Electronic Commerce: The Strategic Perspective

[Pages:115]Electronic Commerce: The Strategic Perspective

This book is licensed under a Creative Commons Attribution 3.0 License

Electronic Commerce: The Strategic Perspective

Richard T. Watson - University of Georgia Pierre Berthon - Bentley College

Leyland F. Pitt ? Simon Fraser University George M. Zinkhan - University of Georgia

Copyright ? 2008 by Richard T. Watson, Pierre Berthon, Leyland F. Pitt, and George M. Zinkhan The Global Text Project is funded by the Jacobs Foundation, Zurich, Switzerland

This book is licensed under a Creative Commons Attribution 3.0 License

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This book is licensed under a Creative Commons Attribution 3.0 License

Table of Contents

Preface...............................................................................................................................................................6

1. Electronic commerce: An introduction...................................................................................8

Electronic commerce defined...........................................................................................................................8 Who should use the Internet?..........................................................................................................................8 Why use the Internet?......................................................................................................................................9 Disintermediation...........................................................................................................................................12 Key themes addressed.....................................................................................................................................13

2. Electronic commerce technology ..........................................................................................21

Internet technology.........................................................................................................................................21 Infrastructure..................................................................................................................................................22 Electronic publishing......................................................................................................................................23 Electronic commerce topologies....................................................................................................................24 Security...........................................................................................................................................................27 Electronic money............................................................................................................................................33 Secure electronic transactions........................................................................................................................35

3. Web strategy: Attracting and retaining visitors...................................................................39

Types of attractors .........................................................................................................................................40 Attractiveness factors.....................................................................................................................................45 Sustainable attractiveness .............................................................................................................................47 Strategies for attractors .................................................................................................................................49 Conclusion ......................................................................................................................................................51

4. Promotion: Integrated Web communications......................................................................53

Internet technology for supporting marketing .............................................................................................53 Integrated Internet Marketing.......................................................................................................................55

5. Promotion & purchase: Measuring effectiveness..................................................................61

The Internet and the World Wide Web..........................................................................................................61 An electronic trade show and a virtual flea market........................................................................................61 The role of the Web in the marketing communication mix...........................................................................64 Web marketing communication: a conceptual framework............................................................................65

6. Distribution............................................................................................................................72

What is the purpose of a distribution strategy?.............................................................................................73 What does technology do?..............................................................................................................................74 The Internet distribution matrix....................................................................................................................75 The effects of technology on distribution channels.......................................................................................76 Some long-term effects ..................................................................................................................................80

7. Service....................................................................................................................................85

What makes services different?......................................................................................................................85 Cyberservice....................................................................................................................................................86

8. Pricing....................................................................................................................................94

Web pricing and the dynamics of markets.....................................................................................................95 Flattening the pyramid and narrowing the scope of marketing....................................................................98 Migrating up the pyramid and more effective marketing ...........................................................................101

9. Post-Modernism and the Web: Societal effects..................................................................106

What is modernism?.....................................................................................................................................107 And Post-Modernism?..................................................................................................................................107

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Fragmentation..............................................................................................................................................108 Dedifferentiation ..........................................................................................................................................109 Hyperreality ..................................................................................................................................................110 Time and space...............................................................................................................................................111 Paradox, reflexivity, and pastiche.................................................................................................................113 Anti-foundationalism ...................................................................................................................................114

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This book is licensed under a Creative Commons Attribution 3.0 License

Preface Electronic edition

When the print edition became out-of-print, we applied for the return of copyright and released the book in this electronic format. We removed the more dated material, such as boxed insert examples of the use of the Internet, but otherwise essentially left the book as is because we believe the fundamental ideas are still relevant.

We seek the support of the adopting community to refresh this book. If you have some suggestions for revision, then please contact the chapter editor.

