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530 VALUECHAINANALYSIS

Management

Organization

Structure:Flatter,

less bureaucracy.

Outsourcing:

Focus on core

competencies.

Organizational

Learning

Employees and

culture: Must be

willing to collect and

use knowledge.

Intellectual Capital:

Requires careful

hiring and training.

Innovativeness

Adaptability: willing

to break old business

models.

Idea generation:Use

teams, encourage

creativity.

Leadership

Management:CEOs

with vision and

technology

knowledge.

Cultures: Employees

who are loyal,

flexible, adaptive,

and quick to respond.

Supported by Intranets, Extr anets, and the Internet.

Figure 6: Management components of the e-commerce value chain.

of strategies e-commerce-based businesses are currently

using to provide value and obtain strong customer rela-

tionships (Kleindl, 2003).

Firms engaged in or planning to engage in e-commerce

must determine how to develop value chains to gain ad-

vantages. For e-commerce firms, speed and flexibility al-

low quick response to environmental change, size permits

economies of scale, brand names give assurance to the

buyer, and close customer relationships entice customers

to return to a site. These do not guarantee long-term ad-

vantage because severe price competition may hurt all but

the most efficient businesses or those with differentiated

niches. Table 2 outlines the impact of a value chain anal-

ysis across different types of retail businesses (Kleindl,

2003).

VALUE CHAIN DEVELOPMENT

Identification of competitive advantages in an e-comm-

erce marketplace requires an analysis of a firm’s business

model and value chain. This section outlines the process

of modeling business functions and the disaggregation

of functions into value chains. Developing e-commerce

models requires identifying the functional process flows

of a firm and then modeling how the application of

e-commerce procedures can result in competitive advan-

tage. This requires a ten-step process:

Identify the functional areas and major players.

Indicate linkage of the functional areas and the directions

of the flow process.

Determine how to apply e-commerce tools and techniques

to the business model.

Develop a new e-commerce model flow.

Disaggregate the business model into a value chain.

Evaluate the competitive advantages of the model by us-

ing a value chain analysis.

Analyze the firm’s own value chain including the costs

related to every activity.

Table 1Methods of Differentiation

Differentiation Value Chain Impact

Strategy Advantages Disadvantages

Gain Speed & First Mover

Advantages

This provides a number of first mover

advantages including costs, meeting

needs, lowering risk, and lower prices.

Firms need to be flexible to be fast. Being first

increases risks and may require large

amounts of capital to maintain advantages.

Build Brand Name Gives buyers assurance when interacting

with a site. Allows easy name

recognition.

Requires a large amount of capital to obtain

and maintain a brand name.

Portal and Market Place

Development

Allows economies of scale and builds

barriers to entry.

Requires large amount of capital, pushing off

profitability.

Pursue Niche Strategies Very good strategy for smaller or weaker

businesses. Allows a business to focus

and become an expert in one competitive

arena.

Having only one niche can be risky because

all of the ”eggs” could be in one basket or

with one customer.

Enhanced Customer

Relationships

Allows businesses to build barriers to entry.

By staying close to customers businesses

can meet needs better.

Could result in a loss of power by the

business supplying the product or service.

FromStrategic Electronic Marketing, Managing E-Business,2nd edition, by Kleindl.©c 2003. Reprinted with permission of South-Western,

a division of Thompson Learning: http://www.thompsonrights.com. Fax 800 730-2215.