What is E-business Strategies?
E-business strategies refer to the plans and techniques used by organizations to conduct business activities online, leveraging the power of the internet, technology, and digital media. These strategies are designed to help businesses achieve their goals by optimizing their online presence and effectively utilizing digital resources to create value for their customers.
Table of Content
- 1 What is E-business Strategies?
- 2 Fundamentals of E-business Strategy
- 3 Objectives of E-business Strategies
- 4 Integration of Objectives With E-business Strategies
- 5 Identification and Estimation of Costs
There are various e-business organizations, ranging from established brick-and-mortar setups to those born on the Internet with additional revenues and earnings. Irrespective of its nature, each e-business organization needs to formulate its e-business strategy to define its objectives, goals, and operational activities. An e-business strategy can be defined as a corporate strategy that interconnects various business plans of an organization for all major functions, such as marketing and other strategic projects.
To formulate its e-business strategy, an organization needs to evaluate three factors, which are explained as follows:
- Nature of organization: Whether the organization was born on the Internet or moved from a traditional business to the Internet.
- Nature of product: Whether the organization is service-based, manufacturing-based, or a mix of the two.
- The online model adopted by the organization: Whether the e-business model is Business-to-Business (B2B), Business-to-Customer (B2C), or other models of e-business.
A strong e-business strategy addresses three fundamental aspects of an organization.
Fundamentals of E-business Strategy
The Chief Executive Officer (CEO) and other senior executives in an organization formulate the e-business strategy of the organization according to the organizational mission and objectives.
After drafting the e-business strategy, the organization needs to develop the technological infrastructure to implement the e-business strategy.
Finally, the organization should ensure that its staff can understand and deploy an e-business solution in the case of a crisis. It can implement organizational learning through shared insights, knowledge, and experience.
Objectives of E-business Strategies
An organization formulates its e-business strategies based on some objectives.
- To Add Value
- To Reduce Cost
- To Manage Risk
- To Innovate Products and Services
- To Expand the Customer Base
To Add Value
An e-business organization adds value by providing better-quality products and services to customers. To do so, the organization arranges strategies to obtain information related to the market, customer orientation, and preferences. Some of the techniques used to implement these strategies are:
- Data mining: It involves analyzing the existing large chunk of data to generate meaningful information.
- Trend analysis: It involves evaluating past data to predict future movements.
- Market survey: It involves collecting, storing, analyzing, and interpreting data on potential markets for a particular product/ service.
To Reduce Cost
An e-business organization uses some strategies to reduce costs and increase revenue. For this purpose, it can increase the efficiency of business processes. It can reduce production costs by creating, marketing, and delivering products or services with fewer resources than before. To do so, the organization can reduce paperwork, decrease the staff required to run electronic processes through automation, and improve internal and external communications.
To Manage Risk
An e-business organization is vulnerable to risks and fraudulent practices caused due to exposure to the Internet. These risks include information risks, technology risks, and other business risks. To prevent and avoid these risks, an e-business organization should create a secure system by:
- Developing strategies to protect against data theft
- Preventing unauthorized use of data during transactions
- Creating a strong telecommunications network
- Integrating business processes for better monitoring
- Following policies and regulations as per the law
To Innovate Products and Services
Due to increasing competition, an e-business organization must innovate and offer new products or services. To remain competitive and innovative, the organization can build strategies to:
- Promote research and development (R&D)
- Use data mining for collecting information about customer preferences
- Adopt new technologies
- Create new ways to develop and offer products through the Internet.
To Expand the Customer Base
Just like any traditional organization, an e-business company should expand its customer base. For this purpose, the organization can focus on the following strategies:
- Using extensive advertising and promotion
- Using social media marketing to attract customers
- Using techniques such as Search Engine Optimisation (SEO) to increase Web traffic
- Offering convenient modes of transactions and payment to customers
- Using efficient Customer Relationship Management (CRM) and reverse logistics
The aforementioned objectives drive e-business strategies and lead to the development of various other objectives.
Integration of Objectives With E-business Strategies
E-business strategies are based on objectives that an organization aims to achieve. After identifying its organizational objectives, an e-business organization should integrate its strategies according to these objectives. In other words, the organization should plan strategies to provide direction and guidelines to achieve these objectives. Table 2.1 describes the relationship between objectives and strategies as follows:
|E-business Strategies to Achieve these Objectives
|To earn revenue from new markets
|Introduce the e-business model in these new markets and increase promotion and advertising
|To ensure customer retention
|Improve aftersales services and offer special discounts
|To improve the sourcing of raw material
|Develop an e-procurement system
|To develop new products and services
|Use data mining and market analysis facilities
|To increase the distribution network
|Integrate the extranet of partners and promote paperless transactions
While developing an e-business strategy, an organization should also develop a strategic plan. A strategic plan defines performance goals in terms of time, cost, and benefits against which its success can be measured. There is a cost involved in implementing any strategic plan. The organization can evaluate the return on investment after a certain period.
The most important benefit of a strategic plan is that it enables an organization to identify the problem areas and focus on their improvement actions, without wasting any time, money, and effort. For this purpose, the organization can implement a performance measurement system, which includes:
- A focused and effective planning process based on clear goals and strategic action plans
- Feedback mechanisms to inform analysts what needs to be improved
Identification and Estimation of Costs
Since any e-business strategy requires a certain cost in planning, development, and implementation, an organization should determine its feasibility before implementation. This helps the organization determine the appropriate cost-benefit ratio of a strategy.
An organization typically incurs the following types of costs in formulating an e-business strategy:
- The cost incurred on research and development (R&D)
- The cost incurred on the payment of financial consultants
- The cost incurred on technology implementation
- The cost incurred in the administration
It is essential for an organization to identify and estimate the costs before implementing a strategy in order to maximize the benefits and reduce any possible losses.
After estimating the costs that will be incurred in implementing e-business strategies, an organization should compare these costs with the expected benefits from the strategy. These benefits are the accomplishment of objectives, such as the addition of value, reduction in cost, management of risk, innovation in products and services, increase in revenue, expansion of customer base, and new product development.
An organization needs to first calculate the expected revenue generated by implementing strategies. It can do so by separately assessing the potential revenue from each target customer group. To do so, it can use market research and trend analysis techniques to evaluate how much revenue or sales per customer the organization can expect to generate.
To determine the expected revenue, the organization needs to find the following information:
- Number of customers
- Average sales per customer
- Number of sales per customer per year
The formula to calculate the estimated revenue in a year for an organization is:
Estimated revenue in a year = Number of customers × Average sale per customer × Number of sales per customer
After calculating the estimated revenue in a year, the organization can compare it with the cost of implementing strategies.
- If the value of benefits is more than the cost of a strategy, the organization might consider implementing it to reap the benefits.
- If the value of benefits is less than the cost of a strategy, the organization might not implement the strategy
There are certain strategies where cost is not a factor to determine their benefits because of the necessity to implement them. Such strategies are meant for emergencies.
Return on Investment
Before implementing an e-business strategy, an organization should identify its value proposition to determine if the strategy is core to its success. After that, the organization must design e-business strategies that fit its overall organizational strategy. To do so, it can use cost-benefit analysis.
An organization can compare the cost and benefit of implementing an e-business strategy by calculating its Return on Investment (ROI). ROI is a tool used for cost-benefit analysis. It is a performance measure used to assess the success of an investment.
In conclusion, an organization implements e-business strategies by integrating them with its business objectives. After determining strategies, the organization evaluates its benefits against the cost of implementation using the ROI measure. Finally, the organization adopts a strategy with a higher ROI.