The Internet Encyclopedia (Volume 3)

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Kleindi WL040/Bidgoli-Vol III-Ch-43 August 13, 2003 17:28 Char Count= 0

E-COMMERCEVALUECHAINSTRATEGIES 529

Procurement

(Online purchasing and tracking linked to inventory through enterprise systems)

Human Resource Management

(Hiring of technologically savvy employees)

Firm Infrastructure

(Technology and innovation oriented management)

Technology Development

(Supported by a technology infrastructure across the Internet, through extranets and intranets)

Value

Creation

Differential

advantages.

Dynamic

Pricing

Margin

Through

Stronger

Customer

Relationships

Inbound

Logistics

Extranet linked

allows for JIT.

Outbound

Logistics

Outsource to

Internet

linked

shippers.

Marketing

& Sales

Web based

promotion

and sales.

Service

Database

supported

customer

relationship

management.

Primary

Activities

Support

Activities

Figure 4: The e-commerce value chain.

team and employees who are willing and able to restruc-

ture business models and capitalize on the advantages

found in customer databases, online access to informa-

tion between buyers and sellers, rapid responses to envi-

ronmental change, and proactive innovation (Downes &

Mui, 1998; Slater, 1998–1999). Not all the components of

the e-commerce value chain must come from within the

organization itself; many e-commerce firms outsource key

components of their value chains or form alliances with

other businesses.

Each of the components of the generic e-commerce

value chain can be disaggregated into subcomponents.

Figures 5 and 6 illustrate this process by identifying the

distinct marketing and sales and management/human re-

sources sections of the value chain.

Information technology is used as a tool to enhance the

e-commerce value chain and is aiding in the development

of closer relationships with customers by speeding up

ordering and delivery of products, improving customer

service, and lowering costs (Caldwell, 1999; Szygenda,

1999). Strong customer relationships that allow a margin

should be the result of e-commerce value chains.

E-COMMERCE VALUE CHAIN

STRATEGIES

A value chain analysis integrates the two traditional paths

to competitive advantage. Value chain analysis can help

determine how a firm can obtain a low-cost (and there-

fore low-price) position though the gaining of efficiencies

or the outsourcing of functions. Value chain analysis can

also allow the determination of a differentiation strategy

by identifying a unique value proposition against com-

petitors. As has been stated, being the low-cost producer

may not be enough to gain a long-term advantage, be-

cause in an electronic environment, competitors may be

able to gain the same efficiencies. E-commerce technol-

ogy can be both a blessing and a curse for businesses.

A frictionless market implies that customers have almost

perfect information and can compare prices around the

world. This process can be enhanced through the use of

intelligence agents to search out best prices. This forces

businesses selling over the Internet and those that com-

pete against Internet sales to lower prices or differentiate

(Kuttner, 1998; Porter, 2001). Table 1 outlines a number

Marketing and Sales

Database

Capture: data

placed into

databases.

Mining: data is

analyzed to

enhance customer

relationships.

E-Commerce

Online purchasing:

direct link to

inventory, billing and

shipping.

Allows ease of access

to products.

Sales Force

Automation

Communication: links

sales force to

corporate data.

Database: allows for

identification of

prospects and client

information.

Promotion

Website: Dyanmic

content linked to

customer,s

information needs.

E-mail marketing:

utilize database for

customized

communication.

Supported by Intranets, Extranets, and the Internet.

Figure 5: Marketing and sales components of the e-commerce value chain.