The article gives a valuable presentation on development of an e-business strategy. The most current key elements of e-business strategy formulation are mentioned and practical examples of e-companies with successful strategies are presented. It can be used as a practical guide for managers and entrepreneurs. Introduction Today most companies have online presence by means of a web site or online advertisement. Does it make them an e-company or a part of e-business? The answer is NO. E-business does not mean having a web site or being present on the Internet in any way, it means incorporating e-business strategy on a high level through all value chain of a company.
Often many of such companies are called virtual companies (e.g. Google, Amazon, Ebay etc). However, after “dot.com” industries bubble collapse this term is avoided to some extent. Moreover, more traditional businesses have been shifting its focus to e-business such as banking, industrial manufacturers and health care and so on. The impact of e-business applications in public sector is still not clear and it is in its earliest stage, whereas commercial e-business applications have proved to bring in a competitive advantage. In this work, taking into account pervasive nature of today’s business, I do not apply e-business or e-company exclusively to a virtual company as e-business strategy formulation ideas presented here may be used eventually by any company aiming to do business or a part of it electronically.
As this work is concerned with terminology that is may be interpreted differently by different people I will look through key terms’ definitions in context in first part of article. In the second part I will present a roadmap for e-business strategy formulation. The conclusion will attempt to sum up the approaches to strategy and views on strategic importance of ICT (Information Communication Technology) for e-business.
Part 1 Theoretical concepts of e-business and strategy The term e-business is defined here as the use of electronic means to run company’s business. This includes all business activities within an organization both internal (Intranet) and external (Internet). The latter is often associated with selling of products and services online, that is E-commerce. Microsoft clearly defines e-commerce as “the use of the Internet, especially the World Wide Web, as a commercial sales and marketing medium”.
The e-commerce is more specific than e-business, and we can basically consider it as a subset of e-business. Likewise, mobile commerce is e-commerce through mobile telecommunication networks, may be viewed as a subset of e-commerce. In fact e-business has become so pervasive that many American business consultants suggest to “drop” “e” because it is pointless to talk about it as a separate discipline. In today’s business environment e-business is just business. This all is only about names. Yet e-business uses its “e” here to emphasize electronic nature and/or capabilities for business.
Strategy is another key term in this article. There are a number of definitions for strategy in fundamental management literature, often too broad or confusing that make hard to obtain a clear understanding of the meaning of strategy. That is why the term is often overused. For instance the most recent definition from “strategist” author Hiroyuki Itami “Mobilizing Invisible Assets” “Strategy determines the framework of a firm’s business activities and provide guidelines for coordinating activities so that the firm can cope with and influence the changing environment”.
The components of strategy are product/market portfolio, the operations mission, and the resource portfolio. The product/market portfolio determines what to sell and to whom, for example, Business to business (B2B) e-markets may be of a help to assess the potential of a product in such market. The operations’ mission – what to do in-house is supposed to provide a clear picture of what activities in the operation flow (value chain) a firm will do internally and which to outsource. The resource portfolio – what resources are required for those activities, it basically determines capabilities of a firm. Each of the components represents strategic decision in itself.
Many definitions have some aspects in common. For example completive strategy according to Porter is “about being different.” He adds, “It means deliberately choosing a different set of activities to deliver a unique mix of value.” In short, strategy is about competitive position, about differentiating yourself in the eyes of the customer, about adding value through a mix of activities different from those used by competitors. Based on the multiple concepts of strategy, the following aspects are critical for strategy formulation: Long-term direction of the firm; Overall plan for deploying the resources; Trade-offs to choose between different directions and between different resources distribution; Unique value proposition or unique positioning against competitors; Competitive advantage over rivals as a central goal of strategy. (based on Elassi T. and Enders A. “Strategies for e-business)
Strategy is often used interchangeably with a term tactics that, in turn, may lead to limited understanding of strategy. “Tactics are schemes for individual and specific actions that are not necessarily related to one another” whereas the strategy covers not just one activity or course of actions at a time but all activities of a firm over an extended time horizon at the same time attempting to achieve consistency among them. Together, strategy and tactics bridge the gap between ends and means. In today’s business environment, the long-term direction of a firm has no clear-cut answer. The emerging innovation may redefine the basis of competition making previous strategy worthless.
This was the case of Amazon.com e-tailer with its online bookstore platform having changed the book selling market. Fast-paced environment strategy is also about changing the strategy. A company can get the better trade-offs by giving up long-term strategy in return for short-term flexibility. Apart from that trade-offs are very important for strategic planning to sustain a competitive advantage and positioning a company on the market.
A successful strategy especially in e-business can be easily imitated as there are no regulations and barriers to enter are low. The strategic trade-off implies the choices among activities, that is, finding such a fit among them or performing them differently from the firm’s competitors can render strategy hard to copy. Fit is important because discrete activities often affect one another. In fact, rather than seeing the company as a whole, managers have turned to “core” competencies, “critical” resources, and “key” success factors. A good example is low budget airlines that chose to eliminate the “old” activities or perform them differently (small airports, only short-haul flights, no meals, no seats assignment etc) in their cost competitive edge and also redesigning travel agencies’ costs in favor to only online booking.