Planning for Electronic Commerce (CH-12)

Objectives Planning Electronic Commerce Initiatives

In this chapter, you will learn about:
• Planning electronic commerce initiatives • Objectives of electronic commerce
• Strategies for developing electronic commerce Web sites – Increasing sales in existing markets
• Managing electronic commerce implementations – Opening new markets
– Serving existing customers better
– Identifying new vendors
– Coordinating more efficiently with existing vendors
– Recruiting employees more effectively

Linking Objectives to Business Strategies

Linking Objectives to Business Strategies (Continued)
• Downstream strategies • Electronic commerce opportunities can inspire businesses to undertake
– Used to improve the value that the business activities such as
provides to its customers – Building brands
• Upstream strategies – Enhancing existing marketing programs
– Focus on reducing costs or generating value – Selling products and services
• Work with suppliers or inbound – Selling advertising
shipping and freight service providers – Developing a better understanding of customer needs

Measuring Benefits Managing Costs

• Tangible benefits of electronic commerce initiatives
– Increased sales • Total cost of ownership
– Reduced costs – Includes costs of hardware, software, design work
• Intangible benefits of electronic commerce initiatives outsourced, and salaries
– Increased customer satisfaction • Change management
– Process of helping employees cope with changes
• Opportunity costs
Web Site Costs – Lost benefits from an action not taken
• International Data Corporation and Gartner, Inc.
– Cost for large company to build and implement Starting a Web Business: Three Price Tags
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

Web Site Costs (Continued) Comparing Benefits to Costs

• Capital projects (Capital investments)
• Experts agree that annual cost to maintain and improve site – Major investments in equipment, personnel, and
will be other assets
– 50 and 200 percent of initial cost • Key part of creating business plan for electronic commerce
• McKinsey & Company study initiatives
– Full portal site cost estimate was $2.4 million to – Identifying potential benefits
build and $4.3 million per year to maintain – Identifying costs required to generate benefits
– Companion site cost estimate was $150,000 to build – Evaluating whether benefits exceed costs
and $270,000 per year to maintain
Cost/benefit Evaluation of Electronic Commerce Strategy
Return on Investment (ROI)
Elements • 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

Increasing Complexity of Web Site Functions

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

Internal Development vs. Outsourcing Early Outsourcing

• Outsourcing • Outsource initial site design and development to launch project
– Hiring another company to provide outside quickly
support for all or part of a project • Outsourcing team trains company’s information systems
• Internal team professionals in the new technology
– Should include people with enough knowledge • It is best to have
about the Internet and its technologies – Company’s own information systems people working
– Should be creative thinkers closely with outsourcing team
• Measuring achievements of internal team is very
important
Late Outsourcing Partial Outsourcing
• Information systems professionals • Company identifies specific portions of the project that can be
– Do initial design and development work completely:
– Implement system – Designed, developed, implemented, and operated by
– Operate system until it becomes a stable part of another firm
business operation • Many smaller Web sites
• Once company has gained competitive advantage – Outsource their e-mail handling and response functions
• Maintenance of electronic commerce
system can be outsourced

Selecting a Hosting Service New Methods for Implementing Partial Outsourcing

• Factors to evaluate when selecting a hosting service • Incubators
– Functionality – Company that offers start-up companies a physical
– Reliability location with
– Bandwidth and server scalability • Offices, accounting and legal assistance
– Security • Computers, and Internet connections
– Backup and disaster recovery – Receive ownership interest in company
– Cost
 New Methods for Implementing Partial Outsourcing Managing Electronic Commerce Implementations
(Continued) • Project management
• Fast venturing – Formal techniques for planning and controlling activities
– Existing company that wants to launch an undertaken to achieve a specific goal
electronic commerce initiative joins external • Project plan
equity partners and operational partners – Includes criteria for cost, schedule, and performance
• Equity partners • Project management software products
– Banks or venture capitalists – Microsoft Project
• Operational partners – Primavera Project Planner
– Firms that have experience in moving projects
along and scaling up prototypes Project Portfolio Management
• Each project is monitored as if it were an investment in a financial
portfolio
Tracking Activities in Primavera Project Planner • 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

General Areas of Staffing

• Business manager
– Should be member of internal team that sets objectives for
project
Staffing for Electronic Commerce • Project manager
• General areas of staffing – Person with specific training or skills in
– Business managers • Tracking costs and accomplishment of specific
– Project managers objectives
– Account managers • Account manager
– Applications specialists – Keeps track of multiple Web sites in use by a project
– Web programmers
– Web graphics designers
– Customer service
General Areas of Staffing (Continued)
• Customer service personnel
– Systems administration
– Help design and implement customer relationship
General Areas of Staffing (Continued) management activities
• Applications specialists • Call center
– Maintain accounting, human resources, and logistics – Company that handles incoming customer telephone
software calls and e-mails for other companies
• Web programmers • Systems administrator
– Design and write underlying code for dynamic – Responsible for the system’s reliable and secure
database-driven Web pages has increased operation
• Web graphics designer
– Person trained in art, layout, and composition Postimplementation Audit (Continued)
– Understands how Web pages are constructed • Allows internal team, business manager, and project manager to
– Raise questions about the project’s objectives
Postimplementation Audit – Provide feedback on strategies
• Formal review of a project after it is up and running • Final report should analyze
• Gives managers a chance to examine – Project’s overall performance
– Objectives – How well the project was administered
– Performance specifications – Specific performance of the project team(s)
– Cost estimates
– Scheduled delivery dates Summary
• Project management
Summary – Formal way to plan and control specific tasks and resources
• Plans for electronic commerce implementations used in a project
– Set objectives • Project portfolio management techniques
– Benefit and cost objectives should be stated in measurable – Used to track and make trade-offs among multiple ongoing
terms projects
• Project evaluation technique • Critical staffing areas
– Return on investment – Business management
• Determining an outsourcing strategy – Application specialists
– Form internal team that includes knowledgeable individuals – Systems administration
from within company