Business Plan for Implementing Electronic Commerce

Introduction to Electronic Commerce

Business Plan for

Implementing

Electronic Commerce

Winter 85, 2 An Introduction to E-Commerce

Objectives

In this chapter, you will learn about:

Š Planning electronic commerce initiatives

Š Strategies for developing electronic

commerce Web sites

Š Managing electronic commerce

implementations

Winter 85, 3 An Introduction to E-Commerce

Planning Electronic Commerce

Initiatives

Š Objectives of electronic commerce

„ Serving existing customers better „ Identifying new vendors

„ Coordinating more efficiently with existing

vendors

„ Recruiting employees more effectively

Winter 85, 4 An Introduction to E-Commerce

Linking Objectives to Business

Strategies

Š Downstream strategies

„ Used to improve the value that the business

provides to its customers

Š Upstream strategies

„ Focus on reducing costs or generating value zWork with suppliers or inbound shipping and freight

Winter 85, 5 An Introduction to E-Commerce

Linking Objectives to Business

Strategies (continued)

Š 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, 6 An Introduction to E-Commerce

Measuring Benefits

Š Tangible benefits of electronic commerce

initiatives

„ Increased sales

„ Reduced costs

Š Intangible benefits of electronic commerce

initiatives

Winter 85, 7 An Introduction to E-Commerce

Measuring the Benefits of

Electronic Commerce Initiatives

Winter 85, 8 An Introduction to E-Commerce

Managing Costs

Š Total cost of ownership

„ Includes costs of hardware, software, design

work outsourced, and salaries

Š Change management

„ Process of helping employees cope with changes

Š Opportunity costs

Winter 85, 9 An Introduction to E-Commerce

Web Site Costs

Š International Data Corporation and Gartner,

Inc.

„ Cost for large company to build and implement

entry-level electronic commerce site is about $1 million

z79 percent of cost is labor related

z10 percent is the cost of software

z11 percent is the cost of hardware

Winter 85, 10 An Introduction to E-Commerce

Starting a Web Business: Three

Price Tags

Winter 85, 11 An Introduction to E-Commerce

Web Site Costs (continued)

Š Experts agree that the annual cost to maintain

and improve a site will be

„ 50 and 200 percent of the initial cost

Š 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, 12 An Introduction to E-Commerce

Cost Estimates for Building and Operating

Magazine Publisher Web Sites

Winter 85, 13 An Introduction to E-Commerce

Cost Estimates for Building and Operating

Magazine Publisher Web Sites (continued)

Winter 85, 14 An Introduction to E-Commerce

Comparing Benefits to Costs

Š Capital projects (capital investments)

„ Major investments in equipment, personnel, and other

assets

Š 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, 15 An Introduction to E-Commerce

Cost/Benefit Evaluation of Electronic

Commerce Strategy Elements

Winter 85, 16 An Introduction to E-Commerce

Return on Investment (ROI)

Š Techniques provide a quantitative expression

of a comfortable benefit-to-cost margin

Š 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

Winter 85, 17 An Introduction to E-Commerce

Strategies for Developing

Electronic Commerce Web Sites

Š Typical early Web site

„ Static brochure not updated frequently „ Seldom had any capabilities for helping the

company’s customers

Š Today’s Web site includes

„ Automated homes for business processes of all

kinds

Winter 85, 18 An Introduction to E-Commerce

Increasing Complexity of Web

Site Functions

Winter 85, 19 An Introduction to E-Commerce

Internal Development vs.

