Fourth Edition E-Business and E-Commerce Management Strategy, Implementation and Practice Dave Chaffey
E-Business and E-Commerce Management Strategy, Implementation and Practice Visit the E-Business and E-Commerce Management, fourth edition Companion Website at www.pearsoned.co.uk/chaffey to find valuable student learning material including: A study guide to reinforce key ideas and topics Multiple choice questions to test your learning Links to relevant sites on the web An online glossary to explain key terms Flashcards to test your understanding of key terms A smarter online searching guide Link to Dave Chaffey s blog with a collection of articles and links Link to Dave Chaffey s Twitter feed
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Fourth Edition E-BUSINESS AND E-COMMERCE MANAGEMENT STRATEGY, IMPLEMENTATION AND PRACTICE Dave Chaffey
Pearson Education Limited Edinburgh Gate Harlow Essex CM20 2JE England and Associated Companies throughout the world Visit us on the World Wide Web at: www.pearsoned.co.uk First published 2002 Second edition published 2004 Third edition published 2007 Fourth edition published 2009 Dave Chaffey 2002 Marketing Insights Limited 2002, 2009 The right of Dave Chaffey to be identified as author of this work has been asserted by him in accordance with the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without either the prior written permission of the publisher or a licence permitting restricted copying in the United Kingdom issued by the Copyright Licensing Agency Ltd, Saffron House, 6 10 Kirby Street, London EC1N 8TS. All trademarks used herein are the property of their respective owners. The use of any trademark in this text does not vest in the author or publisher any trademark ownership rights in such trademarks, nor does the use of such trademarks imply any affiliation with or endorsement of this book by such owners. ISBN: 978-0-273-71960-1 British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data Chaffey, Dave, 1963 E-business and e-commerce management : strategy, implementation, and practice / Dave Chaffey. -- 4th ed. p. cm. Includes bibliographical references and index. ISBN 978-0-273-71960-1 (pbk. : alk. paper) 1. Electronic commerce. 2. Business enterprises--computer networks. I. Title. II. Title: Ebusiness and ecommerce management. HF5548.32.C472 2009 658.8'72--dc22 2009009561 10 9 8 7 6 5 4 3 2 1 13 12 11 10 09 Typeset in 10/12pt Minion by 30 Printed and bound by Rotolito Lombarda, Italy The publisher s policy is to use paper manufactured from sustainable forests.
Brief contents Preface Guided tour Author s acknowledgements Publishers acknowledgements xiii xxiv xxvi xxvii Part 1 Introduction 1 1 Introduction to e-business and e-commerce 3 2 E-commerce fundamentals 51 3 E-business infrastructure 103 4 E-environment 192 Part 2 Strategy and applications 253 5 E-business strategy 255 6 Supply chain management 330 7 E-procurement 380 8 E-marketing 412 9 Customer relationship management 481 Part 3 Implementation 559 10 Change management 560 11 Analysis and design 604 12 Implementation and maintenance 680 Glossary 736 Index 754
Contents Preface Guided tour About the author Author s acknowledgements Publisher s acknowledgements Part 1 Introduction 1 xiii xxiv xxvi xxvii xxvii 1 Introduction to e-business and e-commerce 3 Learning outcomes / Management issues 3 Links to other chapters 3 Introduction 4 The impact of the electronic communications on traditional businesses 6 Real-world E-Business: HP.com 7 What is the difference between e-commerce and e-business? 9 E-commerce defined 10 E-business defined 13 Case Study 1.1 A short history of Facebook 17 Business or consumer models of e-commerce transactions 26 E-business opportunities 29 Business adoption of digital technologies for e-commerce and e-business 30 Drivers of business Internet adoption 30 Case Study 1.2 North West Supplies extends its reach online 33 E-business risks and barriers to business adoption 35 Evaluating an organization s e-business capabilities 36 Drivers of consumer Internet adoption 37 Barriers to consumer Internet adoption 39 Management responses to e-commerce and e-business 39 Part 1: Introduction 39 Part 2: Strategy and applications 40 Part 3: Implementation 42 Case Study 1.3 ebay the world s largest e-business 42 Summary 46 Exercises 46 References 48 Further reading 49 Web links 49 2 E-commerce fundamentals 51 