Approaches to E-business Strategy Formulation - Literature review Example

Part A1 - Critically evaluate any five approaches methodologies to e-business strategy formulation, recommending a suitable approach for the company. Your recommendation should be evaluated in relation to other methodologies. There exist an array of approaches to e-business strategy formulaiton (Kalakota and Robinson, 1999; Hackbarth and Kettinger, 2000; Oliva, 2001; Huizingh, 2002; Rifkin and Kurtzman, 2002; Czuchry and Yasin, 2003; Bhandari et al., 2004). In this context of understanding five approaches are evaluated and one specific approach is recommended for the company in question. While there exist a plethora of approaches to e-business strategy, when considered from a foundational context one of the originary studies was developed by Kalakota and Robinson (1999). The approach formulated by these individuals was largely comprehensive in that it considered the entire business value chain in the context of the construction of e-business models. In these regards, value chain factors investigated included knowledge and decision-support systems (DSS), business design and technology, procurement, IT architecture, selling-chain management, enterprise resource planning (ERP), and supply chain management (SCM). Largely this approach to e-business considered a multi-stage approach to e-business formulation, as companies were expected to establish specific elements in a variety of steps. In articulating these steps Kalakota and Robinson (1999) argued that there were three primary stages: the first stage is the initiation stage where the e-business strategy and models are established; in the second stage a business plan is built to convince stakeholders; finally the third stage decides on implementation elements. It’s noted that, “It’s about balance, about the optimal investment mix of risk and return, cost reduction versus growth, and short-term versus long-term goals” (340). Another approach is that implemented by Hackbarth and Kettinger (2000). The central element in this approach is what they refer to as “strategic breakout methodology”. This methodology functions as a process where companies can shift to e-businesses. Similar to the previous study, these researchers implemented three primary stages of development. The three stages are understood as experimentation, integration, and transformation. In the first stage companies are assumed to have no or limited e-business strategy and as they undergo abstract experimentation. The second stage occurs as a general e-business approach has been established, but it remains subordinate to the main business model. Finally, the third stage witnesses a nearly full-scale transition to the e-business environment. This strategic model is comprehensive and multidimensional in that incorporates nearly all of the business inputs and outputs, including customers, suppliers and revenue streams. The second element of this strategic approach considers the most appropriate ways for a business to move through each of the articulated stages. Hackbarth and Kettinger (2000, p. 79) note that move from the first to the second stage requires, “a deliberate effort to link their corporate strategies with the dispersed digital initiatives taking place throughout the company.” In moving from stage two to stage three Hackbarth and Kettinger (2000, p. 79) argue that it’s necessary for organization to, to “expand inter-enterprise process linkages between customers, suppliers, and partners to create seamless networks. ” The authors further articulate a four-stage methodology: initiation, diagnosis, breakout, and transition. While these stages in-part correspond to the three-part transition process they are more specific in their articulations. The initiation stage, “envisions potential strategic change, confirms top management support, and determines a project schedule” (Hackbarth and Kettinger, 2000, p. 80). The diagnosis stages, “gathers information about the strength and weaknesses of the company as well as opportunities and threats present within the company’s industry” (Hackbarth and Kettinger, 2000, p. 81). The breakout stage, “formulates an E-business strategy with the objective of breaking out of the box by using E-business technology to transform processes and people to better compete in a dynamic global marketplace” (Hackbarth and Kettinger, 2000, p. 81). Finally, the transition stage, “recognizes the reality that the breakout strategy may not be immediately obtainable because of a company’s unwillingness to change, lack of available resources, or shortage of qualified people” (81). Ultimately, these stages combine with the previously established methodological assumptions in approach to e-business implementation. Another prominent approach to e-business strategy is that implemented by Czuchry and Yasin (2003). While the previous two approaches hold many parallel elements, these authors’ approach is largely unique. The main methodology has been articulated as a strategic approach to “unifying the E-business activities, decisions, actions, and investments into a systematic implementable E-business strategy” Czuchry and Yasin (2003, p 29). This main approach is refereed to as the rapid assessment implementation method (RAIM). RAIM predominantly adopts a conceptual framework developed by Baldrige which has in-turn been used in many quality improvement initiatives. This approach is a dynamic consideration of e-business