meljun cortes planning for e-commerce
TRANSCRIPT
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Chapter 12:Planning for Electronic Commerce
Electronic Commerce,
MELJUN CORTESMELJUN CORTES
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Electronic Commerce, Sixth 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
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Electronic Commerce, Sixth 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
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Electronic Commerce, Sixth 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
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Electronic Commerce, Sixth 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
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Electronic Commerce, Sixth Edition 6
Measuring Benefits
• Tangible benefits of electronic commerce initiatives
– Increased sales
– Reduced costs
• Intangible benefits of electronic commerce initiatives
– Increased customer satisfaction
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Electronic Commerce, Sixth Edition 7
Measuring the Benefits of Electronic Commerce Initiatives
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Electronic Commerce, Sixth 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
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Electronic Commerce, Sixth 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
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Electronic Commerce, Sixth Edition 10
Starting a Web Business: Three Price Tags
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Electronic Commerce, Sixth Edition 11
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
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Electronic Commerce, Sixth Edition 12
Cost Estimates for Building and Operating Magazine Publisher Web
Sites
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Electronic Commerce, Sixth Edition 13
Cost Estimates for Building and Operating Magazine Publisher Web
Sites (continued)
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Electronic Commerce, Sixth Edition 14
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
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Electronic Commerce, Sixth Edition 15
Cost/Benefit Evaluation of Electronic Commerce Strategy
Elements
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Electronic Commerce, Sixth Edition 16
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
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Electronic Commerce, Sixth 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
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Electronic Commerce, Sixth Edition 18
Increasing Complexity of Web Site Functions
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Electronic Commerce, Sixth 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
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Electronic Commerce, Sixth Edition 20
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
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Electronic Commerce, Sixth Edition 21
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
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Electronic Commerce, Sixth 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
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Electronic Commerce, Sixth 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
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Electronic Commerce, Sixth 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 the company
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Electronic Commerce, Sixth 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
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Electronic Commerce, Sixth Edition 26
Elements of Fast Venturing
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Electronic Commerce, Sixth 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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Electronic Commerce, Sixth Edition 28
Tracking Activities in Primavera Project Planner
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Electronic Commerce, Sixth Edition 29
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
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Electronic Commerce, Sixth Edition 30
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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Electronic Commerce, Sixth Edition 31
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
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Electronic Commerce, Sixth Edition 32
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
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Electronic Commerce, Sixth 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
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Electronic Commerce, Sixth 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
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Electronic Commerce, Sixth 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)
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Electronic Commerce, Sixth 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 an internal team that includes knowledgeable individuals from within the company
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Electronic Commerce, Sixth Edition 37
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