.. s resources, and any apparent opportunities it may be possible to conclude an effective match, and hence, a favourable outcome. (Brown, L. 1997) These four major environmental factors are important for the organisation, and are vital in assessing its strategy in an E-commerce situation. For example a farming supplier whom currently possesses an e-mail ordering system may be thinking about developing a web-site. As they currently already operate basic E-commerce facilities, they may identify this as a strength in their business.
Hence, in doing so, their strategic formulation has been based around the fundamental practice of SWOT analysis. These ideals keep with common literature and practice, however they can be further explored by looking at some of the external forces that E-commerce poses. As such, E-commerce provides strategic advantages and disadvantages that have been widely discussed and challenge. As opportunities and threats can often be rather blurred, these E-commerce or Internet advantages or disadvantage pose some interesting question. Strategic Advantages/Disadvantages In having a comprehensive analysis of the environment in which the organisation is face with when dealing with E-commerce, the task is now rather simple. The organisation must identify how to use the Internet towards a useful business advantage.
(McEarchern, T. O’Keefe, B., 1998) There are huge amount of interesting approaches to achieving such an ideal, and the basic ideals varying across different industries and organisations. For example, CD Now and Amazon.com are building businesses based on immediate availability and ordering of, respectively, any CD or book. (McEarchern, T. O’Keefe, B., 1998, p.62) While this may be an ideal medium for companies such as Amazon.com it may prove rather less successful for different organisations. Unless clearly define objectives are set when approaching E-commerce, strategic ideals may prove derogatory to an organisation. (Higgins, J.
1999) While it is obvious that dynamic organisation possess varying attributes, there are some general advantages and disadvantages that E-commerce offers across all different industries. As E-commerce advances at it rapid rate, it is clear that no industry will be exempt from its impact. Therefore key issues in its possible uses must be address across all diverse industries. Advertising Advertising on the Internet presents a significant opportunity for an organisation to enter the world of E-commerce. As part of strategic planning any organisation must be ready to develop it’s brand image and as such, the Internet offers a wide range of opportunities. Such as the use of billboards in the real world, the Internet can provide ideal locations to further developing their offer.
Obviously the information received on site hits and relevant user data acquired, helps to focus such ideals towards the appropriate target market. There are, however many views that Internet advertising will not gain distinctive popularity because of the difficulty in assessing it effectiveness (Ottman, 1996 cited Johns, R.,). While Strauss, J. Frost, R. (1999) believes that advertising on the Internet helps reach its revenue objectives, Johns, R.
(1996) suggests that Internet advertising is full of clutter, and therefore proves difficult to gain the attention of the target market. Virtual stores are another significant ideal in which strategic planning can base significant interest in, when addressing E-commerce. Virtual store can provide an inexpensive form of direct sales or help to supplement existing sales channels. (Strauss, J. Frost, R., 1997) By using the Internet, manufacturers are possible to reach the end-consumer without going through intermediaries. (Turban, E. et al, 2000).
Successful exponents of such strategies are organisations such as Amazon.com, and their success in the distribution of books. When aligning a strategic plan based around the development of a virtual store, there are some key issues that must be addressed. As with any strategic development, there are usually threats, and virtual stores pose considerable threats due to intense competition. In a marketplace such as the Internet, other company can apply huge pressure, perhaps due to a sustainable competitive advantage. (Strauss, J. Frost, R., 1997) Electronic Cost-cutting By replacing existing print and publishing cost, organisation can use E-commerce for their electronic publishing.
Distribution on the Web, as opposed to mail, for example can have a huge impact on cost, and may be a strategic driver. The initial strategy might be for lowered cost of the product offer, and hence lowering cost in documentation distribution may help in the financial control of such a strategy. FIG 2. THE STRATEGY HIERARCHY (Brown, L. 1997, p.10) The Strategy Hierarchy As a vital aspect of understanding the implications of E-commerce to marketing strategy, it’s vital to look at all levels of the strategic hierarchy.
The strategy hierarchy (Fig 2.) identifies the: corporate strategy business strategy And at a functional level, the marketing strategy. It is imperative that when addressing the strategic implication of E-commerce, that all three areas of the organisation must be addressed. In doing so, the marketing role within the organisation is not isolated, and is in keeping with the overall organisations core objectives. The first step is to address the corporate strategy and define the its link to the strategic development of E-commerce. The basis for the corporate strategy identifies where the business wants to focus its attention in regards to the scope of the organisation.
In doing so bases it’s mission and vision to align with key objectives. (Brown, L. 1997) Paxton, B. Baker, T. (1997) suggests that it is essential that the Internet planning process is not divorced from the corporate strategic management process but is integrated into each stage of your company’s existing process. The focus of the corporate strategy is to develop synergy between the various Strategic Business Units (SBUs).
This is a vital element to any organisation that is evolving its strategies into new domains, particularly as a result of environment shifts. Therefore when formulated a strategy based around the use of E-commerce, it is imperative that the SBU planning is in synergy with the core corporate objectives. In doing so, the other relevant SBUs will follow the corporate strategies lead. As the varying SBUs are aligned within the corporate strategy, they too have influence over their relative functional levels. The business strategy possesses more defined objectives as well as a clearly defined competitive strategy. Because the SBUs operate in their relevant markets, such clearer focused goals are possible.
At this level the focus is on building, defending and maintaining competitive positions through the development and implementation of competitive marketing strategies. (Brown, L. 1997, p.11) The role of the SBU strategy is clear, and is also highly relevant to E-commerce issues. This drive to maintain competitiveness in a SBU’s market may be the foundation for a move into E-commerce development. As the core goals are to sustain a competitive position, an organisation may decide that E-commerce provide this and inherits it’s use in their strategic planning. However, some organisations may find that E-commerce provide them with no significant competitive offering, and hence chooses to ignore it as part of their strategic formulation.