implementation that involves a six-stage process. The six stages include a base approach to e-business methods. The second stage takes a broad ranging assessment of competing e-businesses. The third stage positions the organization within this competitive context. The fourth stage asks the organization to evaluation which elements of its business would best be transferred to the e-business context. The fifth stage enters into the design of e-business infrastructure. Finally, the sixth stage implements these elements (Czuchry and Yasin, 2003: 37). Another strategic approach to e-business implementation is that established by Huizingh (2002). This researcher considers three models that could potentially be instituted for specific businesses in specific contexts: (1) the Strategic Internet Applications Model (SIAM), (2) the Customer Interaction Cycle (CIC), and (3) the Accessibility, Design, Offer, and Fulfilment (ADOF) model. These approaches function as they contribute to decision making in a multi-dimensional context. The first stage, “details that Internet applications can focus on current customers, new customers, the distribution channel, or the product. It is a strategic choice, for example, to restructure the distribution channel (e.g., desintermediation), or to offer customised products or services” (Huizingh 2002, p. 723). The next stage “assists managers in determining how to increase customer value by means of Web applications. [it] describes the interaction process between a supplier and a customer and highlights instances where a supplier can provide added value” (Huizingh 2002, p.723). The final strategic approach has been established by Kalakota and Robinson (1999). This approach is particularly useful for organizations that had entrenched legacy systems. The main strategic goal was to aid organizations move through four designated stages. These stages include isolated applications, integrated applications, a business blueprint, and an enterprise framework. One recognizes that Hackbarth and Kettinger (2000) also established such a staggered approach to e-business development, however their approach is less multi-layered as Kalakota and Robinson’s approach. Czuchry and Yasin’s (2003) and Huizingh (2002) are important approaches, however they hold notable shortcomings. Conversely, Kalakota and Robinson’s approach is more focused on performance metrics, particularly operational effectiveness. This is distinguished from previous approach that place more emphasis in broad ranging theories. Part A2 - Applying at least five analytical tools in strategic management formulate a suitable e-business strategy for the company. Your proposed strategy should be based on your analysis, and supported by evaluation of your proposed approach, indicating its suitability for the organisation, and also its relation to the company’s business strategy. Seminal theorist Michael Porter has articulated some of most influential perspectives on strategic management. Porter (1985, p.1) argued that the central focus of strategic management should be “to establish a profitable and sustainable position against the forces that determine industry competition.” While Porter has established a strategic approach to business implementation that is overarching and large-scale, it is also specific enough in that following Porter’s five tenants an organization can largely develop a structured approach. Porter (1980) articulates the major factors an organization must consider the barriers of entry by the specific and competing organizations, supply chain bargaining elements, and general industry competition; these elements function in a dynamic context of consideration with elements of focus, differentiation and leadership (Porter, 1985, p 16). The specific case company is highly involved in the manufacture, service, and support scientific machinery, and accessories. It follows that specific strategic management tools must be implemented that target these specific business elements. One such specific model is the BCG growth-share matrix. This matrix considers companies as individual entities, but also evaluates diverse portfolio elements. Still, in the e-business context, theorists such as Kalakota and Robinson (1999) would argue for a multi-structured and staggered approach. From the e-business context, the organization under examination should evaluate central infrastructure elements. Among prominent such elements include supply chain elements; as indicated earlier Porter (1985) places considerable emphasis on the value chain as largely establishing, contributing, and maintaining competitive advantage. Still, these elements must be considered as necessarily contingent on a variety of supplementing factors. Williamson (1975) discusses transaction cost economics; Barney (1991) emphasizes viewing the firm based on resources; Teece (1997) considers core competence and dynamic capabilities. These perspectives constitute a multi-varied approach to investigating the interaction of the value chain in terms of business strategy for the case organization. More specifically, the organization could consider transaction costs in terms of maximizing margins along the manufacturing supply chain. Following Porter’s approach to competitive advantage, maximizing cost on the value chain allows the organization to strengthen their industry competitiveness and general leverage. In terms of structuring these elements, the most strategic approach would be to vertically