Outsourcing

Š Outsourcing

„ Hiring another company to provide outside

support for all or part of a project

Š Internal team

„ Should include people with enough knowledge

about the Internet and its technologies

„ Should be creative thinkers

Š Measuring achievements of internal team is

very important

Winter 85, 20 An Introduction to E-Commerce

Early Outsourcing

Š Outsource initial site design and development

to launch a project quickly

Š Outsourcing team trains company’s

information systems professionals in the new

technology

Š It is best to have a company’s own information

systems people working closely with the

Winter 85, 21 An Introduction to E-Commerce

Late Outsourcing

Š Information systems professionals

„ Operate system until it becomes a stable part of

the business operation

Š Once a company has gained a competitive

advantage maintenance of the electronic

commerce system can be outsourced

Winter 85, 22 An Introduction to E-Commerce

Partial Outsourcing

Š Company identifies specific portions of the

project that can be completely designed,

developed, implemented, and operated by

another firm

Š Many smaller Web sites outsource their

e-mail handling and response functions

Winter 85, 23 An Introduction to E-Commerce

Selecting a Hosting Service

Š Factors to evaluate when selecting a hosting

service

„ Functionality „ Reliability

„ Bandwidth and server scalability „ Security

„ Backup and disaster recovery „ Cost

Winter 85, 24 An Introduction to E-Commerce

New Methods for Implementing

Partial Outsourcing

Š Incubators

„ Company that offers start-up companies a

physical location with

zOffices, accounting, and legal assistance

zComputers and Internet connections

Winter 85, 25 An Introduction to E-Commerce

New Methods for Implementing

Partial Outsourcing (continued)

Š Fast venturing

„ Existing company that wants to launch an

electronic commerce initiative joins external equity partners and operational partners

Š Equity partners

„ Banks or venture capitalists

Š Operational partners

„ Firms that have experience in moving projects

along and scaling up prototypes

Winter 85, 26 An Introduction to E-Commerce

Winter 85, 27 An Introduction to E-Commerce

Managing Electronic

Commerce Implementations

Š Project management

„ Formal techniques for planning and controlling

activities undertaken to achieve a specific goal

Š Project plan

„ Includes criteria for cost, schedule, and

performance

Š Project management software products

„ Primavera Project Planner

Winter 85, 28 An Introduction to E-Commerce

Tracking Activities in

Primavera Project Planner

Winter 85, 29 An Introduction to E-Commerce

Project Portfolio Management

Š Each project is monitored as if it were an

investment in a financial portfolio

Š Chief Information Officer

„ 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, 30 An Introduction to E-Commerce

Staffing for Electronic

Commerce

Š General areas of staffing

„ Project managers „ Account managers „ Applications specialists „ Web programmers „ Web graphics designers „ Customer service

Winter 85, 31 An Introduction to E-Commerce

General Areas of Staffing

Š Business manager

„ Should be a member of the internal team that sets

objectives for a project

Š Project manager

„ Person with specific training or skills in tracking

costs and accomplishment of specific objectives

Š Account manager

„ Keeps track of multiple Web sites in use by a

project

Winter 85, 32 An Introduction to E-Commerce

General Areas of Staffing

(continued)

Š Applications specialists

„ Maintain accounting, human resources, and

logistics software

Š Web programmers

„ Design and write underlying code for dynamic

database-driven Web pages

Š Web graphics designer

„ Person trained in art, layout, and composition „ Understands how Web pages are constructed

Winter 85, 33 An Introduction to E-Commerce

General Areas of Staffing

(continued)

Š Customer service personnel

„ Help design and implement customer

relationship management activities

Š Call center

„ Company that handles incoming customer

telephone calls and e-mails for other companies

Š Systems administrator

„ Responsible for the system’s reliable and secure

operation

Winter 85, 34 An Introduction to E-Commerce

Postimplementation Audit

Š Formal review of a project after it is up and

running

Š Gives managers a chance to examine

„ Performance specifications

„ Cost estimates

Winter 85, 35 An Introduction to E-Commerce

Postimplementation Audit

(continued)

Š Allows internal team, business manager, and

project manager to

„ Raise questions about the project’s objectives „ Provide feedback on strategies

Š Final report should analyze

„ How well the project was administered „ Specific performance of the project team(s)

Winter 85, 36 An Introduction to E-Commerce

Summary

Š Plans for electronic commerce implementations „ Set objectives

„ Benefit and cost objectives should be stated in measurable

terms

Š Project evaluation technique „ Return on investment

Š Determining an outsourcing strategy

„ Form an internal team that includes knowledgeable

Winter 85, 37 An Introduction to E-Commerce

Summary (continued)

Š Project management

„ Formal way to plan and control specific tasks and

resources used in a project

Š Project portfolio management techniques „ Used to track and make trade-offs among multiple

ongoing projects

Š Critical staffing areas „ Business management „ Application specialists „ Systems administration