Introduction to Electronic Commerce Business Plan for Implementing Electronic Commerce Objectives In this chapter, you will learn about: Planning electronic commerce initiatives Strategies for developing electronic commerce Web sites Managing electronic commerce implementations Winter 85, 2 1
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 Winter 85, 3 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 Winter 85, 4 2
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 Winter 85, 5 Measuring Benefits Tangible benefits of electronic commerce initiatives Increased sales Reduced costs Intangible benefits of electronic commerce initiatives Increased customer satisfaction Winter 85, 6 3
Measuring the Benefits of Electronic Commerce Initiatives Winter 85, 7 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 Winter 85, 8 4
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 Winter 85, 9 Starting a Web Business: Three Price Tags Winter 85, 10 5
Web Site Costs (continued) Experts agree that the annual cost to maintain and improve a site will be 50 and 200 percent of the 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 Winter 85, 11 Cost Estimates for Building and Operating Magazine Publisher Web Sites Winter 85, 12 6
Cost Estimates for Building and Operating Magazine Publisher Web Sites (continued) Winter 85, 13 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 Identifying potential benefits Identifying costs required to generate benefits Evaluating whether benefits exceed costs Winter 85, 14 7
Cost/Benefit Evaluation of Electronic Commerce Strategy Elements Winter 85, 15 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 longrun benefits Winter 85, 16 8
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 Winter 85, 17 Increasing Complexity of Web Site Functions Winter 85, 18 9
Outsourcing Internal Development vs. 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 Winter 85, 19 Early Outsourcing Outsource initial site design and development to launch a project quickly Outsourcing team trains company s information systems professionals in the new technology It is best to have a company s own information systems people working closely with the outsourcing team Winter 85, 20 10
Late Outsourcing Information systems professionals Do initial design and development work Implement system Operate 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 Winter 85, 21 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 Winter 85, 22 11
Selecting a Hosting Service Factors to evaluate when selecting a hosting service Functionality Reliability Bandwidth and server scalability Security Backup and disaster recovery Cost Winter 85, 23 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 Winter 85, 24 12
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 Winter 85, 25 Elements of Fast Venturing Winter 85, 26 13
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 Winter 85, 27 Tracking Activities in Primavera Project Planner Winter 85, 28 14
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 ranking for each project based on importance and level of risk Winter 85, 29 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 Winter 85, 30 15
General Areas of Staffing 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 Winter 85, 31 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 Web graphics designer Person trained in art, layout, and composition Understands how Web pages are constructed Winter 85, 32 16
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 Winter 85, 33 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 Winter 85, 34 17
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) Winter 85, 35 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 an internal team that includes knowledgeable individuals from within the company Winter 85, 36 18
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 Winter 85, 37 19