E-Commerce: The Second Wave Fifth Annual Edition Chapter 12: Planning for Electronic Commerce.
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Transcript of E-Commerce: The Second Wave Fifth Annual Edition Chapter 12: Planning for Electronic Commerce.
E-Commerce: The Second WaveFifth Annual Edition
Chapter 12:
Planning for Electronic Commerce
E-Commerce: The Second Wave, Fifth Annual Edition 2
Objectives
In this chapter, you will learn about:
• Planning electronic commerce initiatives
• Strategies for developing electronic commerce Web sites
• Managing electronic commerce implementations
E-Commerce: The Second Wave, Fifth Annual Edition 3
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
E-Commerce: The Second Wave, Fifth Annual Edition 4
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
E-Commerce: The Second Wave, Fifth Annual Edition 5
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
E-Commerce: The Second Wave, Fifth Annual Edition 6
Measuring Benefits
• Tangible benefits of electronic commerce initiatives
– Increased sales
– Reduced costs
• Intangible benefits of electronic commerce initiatives
– Increased customer satisfaction
E-Commerce: The Second Wave, Fifth Annual Edition 7
Measuring the Benefits of Electronic Commerce Initiatives
E-Commerce: The Second Wave, Fifth Annual Edition 8
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
E-Commerce: The Second Wave, Fifth Annual Edition 9
Web Site Costs
• International Data Corporation and Gartner, Inc.
– Cost for large company to build and implement 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
E-Commerce: The Second Wave, Fifth Annual Edition 10
Starting a Web Business: Three Price Tags
E-Commerce: The Second Wave, Fifth Annual Edition 11
Web Site Costs (Continued)
• Experts agree that annual cost to maintain and improve site will be
– 50 and 200 percent of initial cost
• McKinsey & Company study
– Full portal site cost estimate was $2.4 million to build and $4.3 million per year to maintain
– Companion site cost estimate was $150,000 to build and $270,000 per year to maintain
E-Commerce: The Second Wave, Fifth Annual Edition 12
Cost Estimates for Building and Operating Magazine Publisher Web Sites
E-Commerce: The Second Wave, Fifth Annual Edition 13
Cost Estimates for Building and Operating Magazine Publisher Web Sites
(Continued)
E-Commerce: The Second Wave, Fifth Annual Edition 14
Comparing Benefits to Costs
• Capital projects (Capital investments)
– Major investments in equipment, personnel, and other assets
• Key part of creating business plan for electronic commerce initiatives
– Identifying potential benefits
– Identifying costs required to generate benefits
– Evaluating whether benefits exceed costs
E-Commerce: The Second Wave, Fifth Annual Edition 15
Cost/benefit Evaluation of Electronic Commerce Strategy Elements
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Return on Investment (ROI)
• 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
E-Commerce: The Second Wave, Fifth Annual Edition 17
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
E-Commerce: The Second Wave, Fifth Annual Edition 18
Increasing Complexity of Web Site Functions
E-Commerce: The Second Wave, Fifth Annual Edition 19
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
E-Commerce: The Second Wave, Fifth Annual Edition 20
Early Outsourcing
• Outsource initial site design and development to launch project quickly
• Outsourcing team trains company’s information systems professionals in the new technology
• It is best to have
– Company’s own information systems people working closely with outsourcing team
E-Commerce: The Second Wave, Fifth Annual Edition 21
Late Outsourcing
• Information systems professionals
– Do initial design and development work
– Implement system
– Operate system until it becomes a stable part of business operation
• Once company has gained competitive advantage
• Maintenance of electronic commerce system can be outsourced
E-Commerce: The Second Wave, Fifth Annual Edition 22
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
E-Commerce: The Second Wave, Fifth Annual Edition 23
Selecting a Hosting Service
• Factors to evaluate when selecting a hosting service
– Functionality
– Reliability
– Bandwidth and server scalability
– Security
– Backup and disaster recovery
– Cost
E-Commerce: The Second Wave, Fifth Annual Edition 24
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 company
E-Commerce: The Second Wave, Fifth Annual Edition 25
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
E-Commerce: The Second Wave, Fifth Annual Edition 26
Elements of Fast Venturing
E-Commerce: The Second Wave, Fifth Annual Edition 27
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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Tracking Activities in 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 list with current information about each project’s status
– Assigns ranking for each project based on importance and level of risk
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Staffing for Electronic Commerce
• General areas of staffing– Business managers
– Project managers
– Account managers
– Applications specialists
– Web programmers
– Web graphics designers
– Customer service
– Systems administration
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General Areas of Staffing
• Business manager – Should be member of internal team that sets
objectives for 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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General Areas of Staffing (Continued)
• Applications specialists – Maintain accounting, human resources, and
logistics software
• Web programmers– Design and write underlying code for dynamic
database-driven Web pages has increased
• Web graphics designer– Person trained in art, layout, and composition
– Understands how Web pages are constructed
E-Commerce: The Second Wave, Fifth Annual Edition 33
General Areas of Staffing (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
E-Commerce: The Second Wave, Fifth Annual Edition 34
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
E-Commerce: The Second Wave, Fifth Annual Edition 35
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)
E-Commerce: The Second Wave, Fifth Annual Edition 36
Summary
• Plans for electronic commerce implementations
– Set objectives
– Benefit and cost objectives should be stated in measurable terms
• Project evaluation technique
– Return on investment
• Determining an outsourcing strategy
– Form internal team that includes knowledgeable individuals from within company
E-Commerce: The Second Wave, Fifth Annual Edition 37
Summary• 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