integrate supply chain elements where the firm holds a noted advantage; conversely, areas where the firm holds no advantage should be outsourced. Nahapiet and Ghoshal (1998, p 243) note that limiting transaction costs can further be established by the development of social capital, as, “the sum of the actual and potential resources embedded within, available through, and derived from the network of relationships possessed by an individual or social unit.” Ultimately, the Digital Age presents a unique opportunity for e-businesses to strengthen supply chain elements. In situating the case company in a specific theoretical context there are a number of notable considerations. Following Kalakota and Robinson (1999), the organization is situated by stage 1 isolated applications and stage 2 integrated applications. This indicates that the organization is in the foundational stages of e-business development and has not approached any form of implementation. Specifically, internally, “the Local Area Network provides access to MS Office, Stock Control System, Computer Aided Design (CAD), and a host of other functional applications, developed either internally or, provided by software houses. The Wide Area Network provides access to e-mail and the Internet. The company has its own web site. But, due to the nature of its products and services, there is no immediate plan for incorporating e-commerce facilities. However, the site’s feedback mechanism enables the company to respond to enquiries and establish initial contact with potential customers” (Case Study, 2007). It follows that the organization must work towards developing a strategy to aid its transition from stage 1 and 2 to stage 3 (application blueprint) and then to enterprise framework, stage 4. Essentially, in transitioning to these activities the organization will be able to vertically integrate its strengths and outsource its non-core elements. Ultimately, this process will require that the organization implement the basic stages of blueprint establishment and implementation, convincing stakeholders of the business model, and successfully and efficiently implementing this approach. There are further specific elements one must consider in implementing these implements. In establishing the blueprint, as the case organization has limited legacy systems, it seems clear that an aggressive approach should be adopted. In these regards, initiatives could be developed that focus on developing major company applications and successfully launching them in the context of the efficient value change. These measures specifically refer to CRM, ERP, and SCM procurement. The underlying goal is to improve the organization’s operating income. Consider that the Case Study (2007) notes, “To compete in the UK and international markets, the company relies on the quality of its products and services together with its competitive pricing strategy. The latter is achieved by reducing the profit margin. As a small company, they are happy with a limited margin, and in some cases, just, to break even.” Ultimately, the viability of this approach will be contingent upon the extent that the organization is able to reduce its operating and supply costs to improve margins. Part B - Discuss the challenges of adoption of e-business in relation to the company in relation to operations in a new country. Evaluate the Critical Success Factors (CSFs) for E-business in relation to the company with a view of improving performance. There are a number of challenges to adopting an e-business in the context of a foreign country. These elements are a variety of Critical Success Factors (CSFs) that are considered within this area of investigation. As has already been established, the organization is currently in the early stages of e-business development. Kalakota and Robinson’s (1999) conceptual framework, which has been the model framework implemented for this organization, situates the organization between level 1 and level to e-business development. In these regards, the organization has a number of opportunities and threats. While the organization may face steeper barriers to entry for its late era e-business development, it also has the opportunity to envision its value chain from a fresh perspective. In transitioning from level 1 and 2 to level 3 the organization must consider the relative speed with which they want to implement structural changes. These questions have been investigated by a number of researchers. Hoffman (2001) surveyed 100 chief financial officers and discovered that limited amounts had developed significant e-business initiatives. It’s noted that “part of the problem…is that its probably going to take at least another few years before successful e-business models have been firmly established and can be easily implemented by companies. Thats true even at some businesses that have their feet in both the brick-and-mortar and online worlds…Other companies that have been aggressive about championing e-business strategies have run into some snags. For example, James Parke, vice chairman and CFO at General Electric Capital Corp., said the Stamford, Conn.