Print edition

Since 1995, the four of us have had a very active program of research on electronic commerce. We have published more than 20 refereed articles on this topic and have collectively given dozens of seminars on electronic commerce in more than 20 countries for a wide range of corporations and universities. We have tested and refined our ideas by working with corporations to develop electronic commerce strategies. The focus of our work has been to address fundamental issues that are common to many business practitioners. Thus, we have frequently emphasized the strategic elements of electronic commerce. In particular, we have explored the impact that Internet technology has on marketing strategy and practice. We have reflected on the feedback provided by many who have attended our seminars, workshops, and classes, and commented on our publications. As a result, we have refined and honed our thinking, and this book represents the culmination of these efforts.

This book reports the results of our research. It is written both for practitioners and business students. Managers wishing to understand how electronic commerce is revolutionizing business will find that our comprehensive coverage of essential business issues (e.g., pricing and distribution) answers many of their questions. Advanced business students (junior, seniors, and graduate students) will find that the blend of academic structure and practical examples provides an engaging formula for learning.

The book's title reflects some key themes that we develop. First, we are primarily concerned with electronic commerce, which we define as using technology (e.g., the Internet) to communicate or transact with stakeholders (e.g., customers). Second, we discuss how organizations must change in order to take advantage of electronic commerce opportunities. In this sense, our book offers the strategic perspective (i.e., the best way to operate a successful business in the 21st century). Third, with the growing importance of the Internet and related technologies, organizations must take electronic commerce into account when they are creating strategic plans. Thus, electronic commerce is a strategic perspective that all firms must adopt, both in the present and in the future. In other words, an organization that does not explicitly consider electronic commerce as a strategic imperative is probably making a crucial error. Here, we focus primarily on the opportunities and tactics that can lead to success in the electronic marketplace.

We live in exciting times. It is a rare event for an economy to move from one form to another. We are participating in the transition from the industrial to the information age. We all have an opportunity to participate in this historic event. The extent to which you partake in this revolution is determined, in part, by your desire to facilitate change and your understanding of how the new economy operates. We hope this book inspires you to

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Preface become an electronic commerce change agent and also provides the wherewithal to understand what can be changed and how it can be changed.

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1. Electronic commerce: An introduction

Editor: Richard T. Watson (University of Georgia, USA)

Introduction

Electronic commerce is a revolution in business practices. If organizations are going to take advantage of new Internet technologies, then they must take a strategic perspective. That is, care must be taken to make a close link between corporate strategy and electronic commerce strategy.

In this chapter, we address some essential strategic issues, describe the major themes tackled by this book, and outline the other chapters. Among the central issues we discuss are defining electronic commerce, identifying the extent of a firm's Internet usage, explaining how electronic commerce can address the three strategic challenges facing all firms, and understanding the parameters of disintermediation. Consequently, we start with these issues.

Electronic commerce defined

Electronic commerce, in a broad sense, is the use of computer networks to improve organizational performance. Increasing profitability, gaining market share, improving customer service, and delivering products faster are some of the organizational performance gains possible with electronic commerce. Electronic commerce is more than ordering goods from an on-line catalog. It involves all aspects of an organization's electronic interactions with its stakeholders, the people who determine the future of the organization. Thus, electronic commerce includes activities such as establishing a Web page to support investor relations or communicating electronically with college students who are potential employees. In brief, electronic commerce involves the use of information technology to enhance communications and transactions with all of an organization's stakeholders. Such stakeholders include customers, suppliers, government regulators, financial institutions, mangers, employees, and the public at large.

Who should use the Internet?

Every organization needs to consider whether it should have an Internet presence and, if so, what should be the extent of its involvement. There are two key factors to be considered in answering these questions.

First, how many existing or potential customers are likely to be Internet users? If a significant proportion of a firm's customers are Internet users, and the search costs for the product or service are reasonably (even moderately) high, then an organization should have a presence; otherwise, it is missing an opportunity to inform and interact with its customers. The Web is a friendly and extremely convenient source of information for many customers. If a firm does not have a Web site, then there is the risk that potential customers, who are Web savvy, will flow to competitors who have a Web presence.

Second, what is the information intensity of a company's products and services? An information-intense product is one that requires considerable information to describe it completely. For example, what is the best way to

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