Lecture #8

Operations of New Business

Syed Abdullah Hayat

AIOU fall 2015
Learning Objectives
 Operations of new business
 Model
 (Business Model, E-Business Model)
 Organizational Strategy
 Business Planning in E-Commerce
 E-Strategy
 Initiation

 Formation

 Implementation

 Assessment
E-commerce
 Commercial transactions conducted electronically on the Internet.
 E-commerce is defined as the use of the Internet and the Web to transact
business
 E-commerce is a new way of conducting business, and as with any other
new application of technology, it presents both opportunities for
improvement and potential problems
E-commerce

 Electronic commerce is broadly as the ability to

execute business activities (transactions, contracts,
and partnership) over a computer network. The
execution of these activities lead to the exchange of
goods, services, and money.
 Online business activities are changing market
dynamics and structures of various industries.
 Electronic commerce adds a new dimension
"information" to business activities involving
information goods, information services, and
electronic money.
e-Business vs e-Commerce

e-Business is more than selling and marketing online!

Operations of new business
 Be shaped and reshaped by customers and the business
community
 Emerging through evolution and adaptation
 A flexible Value web (network) dominated a
single/dedicated value chain
 What is a model?
 The properties of models
 Enable study of the structure of a complex system, relationships
among structural elements, assumptions, and a description of the
system in action
 Can be built before the real system to help predict how the system
might respond if we change the structure, structure, relationships,
and assumptions
 A model in the world of business
 A description of a complex business that enables study of its
structure, the relationships among structural elements, and how it
will respond in the real world
What is the so-called business model?

A business model depicts the content,

structure, and governance of
transactions designed so as to create
value through the exploitation of
business opportunities.
The Content of Business Model
 The good or information that are being exchanged
 The resources and capabilities that are required to enable the exchange
 E.g., transparency of transaction, vertical & horizontal expansion of
product/service, the degree of customization, technologies of transaction
The Structure of Business Model
 The parties that participate in the exchange
 The ways in which these parties are linked
 The order process and the adopted exchange mechanism
 E.g., the providers of complementary assets, transaction speed, mode,
simplicity, safety & reliability, integration of online & offline supply chains
The Governance of Business
Model
The ways in which flows of information, resources, and goods are
controlled by the relative parties
 The incentives for the participants in transactions
 E.g. cooperative and shared incentive among allied partners,
commitment and investment of co-specialized assets, loyalty
maintenance
E-business Models
A description of roles and relationships
among a firm’s consumers, customers,
allies, and suppliers that identifies the
major flows of product, information, and
money, and the major benefits to
participants, almost, over Internet.
E-business models & examples
 Distributors models
 Focused distributor models
 Retailer, marketplace, aggregator/infomediary, exchange, E*trade, Amazon
 Portal models
 Horizontal, vertical, affinity, AOL, Yahoo!, iVillage
 Producer models
 Manufacturers, service providers, educators, advisors, information/news
service, custom suppliers, Ford, GE, Boeing, Ernst & Yong, WSJ,
McGraw-Hill
E-business models & examples
Infrastructure provider models: to construct business that
deliver the technology infrastructure
Focused distributor
Infrastructure retailer/marketplace/exchange, CompUSA, Staples,
IngramMicro, Egghead
Portal
Horizontal/vertical infrastructure portals, AOL, AT&T, Oracle
Producer
Equipment/component manufacturers, infrastructure software/services
firms, IBM, Dell, Compaq, Oracle, Ariba, MS, Doubleclick
Custom software/hardware suppliers, Dell, Andersen Consulting
Organizational Strategy:
 strategy
A broad-based formula for how a business is going to accomplish its
mission, what its goals should be, and what plans and policies will be
needed to carry out those goals
 Strategy and the Web Environment
 e-commerce strategy (e-strategy)
The formulation and execution of a vision of how a new or existing company
intends to do business electronically
Organizational Strategy:

 Strategy and the Web Environment

 strategic information systems planning (SISP)
A process for developing a strategy and plans for aligning
information systems (including e-commerce applications) with
the business strategies of an organization
Organizational Strategy:
 The Strategic Planning Process
 Strategy initiation
 Strategy formulation
 Strategy implementation
 Strategy assessment
Organizational Strategy:
 strategy initiation
The initial phase of strategic planning in which the organization examines
itself and its environment
Organizational Strategy:
 Specific outcomes initiation phase include:
 Company analysis and value proposition
 value proposition
The benefit that a company’s products or services provide to a company and its
customers
 Core competencies
 Forecasts
 Competitor (industry) analysis
Organizational Strategy:

 strategy formulation
The development of strategies to exploit opportunities and
manage threats in the business environment in light of
corporate strengths and weaknesses
Organizational Strategy:

 Specific activities and outcomes from the formulation phase

include:
 Business opportunities
 Cost-benefit analysis
 Risk analysis, assessment, and management
 Business plan
Organizational Strategy:

 strategy implementation
The development of detailed, short-term plans for carrying
out the projects agreed on in strategy formulation
Organizational Strategy:

 Specific activities and outcomes from the strategy

implementation phase include:
 Project planning
 Resource allocation
 Project management
Organizational Strategy:

 strategy assessment
The continuous evaluation of progress toward the
organization’s strategic goals, resulting in corrective action
and, if necessary, strategy reformulation
Organizational Strategy:

 Strategic Planning Tools

 SWOT analysis
A methodology that surveys external opportunities and threats
and relates them to internal strengths and weaknesses
 competitor analysis grid
A strategic planning tool that highlights points of
differentiation between competitors and the target firm
Organizational Strategy:

 scenario planning
A strategic planning methodology that
generates plausible alternative futures to help
decision makers identify actions that can be
taken today to ensure success in the future
 balanced scorecard
A management tool that assesses
organizational progress toward strategic goals
by measuring performance in a number of
different areas
Business Planning in E-Commerce
 business plan
A written document that identifies the company’s goals and outlines how
the company intends to achieve those goals
Business Planning in E-Commerce

 Outline of a business plan

 Executive Summary
 Business Description
 Operations Plan
 Financial Plan
 Marketing Plan
 Competitor Analysis
Business Planning in E-Commerce

 Business Plan Fundamentals

 Purposes for business plan
 To acquire funding
 To acquire nonfinancial resources
 To obtain a realistic approach to the business
 business case
A business plan for a new initiative or large, new project
inside an existing organization
E-Strategy Initiation

 Issues in E-Strategy Initiation

 Be a First Mover or a Follower?
 Born-on-the-Net or Move-to-the-Net?
 Determining Scope
 Have a Separate Online Company?
 Have a Separate Online Brand?
E-Strategy Formulation

 Selecting EC Opportunities
 Incorrect approaches to EC strategy selection:
1. Indiscriminately funding many projects and hoping for a
few winners
2. Betting it all in a single, high-stakes initiative
3. “Trend-surfing”
 Productive approaches to EC strategy selection
1. Problem-driven strategy
2. Technology-driven strategy
3. Market-driven strategy
4. E-business maturity model
E-Strategy Formulation

 Risk Analysis and Management

 e-commerce (EC) risk
The likelihood that a negative outcome will occur in the
course of developing and operating an electronic commerce
strategy
 Security issues
E-Strategy Formulation
 Issues in Strategy Formulation
 How to handle channel conflict
 How to handle conflict between the off-line and online
businesses
 Pricing strategy
 Price comparison is easier
 Buyers sometimes set the price
 Online and off-line goods are priced differently
 Differentiated pricing can be a pricing strategy
 versioning
Selling the same good, but with different selection and delivery
characteristics
E-Strategy Implementation
 Create a Web Team
 project champion
The person who ensures the EC project gets the time, attention, and resources
required and defends the project from detractors at all times
 Start with a Pilot Project
 Allocate Resources
 Manage the Project
E-Strategy Implementation

 Strategy Implementation Issues

 Application development
 Partners’ strategy
 outsourcing
The use of an external vendor to provide all or part of the
products and services that could be provided internally
E-Strategy Implementation

 Business alliances and virtual corporations

virtual corporation (VC)
 An organization composed of several business
partners sharing costs and resources for the
production or utilization of a product or service
 co-opetition

Two or more companies cooperate together on

some activities for their mutual benefit, even
while competing against each other in the
marketplace
E-Strategy Implementation
 Redesigning business processes
 business process reengineering (BPR)
A methodology for conducting a comprehensive redesign of an enterprise’s
processes
 business process management (BPM)
Method for business restructuring that combines workflow systems and
redesign methods; covers three process categories—people-to-people, systems-
to-systems, and systems-to-people interactions
E-Strategy and Project Assessment

 The Objectives of Assessment

 Measure the extent to which the EC strategy and
ensuing projects are delivering what they were
supposed to deliver
 Determine if the EC strategy and projects are
still viable in the current environment
 Reassess the initial strategy in order to learn
from mistakes and improve future planning
 Identifyfailing projects as soon as possible and
determine why they failed
Review of Lecture
 Operations of new business
 Model

◦ (Business Model, E-Business Model)

 Organizational Strategy
 Business Planning in E-Commerce
 E-Strategy

◦ Initiation
◦ Formation
◦ Implementation
◦ Assessment
The End