Learning outcomes / Management issues 51 Links to other chapters 51 Introduction 52 Real-world E-Business: More Th>n 53 The e-commerce environment 57 Strategic agility 57 Online marketplace analysis 59 Location of trading in the marketplace 67 The importance of multi-channel marketplace models 70 Different types of online intermediary 71 Types of intermediaries 74 The importance of search engines 76 Business models for e-commerce 77 Revenue models 79 Online publisher and intermediary revenue models 80 Focus on auction business models 86 Case Study 2.1 The impact of B2B reverse auctions 87 Focus on Internet start-up companies 88 From bricks and mortar to clicks and mortar 88 Assessing e-businesses 89 Valuing Internet start-ups 89 Case Study 2.2 lastminute.com an international dot-com survivor 91 The dot-com bubble bursts 93 Why dot-coms failed 93 The impact of the dot-com phenomenon on traditional organizations 95 Case Study 2.3 Zopa launches a new lending model 95 Summary 98 Exercises 99 References 100 Further reading 101 Web links 101 3 E-business infrastructure 103 Learning outcomes / Management issues 103 Links to other chapters 103 Introduction 104 E-business infrastructure components 105 Real-world E-Business: Random House 107 Internet technology 109 Hosting of web sites and e-business services 110 The Internet timeline 111 Just how big is the Internet? 114 Case Study 3.1 Innovation at Google 115 Intranets and extranets 116 Web technology 124 Internet-access software applications 128 Blogs and blogging 129 Electronic mail or e-mail 131 Feeds 132 Voice over IP (VoIP) 134
viii Contents How does it work? Internet standards 136 Networking standards 136 The HTTP protocol 138 Uniform resource locators (URLs) 139 Domain names 139 Web presentation and data exchange standards 141 Audio and video standards 152 Focus on Internet governance 152 Managing e-business infrastructure 158 Managing hardware and systems software infrastructure 159 Managing Internet service and hosting providers 160 Managing employee access to the Internet and e-mail 165 Managing e-business applications infrastructure 165 Focus on web services, SaaS and service-oriented architecture (SOA) 168 Benefits of web services or SaaS 168 Challenges of deploying SaaS 169 Case Study 3.2 New architecture or just new hype? 174 EDI 176 Focus on mobile commerce 177 Wireless Internet access standards 178 Wireless access devices 179 Popularity of mobile applications 179 Summary 186 Exercises 187 References 188 Further reading 190 Web links 190 4 E-environment 192 Learning outcomes / Management issues 192 Links to other chapters 192 Introduction 193 Real-world E-Business: GD Worldwide 196 Social and legal factors 198 Factors governing e-commerce service adoption 198 Privacy and trust in e-commerce 209 Other e-commerce legislation 222 Environmental and green issues related to Internet usage 227 Taxation 229 Freedom-restrictive legislation 231 Economic and competitive factors 232 Focus on e-commerce and globalization 233 Case Study 4.1 The implications of globalization for consumer attitudes 235 The implications of e-commerce for international B2B trading 236 Political factors 238 Internet governance 239 E-government 240 Technological innovation and technology assessment 241 Approaches to identifying emerging technology 244 Summary 246 Exercises 246 References 247 Further reading 249 Web links 249 Part 2 Strategy and applications 253 5 E-business strategy 255 Learning outcomes / Management issues 255 Links to other chapters 255 Introduction 256 Real-world E-Business: Standard Life 256 What is e-business strategy? 259 The imperative for e-business strategy 261 E-channel strategies 262 Strategy process models for e-business 264 Strategic analysis 269 Resource and process analysis 269 Competitive environment analysis 276 Assessing competitive threats 276 Co-opetion 281 Competitor analysis 281 Strategic objectives 281 Defining vision and mission 282 How can e-business create business value? 285 Case Study 5.1 Capital One creates value through e-business 286 Objective setting 287 Case Study 5.2 Setting the Internet revenue contribution at Sandvik Steel 292 Strategy definition 295 Decision 1: E-business channel priorities 298 Decision 2: Market and product development strategies 300 Decision 3: Positioning and differentiation strategies 303 Decision 4: Business, service and revenue models 306 Decision 5: Marketplace restructuring 308 Decision 6: Supply-chain management capabilities 309 Decision 7: Internal knowledge management capabilities 310 Decision 8: Organizational resourcing and capabilities 310 Strategy implementation 313 Failed e-business strategies 314 E-business strategy implementation success factors for SMEs 315 Case Study 5.3 Boo hoo learning from the largest European dot-com failure 316 Focus on information systems strategy and e-business strategy 319 Elements of IS strategy 320 Investment appraisal 320 Summary 324 Exercises 325 References 326 Further reading 328 Web links 329
