E-COMMERCE STRATEGY FOR COMPANIES
Ji ří DVO ŘÁK, Ji ří K ŘÍŽ
The article contains a brief description of possibilities of corporate strategy and outlines possible new conception of e-commerce strategy for companies in the new economy.
Key words: Corporate strategy, functional strategy, e-commerce, e-commerce strategy.
Introduction
Competitiveness of any company depends on a wide range of factors, among which also ability to accommodate to changes belongs. The beginning of this millennium can be characterized by high growth and globalization of competition and by remarkable development in the areas of utilization of information and communication technologies. Information and communication technologies thus enable occurance of new ways of managing the relationships between suppliers and consumers. These relationships can be characterized by a large degree of automation, and by use of the Internet as the main communication tool. Implementation of e-commerce can be considered as a medium-term investment, which has to be controlled systematically, in order to achieve the desired effect. If a compa
ny decides to implement e-commerce, it is very important to make preparations first. The main point of these preparations is creating an e-commerce strategy (13).
Analysis of the current state in the area of e-commerce
The Czech Statistical Office presents four basic features of …New Economics“, which are, according to the Eurostat (the Statistical Office of the European Communities), agreed upon by most experts (1): knowledge and new branches with high added value, utilization of new information and communication technologies that increase competitiveness, virtual communities that are based on common interests, decreasing role of brokers thanks to increasing utilization of information and communication technologies
E-commerce is made up by a complex of links between individual participants in the given commercial transaction (Fig. 1.).
B2B B2C
C2B C2C
Source: CHEN, S. Strategic Management of e-Business. 2004 (7)
Fig. 1. E-commerce as a complex of links between individual participants
In Fig. 2. present classification of e-commerce according the product, broker and process.
E-commerce in the Czech Republic
Also the Czech Statistical Office is concerned with research in the area of utilization and development of e-commerce: every fourth household in the Czech Republic has a computer (8). The results of the researches show that up to 70 % of Internet users shop online. 75 % of Internet users have experience with shopping online – the purchasers are men, who made up 54 % of all purchasers. Approximately one third of all purchasers is made up by people aged 20-29 years (9). The highest interest is in books, magazines and text-books (37 %). The second most favourite goods were electronic devices (28.9 %). These were followed by tickets to cultural events (23.6 %), clothes and sports equipment (21.4 %), services in the area of travelling consumer
business  consumer  business
and accommodation (16.2 %), films and music (16.2 %).(8). 56 % of the purchasers chose to pay for the purchased goods by means of cash on delivery. 26 % of the purchasers paid by means of bankin
g transfer, 19 % paid cash, 6 % by means of a postal order and 4 % by means of a credit card (8).
Source: CHEN, S. Strategic Management of e-Business. 2004 (7)
Fig. 2. Classification of e-commerce according the product, broker and process
Utilization of e-commerce in the business sphere
The volume of purchases by means of the Internet in the Czech Republic reached approximately 2.8 % of total purchases. The volume of sales by means of the Internet reached 2.1 % of total sales. It is thus obvious, that the companies more and more often utilize the Internet for purchasing, the sale on the other hand interannually rather fluctuates (8).
In Fig. 3. present utilization of e-commerce in the business sphere (economic subjects with more than 10 employees).
Source: Czech Statistical Office, 2004 (9)
Fig. 3. Utilization of e-commerce in the business sphere
Formulation of the e-commerce strategy
Management can generally be divided into three basic groups, namely strategic, tactical, and operative management. These three types of management are hierarchically arranged and, on the basis of this, can be stated that every company that wants to be successful has to have a quality system of strategic management. It namely is the basis of management in general, from which then tactical and operative management follows.
agent agent commerce
Strategic management is a never-ending, continuous process, oriented primarily on retaining harmony between corporate mission, long-term objectives, available resources, but also on achieving harmony in mutual interactions with the environment that the company finds itself in. Strategy can be in a simplified way characterized as basic notions of the manner of achieving the determined objectives. Strategy can be defined by means of the following eight attributes (4, 8, 13):
-Strategy points to the more distant future
-Strategy should secure the company a specific competitive advantage
-Strategy determines primarily basic parameters of business activity, set of products, services, volume of production, markets etc.
