has gained a competitive advantage, maintenance of the electronic commerce system can be outsourced
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Partial Outsourcing
• Company identifies specific portions of the project that can be completely designed, developed, implemented, and operated by another firm
• Many smaller Web sites outsource their e-mail handling and response functions
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Selecting a Hosting Service
• Factors to evaluate when selecting a hosting service include:
– Functionality
– Reliability
– Bandwidth and server scalability
– Security
– Backup and disaster recovery
– Cost
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New Methods for Implementing Partial Outsourcing
• Incubators
– Company that offers start-up companies a physical location with:
• Offices, accounting, and legal assistance
• Computers and Internet connections
– Receive ownership interest in the company
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New Methods for Implementing Partial Outsourcing (continued)
• Fast venturing– Existing company that wants to launch an
electronic commerce initiative joins external equity partners and operational partners
• Equity partners – Banks or venture capitalists
• Operational partners– Firms that have experience in moving projects
along and scaling up prototypes
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Managing Electronic Commerce Implementations
• Project management– Formal techniques for planning and controlling
activities undertaken to achieve a specific goal
• Project plan– Includes criteria for cost, schedule, and performance
• Project management software products– Microsoft Project – Primavera Project Planner
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Project Portfolio Management
• Each project is monitored as if it were an investment in a financial portfolio
• Chief Information Officer
– Records projects in a list
– Updates the list with current information about each project’s status
– Assigns a ranking for each project based on importance and level of risk
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Staffing for Electronic Commerce
• General areas of staffing include:– Business managers– Project managers– Account managers– Applications specialists– Web programmers– Web graphics designers– Customer service– Systems administration
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Staffing for Electronic Commerce (continued)
• Business manager – Should be a member of the internal team that sets
objectives for a project
• Project manager – Person with specific training or skills in tracking
costs and accomplishment of specific objectives
• Account manager – Keeps track of multiple Web sites in use by a
project
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Staffing for Electronic Commerce (continued)
• Applications specialists – Maintain accounting, human resources, and
logistics software
• Web programmers– Design and write underlying code for dynamic
database-driven Web pages
• Web graphics designer– Person trained in art, layout, and composition– Understands how Web pages are constructed
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Staffing for Electronic Commerce (continued)
• Customer service personnel– Help design and implement customer relationship
management activities
• Call center– Company that handles incoming customer
telephone calls and e-mails for other companies
• Systems administrator – Responsible for the system’s reliable and secure
operation
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Postimplementation Audit
• Formal review of a project after it is up and running
• Gives managers a chance to examine:
– Objectives
– Performance specifications
– Cost estimates
– Scheduled delivery dates
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Postimplementation Audit (continued)
• Allows internal team, business manager, and project manager to:
– Raise questions about the project’s objectives
– Provide feedback on strategies
• Final report should analyze:
– Project’s overall performance
– How well the project was administered
– Specific performance of the project team(s)
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Summary• Plans for electronic commerce implementations
include:– Setting objectives
– Determining benefit and cost objectives which should be stated in measurable terms
• Project evaluation technique– Return on investment
• Determining an outsourcing strategy– Form an internal team that includes knowledgeable
individuals from within the company
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Summary (continued)• Project management
– Formal way to plan and control specific tasks and resources used in a project
• Project portfolio management techniques– Used to track and make trade-offs among multiple
ongoing projects
• Critical staffing areas:– Business management– Application specialists– Systems administration