IT and Competitive Advantage

The Strategic Planning Process

In today’s highly competitive business environment, budget-oriented planning or forecast-based planning methods are insufficient for a large corporation to survive and prosper.

The firm must engage in strategic planning that clearly defines objectives and assesses both the internal and external situation to formulate strategy, implement the strategy, evaluate the progress, and make adjustments as necessary to stay on track.

Marketing and Competitive Advantage

‘Marketing is the Guardian of the customer’ and therefore best placed to determine the deliverables that will contribute most to building strong relationships between customers and organization.

Fluctuating customer requirements and competitive forces are putting more pressure on marketing andare demanding superior sales and marketing strategy and tactical execution. The cycle time from product creation, to product launch, for a winning go- to- market strategy, leaves no margin for error.

Two means by which competitive advantage can be gained are

Through differentiation A focus on differentiation was and always would have been the vehicle to achieve Sustainable Competitive Advantage. There are different ways with which the organizations can achieve differentiation and can create competitive advantage. These are-

Consider marketing in the bigger picture context to maximize the uncovering of differentiation opportunities.

Differentiation can arise from a wide range of areas of an organization, in its interaction with customers, including, achieving competitive advantage from products, brands, pricing, promotion, geographic location, communication, manufacturing efficiencies, sales capabilities, distribution, financial strength, proper business performance measurement, people etc.

Recognize that differentiation in marketing initiatives changes the ‘value equation’ for customers when they make choices between a firm and its competitors.

Understand the relevance and importance of differentiation opportunities to customers before making them part of strategy to maximize impact and the profitable appropriation of marketing funds.

Make market knowledge a critical and ongoing part of the marketing disciplines and ensure this knowledge is interpreted by people with appropriate marketing experience able to convert it into actionable differentiation strategies.

Using web technology Many firms underestimate the value of using their websites to gain significant competitive advantage in their given markets. Most businesses only utilize their website as a means of displaying their corporate profile, list of products as well as things like their contact details and email address. But a firm’s website, when used as an effective Internet Marketing Channel, can enhance competitive advantage.

It is fairly safe to say that managers should always view web technology in light of the whole marketing mix instead of merely as an extension of their existing advertising efforts. A firm’s website indeed can positively impact each of these marketing mix elements – product, price, place and promotion.

Business Model

Business model converts innovation to economic value for the business. The business model spells-out how a company makes money by specifying where it is positioned in the value chain. It draws on a multitude on business subjects including entrepreneurship, strategy, economics, finance, operations, and marketing. In short, a business model is nothing else than a representation of how an organization makes (or intends to make) money. Simply put, a business model describes how a business positions itself within the value chain of its industry and how it intends to sustain itself that is to generate revenue.

Components of the Business Model

According to Chesbrough and Rosenbloom (2000), there are six components of the business mode, viz.

Value Proposition – a description of the customer problem, the solution that addresses the problem, and the value of this solution from the customer’s perspective.

Market Segment – the group to target, recognizing that different market segments have different needs. Sometimes the potential of an innovation is unlocked only when a different market segment is targeted.

Value Chain Structure – the and the value chain

how the firm will capture part of the value that it creates in the chain.

Revenue Generation and Margins – how revenue is generated (sales, leasing, subscription, support, etc.), the cost structure, and target profit margins.

Position in the Value Network – identification of competitors, complementors, and any network effects that can be utilized to deliver more value to the customer, and

Competitive Strategy – how the company will attempt to develop a sustainable competitive advantage and use it to improve the enterprise’s competitive position in the market.

Business planning

Business planning is the process of setting goals, explaining the objectives and then mapping out a document to achieve these goals and objectives. A well- written Business Plan lays out the best growth path and strategy, as well as the rationale for the selection of the strategy over other alternatives.

In essence, a Business Plan is the articulation and explanation of why the chosen game plan for building the company makes sense, what resources it will need to implement the vision, who will comprise the team (those who will have the skills and leadership to execute the vision), and what path they will follow to get there.

As the document that tells the company’s story, the Business Plan also helps shape and modifies the entrepreneurial company’s Business Model, the elements of which will be driven by the answers to the following questions

Who are we? (Team)

What are we trying to do? (Mission)

What problem do we solve? (Faster/Better/Easier/Cheaper)

How are we going to get it done? (Operations)

How do we reach our customers? (Sales/Marketing/Distribution Channel)

Who else is doing this? How do we obtain our initial customers?

Which are the easiest to reach? What are the target customers’ decision-making processes? What relationships do they currently have in place that will need to be terminated for them to do business with us? (Competition/Competitive Analysis)

What market research have we done to be sure that anyone wants to buy this product or service at this price - or at all? (Substantiation)

Do we truly modify the way business is being done in our industry (as a change agent) or is this more of a fad or a trend? (Market Trends/First Mover Advantage (FMA))

Are these targeted customer relationships profitable? How do we make money? (Business Model)

What do we need to accomplish our goals? (Budget/Resources)

When are we profitable? (Breakeven/Timetable)

What is E-Business?

E-Business and E-commerce are often used interchangeably. The difference lies in the integration and end user. E-business is the conduct of business on the Internet, not only buying and selling but also servicing customers and collaborating with business partners.

E-commerce is considered more of a presentation layer dealing with getting the message out to the consumer, along with means to create an ordering interface.

E-business is concerned with the total internetworking of organizational systems for the purpose of producing totally automated business commercial processes.

Steps of E-Business Development Process

There are five phases in the development process of establishing an E-Business, viz. Opportunity Analysis, Website Development, E-Marketing Program, Implementation and Expansion/E-Commerce.