The decisions must follow a well prepared business plan and require a thorough understanding of the impact of the bottom line. (Higgins, J. 1999, p.48) The marketing strategy level of strategic planning identifies some key functional issues that the organisation must implement. This identifies the relevant marketing objectives that the organisation wishes to implement as well as the product market strategies. This level gains a clearer focus on the consumer in each particular target market. This integrates many key marketing ideals, and is used to co-ordinate marketing resource and the marketing mix to reach the desired markets in which are targeted. The Marketing strategy is by far the most relevant in measuring the impact of E-commerce on the marketing strategy formula. While the upper levels in the hierarchy shapes the direction in which various marketing strategies are planned; it is this level that develops the functional elements of this strategy.
Retailing in E-commerce A major shift in the evolution of E-commerce is it’s impact on the traditional retailing system, in particular the shift of intermediaries from the distribution channel. In theory, the Internet allows manufacturers to sell directly to the consumer, cutting out the traditional ideals of a middleman or intermediary. (Turban, E. et al. 2000). Turban (et al.
2000) describes this phenomenon as disintermediation. Turban, E. et al. (2000) also identifies an emerging electronic middlemen such as e-mail and product selection agents. This is quite naturally classified as reintermediation. (Fig 3.) Shows the prevalence of the two as a result of E-commerce developments.
The evolution of the second phenomenon is commonly believe to the basis for future E-commerce practices. Hutchinson, A. (1997) suggests that this middleman effect with combine with global integration and widespread network connections. Once again Amazon.com provides are useful example of a strong electronic intermediary. When devising a marketing strategy an organisation must be aware of this shift in E-commerce structures.
The awareness of how intermediaries in the distribution channel is absolutely vital to marketing strategy, and the implications of how this is changing could have a profound effect on marketing strategy formulation. FIG 3. DISINTERMEDIATION AND REINTERMEDIATION BY EC (Turban, E. et al. 2000, p.64) Implementation Issues Financial The development of Web site is fundamentally used to result in some level of revenue or a decrease in the cost. Revenue is typically based around increase sales, and decrease cost could arise due to elimination of intermediary forces.
(Strauss, J. Frost, R. 1999) Therefore the basis for integration into E-commerce has an effect on financial issues, and may perhaps be the basis for the strategic formulation. As with almost any strategic plan, there are associated costs that derive, and this is reflected also in E-commerce. Such cost could be identified as follows: Connecting to the Internet (The Internet Service Provider) Hardware and software Web site and advertising designers Staff to maintain the Web sites and manage e-mail with stakeholders.
Performance monitoring As with any strategic formulation, E-commerce requires appropriate performance monitoring to ensure that is place in the organisation continues to be in sync with the functional goal and objectives put in place. This includes ensuring that any adaptation to E-commerce is monitored, including staff training and awareness. The use of E-commerce in an organisation must be carefully monitored to ensure that it remains productive, and that they generate some sort of gain. As well as these functional aspects, it is imperative that the actual strategies that are formulated as constantly review, and future developments are adapted into such strategies. Conclusion E-commerce is revolutionising the way in which an organisation thinks, and in particular how an organisation bases it’s future goals and objective.
An understanding of the critical make up of organisations, and how they develop their strategies, helps to close the gap between E-commerce and strategic marketing. An organisations strategic planning process helps to cover the vital issues that any new paradigm may invoke. This structure helps provide a basis for assessing the impact of E-commerce and it’s relationship with marketing strategy. By understanding the organisation as a whole, it becomes clear what initiates strategic development, and hence provides clear reasons why E-commerce may become prevalent in strategy formulation. Such an understand allows the organisation to develop E-commerce strategy that is in sync with the organisations corporate strategies.
Such fundamental comparisons help to gauge the effect E-commerce has and will have on modern organisations. If Organisations gain an understanding of E-commerce and its relationship to marketing and operational strategies, they will be better ready for future development and technological change. (Baty, E. 2000) In order to be competitive in modern business it is imperative that the organisation’s corporate strategies are constantly review, and environmental influences addressed. One of the major shifts in recent years is the technological shift towards the Internet, and as a result E-commerce.
E-commerce has developed into an enormous aspect of the Internet and as such, organisations have been required to address this in their strategic planning. For example, the University of Otago’s strategic plans would be to look forward to technological changes, and be ready to adapt to these. As such, perhaps the introduction of an E-commerce Degree may be a resultant of their strategic plans. Organisations that are looking towards E-commerce as a strategic option are met with numerous issues that must be addressed. Analysing theories and thoughts on E-Commerce helps to gain a better understanding of how an organisation would approach such a strategy.
As with any strategy, many attributes must be considered, and carefully evaluated. As a fundamental component of strategic planning is to envision future development, perhaps these ideals could be advanced further. While E-commerce does and will have a profound effect on marketing strategy formulation, what will the future of E-commerce hold? As organisations implement their strategic plans in respect to E-Commerce, it must be realised how this will effect other part of the organisations. It is also important to understand how society is impacted as a result of their strategic plan. Is promoting a greater number of Internet users irresponsible? Perhaps promoting regular use of computers is affecting the general health of the consumer.
While such suggestion seen rather extreme, it is feasible to assume that such ideals warrant further investigation. In keeping with these future ideals, research may be sought on developments in technology and the potential for total media packages and what they would mean to the advertiser. Perhaps the next step in the Internet, is total home entertainment, and identification of this early, could lead to a sustainable competitive advantage in E-commerce. Such forward thinking epitomises the fundamentals of formulating a successful Marketing and Advertising.