-based firm has faced challenges in getting its "hands around [the] systems that worked well in the legacy world but had to be Web-enabled" (Hoffman (2001, p. 36). Another consideration is the organization’s digital infrastructure. It’s recognized that the organization has limited internal IT capabilities. This is not to say that the organization lacks any IT elements, as the Case Study (2007) indicates that, “the Managing Director is an IT literate and IT is used extensively throughout the company. The Local Area Network provides access to MS Office, Stock Control System, Computer Aided Design (CAD), and a host of other functional applications. ” Still, it’s apparent that the organization lacks the significant IT infrastructure needed for the large-scale implementation of e-business ventures. Rouault and Worrall (2003) note that, “e-business initiatives - such as enterprise, B2B, and B2C applications - typically reach throughout and beyond an enterprise, requiring users to move across networks, applications, and security domains.” In these regards, one recognizes that the implementation of e-businesses systems in a complex and multi-dimensional venture. Rouault and Worrall (2003) further note that, “A single organization cannot effectively manage or control an e-business initiative from beginning to end, especially when multiple partners are involved. Even within the enterprise, different business units often manage distinct sets of users and resources.” It follows that gaining a strong handle on these elements will be a prominent challenge. While digital infrastructure is a prominent challenge, implementing the e-business blueprint is another prominent difficulty. Kalakota and Robinson (1999, p. 357) note that, “weak blueprint management can set the company adrift in a sea of too many projects. There is no consistent mechanism for evaluating and, if necessary, killing weak projects. Instead, projects seem to take on lives on their own, like runaway trains that don’t stop at review points. Further, new projects get added without considering whether there are resources available or how they will affect other projects already in the works. The result is a total lack of focus and a strain on available resources.” It follows that managing the adoption of the e-business model will be an important challenge. While there are a number of prominent challenges, it’s necessary to consider major critical success factors (CSFs). The critical success factors establish nodes on which incremental progress can be measured. Jeon et al. (2006) establishes three major critical success factors: CEO characteristics, organisational characteristics, environmental characteristics, and IS characteristics. CEO characteristics involve relative levels of CEO IT and e-business knowledge and skills, and their perspective on innovation. Higher levels of knowledge in these categories generally correlate to higher levels of success in e-business implementation. In the specific company under examination, it’s been established that the Managing Director is IT literate and demonstrates a strong propensity towards innovation and service improvements. Another prominent critical success factor is ‘organizational characteristics’. While CEO characteristics considered e-business and IT knowledge as vested in the CEO, organisational characteristics relate to broader range human resource IT knowledge. In the specific organization it’s noted that, “IT is used extensively throughout the company. The Local Area Network provides access to MS Office, Stock Control System, Computer Aided Design (CAD), and a host of other functional applications, developed either internally or, provided by software houses. The Wide Area Network provides access to e-mail and the Internet” (Case Study 2007). Even with this knowledge base, it’s also understood that the company is still small in size, as the IT department contains only 10 people. It’s clear further IT development needs to occur to advance the e-business elements. Environmental characteristics are other prominent critical success factors. These characteristics relate to external industry competition, governmental e-business support, and the extent that the organization desires to implement a global approach. Clearly, some of these elements are not articulated in the case study; for instance, it does not specifically refer to governmental support. It’s also vague as to the extent that the company wants to expand into internal markets, or merely expand into the digital context. Still, it’s noted that there is a high level of industry competition and, “to compete against the big players in the market, the company focus on customer satisfaction and what they can do for their customers, even at the expense of less margins” (Case Study 2007). It’s also established that, “there is a minimum pre set price limit on the products, however, if they cover the costs, they are happy with the tangible benefits of the sale that may follow in the future” (Case Study 2007). In these regards, e-business implementation holds a number of significant potential benefits in terms of improved margins. In conclusion, e-business elements relate to the process and compatibility of existing systems. In this context of understanding, there are significant elements related to opportunities for e-businesses adoption. Further consideration is given to critical success factors in the e-business context (Kalakota and Robinson, 1999; Hackbarth and Kettinger, 2000; Hoffman, 2001; Oliva, 2001; Huizingh, 2002; Rifkin and Kurtzman, 2002; Czuchry and Yasin, 2003; Bhandari et al., 2004). It’s established that although the case company has a number of IT systems already in place, to a large degree these systems are basic and fundamental IT elements. 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