PHASE I Opportunity Analysis

The purpose of Phase I in the E-business development process is to assess how ready the organization for E-business is. An analysis on the potential benefits of

E-biz and the investment required is performed. The necessity of E-business may stem from the customers who want the firm to have a Web presence or from the competitors who do their businesses online.

Phase I is the strategic planning stage of an E-business development process.

This phase prepares for further development of the E-business plan by positioning one’s

E-business successfully with competitive advantages as follows

Step1 Assess E-Business Readiness

Find out reasons for establishing an E-business

Conduct a cost/benefit analysis

Step2 Identify a Unique E-Business Opportunity

Conduct a market analysis for one’s E-business

Find out online customer needs

Decide if the product or service sold is a good fit for the Web

Check out the online competition

Review traditional business/marketing plans for one’s E-business fit

Develop the E-business concept

Step3. Prepare a Unique Selling Proposition

Identify online customers for one’s E-business

Find out one’s competitive advantages

Identify Critical Success Factors for the E-business

Select a domain name for the E-business

PHASE II Web Site Development

Phase II is the technology side of E-business development process. In this phase, one will determine what kind of Web presence is desired and how to develop the Web site, e.g., in-house or outsourcing.

Also, an Internet Service Provider (ISP) for one’s E-business is selected and actual Web content based upon the goals of the Web site is developed.

Step1

Determine Web Site Type & E-Business Model

Determine financial needs and secure the resources

Determine type of Web site for the E-business

Decide on the E-business models such as information sharing/corporate site/E-commerce site (direct selling or intermediaries)

Forecast revenue for advertising, referral, or sales

Step2.Decide on How to Construct the Web Site

Review various options of in-house and outsourcing Web site development

Review different types of Web hosting services ➢  Select an Internet Service Provider

Estimate developments costs

Step3. Develop Content for the Web site

Specify goals of the Web site

Determine what content to include in the Web site

Edit content to ensure a Web-friendly style

Contact ISP for hard ware advice on having the pages designed

Phase III E-Marketing Program

Phase III is the planning stage of E-marketing programs. A firm will develop pric-ing, distribution and promotion strategies adapted to E-business, including online adver-tising and search engine strategies.

Developing the Internet marketing goals and strategies before the actual Web site development will allow to check how well the Web site can serve the goals of the E-mar-keting programs, before one actually makes long-term financial commitment.

Step1 Clarify the E-Marketing Objectives & Develop Strategies

Develop E-Marketing objectives and show how the use of Web will strengthen the existing business

Develop product, price, promotion and distribution strategies adapted to E-Marketing plan

Develop time line chart showing E-marketing activities alongside traditional marketing activities and necessary costs

Step2 Develop an Evaluation System

Review the various measurement options for the E-marketing objectives and budget

Rate each option for its relevance to the current needs

Download or install a shareware program that measures Web traffic or

Hire an outside agency to design a customer package that meets the evaluation needs

Phase IV Implementation

In Phase IV, a firm will implement E-business by building, testing and registering the Web site as well as executing various E-marketing programs from Phase III. If it is selling on-line, then it should also set up a shopping cart program, an account payment system and tools for online customer service.

Step1. Develop a Detailed Budget

Review the traditional business budget

Estimate E-business costs

Step2. Construct Web Site

Design the structure of Web site

Generate Web site

Arrange for Hosting and post pages to site

Register the domain name

Test pages, links, and scripts to assure a well run Web site

Publish the URL and list with search engines

Maintain the Web site

Step3. Execute E-Marketing Programs

Implement E-marketing strategies

Set up an account payment system and a shopping cart program, if the firm sells online

Deliver products/services/information efficiently

Provide excellence service to the customers

Measure Internet marketing results in a timely manner

PHASE V Expansion / E-commerce

Phase V is the expansion stage of the E-business development process. A firm may expand its current E-business by upgrading its Web site to a higher level, or just simply by enhancing its current E-marketing programs.

Execute enhanced E-business marketing programs

Move to a higher level of E-business by adding new features to the Web site

A strategic positioning matrix (Figure ) can help a firm identify where to concentrate its use of Internet technologies to gain competitive advantage with E-business and E-commerce.

It describes the drivers of a firm’s E-business strategy and advises how far a firm may go with its E-business as illustrated in the following figure.

Cost and Efficiency Improvements

This quadrant represents a low amount of internal company, customer, and competitor connectivity and use of web systems via the Internet and other networks. One recommended strategy would be to focus on improving efficiency and lowering costs by using Internet and web systems to communicate and interact with customers, suppliers, and business partners.

The use of E-mail, chat systems and discussion forums on your company website are typical examples.

Performance improvement in Business Effectiveness

Here a company has a high degree of internal connectivity and pressures to substantially improve its business process, but external connectivity by customers and competitors is still low.

A strategy of making major improvements in business effectiveness is recommended. For example, widespread use of web-based technologies like intranets and extranets can substantially improve information sharing and collaboration within the business and with its trading partners.

Global Market Penetration

A company that enters this quadrant of the matrix must capitalise on a high degree of customer and competitor connectivity and use of web systems. Developing E-business and E-commerce applications to optimise interaction with customers and build market share is recommended.

For example, E- commerce websites with value added information services and extensive services and extensive online customer support would be one way to implement such a strategy.

Product and Service Transformation

Here a company and its customers, suppliers, and competitors are extensively networked. Web-based technologies including E-commerce websites, and E- commerce intranets and extranets, must now be implemented through the company’s operations and business relationships.

This enables a company to develop and deploy new web-based products and services that strategically reposition it in the marketplace. Using the internet for electronic commerce transaction processing with customers at company websites, and E-commerce auctions and exchanges for suppliers are typical examples of such E-business applications.

Thus a strategic positioning matrix helps a company optimise the strategic impact of web-based technologies for electronic business and commerce applications.