Contents ix 6 Supply chain management 330 Learning outcomes / Management issues 330 Links to other chapters 330 Introduction 331 Problems of supply chain management 334 What is supply chain management? 335 Using technology to support supply chain management an example 337 A simple model of a supply chain 340 Case Study 6.1 Shell chemicals redefines its customers supply chains 341 What is logistics? 345 Push and pull supply chain models 347 Focus on the value chain 348 Restructuring the internal value chain 350 The value stream 351 Value chain analysis 351 Value networks 352 Towards the virtual organization 354 Options for restructuring the supply chain 356 Using e-business to restructure the supply chain 358 Technology options and standards for supply chain management 359 Adoption rates of e-business applications 360 Case Study 6.2 Tesco develops a buy-side e-commerce system for supply chain management 363 IS-supported downstream supply chain management 365 Outbound logistics management 365 IS infrastructure for supply chain management 366 Supply chain management implementation 368 Data standardization and exchange 368 Human resources requirements of SCM 369 The supply chain management strategy process 371 Managing partnerships 372 Managing global distribution 374 Case Study 6.3 RFID: keeping track starts its move to a faster track 374 Summary 375 Exercises 376 References 377 Further reading 379 Web links 379 7 E-procurement 380 Learning outcomes / Management issues 380 Links to other chapters 380 Introduction 381 What is e-procurement? 381 Understanding the procurement process 384 Types of procurement 385 Participants in online procurement 386 Drivers of e-procurement 387 Case Study 7.1 Cambridge Consultants reduce costs through e-procurement 388 Focus on estimating e-procurement cost 390 The impact of cost savings on profitability 391 Risks and impacts of e-procurement 392 Organizational risks 393 Failure to achieve real cost reductions 393 Technology risks 394 Implementing e-procurement 394 The growth in adoption of web-enabled e-procurement 396 Integrating company systems with supplier systems 397 Focus on electronic B2B marketplaces 400 Case Study 7.2 Covisint a typical history of a B2B marketplace? 403 Types of marketplace 405 The future of e-procurement? 407 Summary 407 Exercises 408 References 409 Further reading 410 Web links 410 8 E-marketing 412 Learning outcomes / Management issues 412 Links to other chapters 412 Introduction 413 Chapter structure 414 Real-world E-Business: Guess 415 What is e-marketing? 416 Marketing defined 416 E-marketing defined 417 Distinguishing between e-marketing, e-business and e-commerce 417 E-marketing planning 418 Is a separate e-marketing plan required? 418 Situation analysis 420 Demand analysis 421 Competitor analysis 425 Intermediary analysis 427 Internal marketing audit 428 Objective setting 428 Case Study 8.1 The e-volution of easyjet s online revenue contribution 431 Strategy 433 Market and product positioning 436 Target market strategies 437 Focus on characteristics of new-media marketing communications 443 Tactics 448 Product 451 Case Study 8.2 Dell gets closer to its customers online 453 Price 456 Place 460 Promotion 462 People, Process and Physical evidence 464 Focus on online branding 464 The importance of brand online 467 Actions 469 Control 470 Case Study 8.3 The new Napster changes the music marketing mix 471