-Strategy should aim at achieving harmony between activities of the company and its environment -Strategy should base on key resources and abilities of the company
-Strategy should delimit basic ways of securing resources that are necessary for its implementation -Strategy fundamentally determines objectives on the tactical and operative level of management
-Strategy also has to reflect corporate values, expectations of the stakeholders, and corporate culture
securingA company can be successful only then, when it chose a suitable strategy. This strategy has to deal with a wide range of areas related to the given business, and if the company is also involved in e-commerce, it has to contain functional strategy that solves the particular problem – e-commerce strategy. It is suitable to implement the e-commerce strategy only in case, when there is a significant strategic gap that can be filled exactly by implementing the e-commerce strategy.
If a company is able to find answers to previous questions and comes to the conclusion that implementation of e-commerce might be an asset, it can start developing an e-commerce strategy. It is a demanding process, which can be divided into five basic stages (11).
E-commerce strategy is a functional strategy that contains objectives of the given company and ways how to achieve them that focus on the area of e-commerce. E-commerce strategy can be part of another functional strategy, e.g. IS/IT strategy, which represents a separate functional strategy that blends together with other functional strategies of the given strategic business unit. A typical example of this blending can e-marketing. E-marketing can be part of both e-commerce strategy, and marketing strategy. An important condition however is preservation of consistence, i.e. that the given issue is divided into technical and logical part, or is elaborated comprehensively as part of one of the given strategies (5).
E-commerce strategy is analogous to corporate strategy. It differs only in being oriented on how the company should be adapted to new business conditions or how should a new company operate electronically. This approach concerns basically all companies, large as well as small – all of them have to consider the e-commerce strategy. It may come in useful here to mention the statement of M. Dell, the founder of Dell Computers: …Internet is like a weapon on your desk, you either pick it up and use it or your rival does. In this case it is of no importance to ask WHETHER, but only WHEN“.
It is very difficult to harmonize the corporate strategy with new perspective technologies and it requires considerable effort of the management. One of the methods of formulation of e-commerce st
rategy is the model by R. Plant (6), which is based on seven key factors. Four of these seven factors - technologies, market, services and brand – are the main pillars. These four pillars are connected by means of other three factors – management, infrastructure and training, without which the pillars given above would occur in isolation.
It is important that all factors – technologies, brand, services, market, management, infrastructure, a learning organization – are mutually balanced and connected. This mutual cohesion and balance is secured by means of effective infrastructure. It can be characterized for example by means of the 7S model of consultants R.T. Pascal and A. Athos from the company McKinsey.
New companies starting to operate on the Internet usually have a flat organizational structure and their main objective is primarily cost minimization. The costs however usually grow with increasing market requirements. This type of companies also tries to achieve the biggest possible understanding of the market. Unlike …start-up“ companies, the companies that already operate on the Internet and are well-established try to find and make use of new distribution channels or services and try to provide answers to questions such as: What makes us better than the competition? What are our weaknesses? How effective is the utilization of information and data? How can we optimise the key processes, etc.-? And exactly this knowledge-guided approach to man
agement is the key to success (5). A company that wants to succeed in the current globalised
market however has to combine both approaches mentioned above: flexibility and low costs, knowledge management and knowledge of the market.
Evaluation of the e-commerce strategy has three basic stages (5):
-Analysis of the company and choice of e-commerce model from the point of view of brand, technology, market and services.
-Proposal of balanced metrics, which are going to be utilized in evaluation of financial impacts, competitiveness, brand, provided services, market, technologies and style of the web pages. Each of these areas should contain a large number of questions concerning influence of the strategy on the organization. Balanced evaluative criteria are going to be proposed for each dimension of the e-
commerce strategy (e.g. verbal – questions that express the influence of the given factor on the strategy). Results of the metrics should then be evaluated carefully, primarily on account of their mutual connection. Customer satisfaction measurement, for example, can have an influence on a low interest in customer on-line centre, because the customer prefers calling by phone and at the same time e-commerce prefers on-line communication by means of the Internet.
-To evaluate the e-commerce strategy can be the 10-point scale, which shows the influence of key factors on the selected strategy, where 1 expresses absolutely negative and 10 - absolutely positive influence. Sum of the points of each factor is then expressed by means of a polar graph (7).
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