Chapter 12: Planning for Electronic Commerce

1. Chapter 12:Planning for Electronic Commerce

2. Objectives In this chapter, you will learn about: • Planning electronic commerce initiatives • Strategies for developing electronic commerce Web sites • Managing electronic commerce implementations

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

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

5. Linking Objectives to Business Strategies • 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

6. Measuring Benefits • Tangible benefits of electronic commerce initiatives include: • Increased sales • Reduced costs • 3-Rs (reach, richness, range) • Intangible benefits of electronic commerce initiatives include: • Increased customer satisfaction • Improved customer service

8. Managing Costs • Total cost of ownership (TCO) • Includes costs of hardware, software, design work outsourced, and salaries

9. 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 • The annual cost to maintain and improve a site will be between 50 and 200 percent of the initial cost

11. Comparing Benefits to Costs • 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

13. 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

14. 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 • Current SOA for Web sites include: • Transaction-processing tools • Automated homes for business processes of all kinds

16. 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

17. 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

18. 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

19. 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

20. 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 • Often negotiate an ownership interest in the company

21. New Methods for Implementing Partial Outsourcing • 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

23. 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

25. 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

26. 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

27. Staffing for Electronic Commerce • 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

28. Staffing for Electronic Commerce • 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

29. Staffing for Electronic Commerce • 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

30. 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

31. Postimplementation Audit • 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)

32. 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

33. 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