x Contents Summary 475 Exercises 476 References 477 Further reading 479 Web links 480 9 Customer relationship management 481 Learning outcomes / Management issues 481 Links to other chapters 481 Introduction 482 Marketing applications of CRM 483 Real-world E-Business: Warner Breaks 484 What is e-crm? 486 Benefits of e-crm 487 Permission marketing 488 Customer profiling 490 Conversion marketing 491 The online buying process 492 Differences in buyer behaviour in target markets 493 Differences between B2C and B2B buyer behaviour 493 The net promoter score 495 Customer acquisition management 498 Focus on marketing communications for customer acquisition 498 The characteristics of interactive marketing communications 499 Assessing marketing communications effectiveness 502 Online marketing communications 503 Customer retention management 526 Personalization and mass customization 528 Online communities 530 Techniques for managing customer activity and value 533 Lifetime value modelling 534 Focus on excelling in e-commerce service quality 536 Improving online service quality 536 Customer extension 539 Advanced online segmentation and targeting techniques 540 Technology solutions for CRM 546 Types of CRM applications 547 Integration with back-office systems 547 The choice of single-vendor solutions or a more fragmented choice 548 Data quality 549 Case Study 9.1 Tesco.com increases product range and uses triggered communications to support CRM 549 Summary 552 Exercises 552 References 553 Further reading 556 Web links 557 Part 3 Implementation 559 10 Change management 560 Learning outcomes / Management issues 560 Links to other chapters 560 Introduction 561 The challenges of e-business transformation 561 The challenges of sell-side e-commerce implementation 563 Different types of change in business 566 Case Study 10.1 Process management: making complex business simpler 570 Planning change 572 The imperative for project governance? 572 The project plan and schedule for an e-business system 574 Prototyping 576 Human resource requirements 579 Staff retention 580 Outsourcing 581 Revising organizational structures 583 Approaches to managing change 586 Senior management involvement 586 Models for achieving change 586 Organizational culture 588 Focus on knowledge management 590 What is knowledge? 590 Objectives of knowledge management 592 Implementing knowledge management 593 Technologies for implementing knowledge management 594 Case Study 10.2 Using Web 2.0 tools to support knowledge management at Janssen-Cillag Australia 596 Risk management 598 Summary 600 Exercises 600 References 601 Further reading 603 Web links 603 11 Analysis and design 604 Learning outcomes / Management issues 604 Links to other chapters 604 Introduction 605 Real-world E-Business: Arena Flowers 606 Analysis for e-business 608 Workflow management 609 Process modelling 610 Process mapping 610 Task analysis and task decomposition 610 Process dependencies 612 Validating a new process model 618
Contents xi Data modelling 619 Design for e-business 621 Architectural design of e-business systems 621 Focus on user-centred site design 623 Use-case analysis 627 Designing the information architecture 634 Customer orientation 639 Elements of site design 641 Web accessibility 646 Case Study 11.1 Dabs.com refines its web store 649 Focus on security design for e-business 652 Managing computer viruses 658 Controlling information service usage 660 Monitoring of electronic communications 660 E-mail management 665 Hacking 669 Secure e-commerce transactions 671 Approaches to developing secure systems 671 Current approaches to e-commerce security 673 Reassuring the customer 674 Case Study 11.2 Building an e-business fortress 674 Summary 675 Exercises 676 References 677 Further reading 679 Web links 679 12 Implementation and maintenance 680 Learning outcomes / Management issues 680 Links to other chapters 680 Introduction 681 Real-world E-Business: Thomas Cook 682 Alternatives for acquiring e-business systems 684 Development of web-based content and services 686 Creating static web content 686 Software and services for web-site development and testing 689 Testing 694 The testing process 694 Testing environments 695 Changeover 695 Database creation and data migration 696 Deployment planning 697 Content management and maintenance 697 Frequency and scope of content updating 697 Maintenance process and responsibilities 699 Focus on measuring and improving performance of e-business systems 703 Principles of performance management and improvement 704 Stage 1: Creating a performance management system 705 Stage 2: Defining the performance metrics framework 706 Stage 3: Tools and techniques for collecting metrics and summarizing results 711 Budgeting 724 Case Study 12.1 Learning from Amazon s culture of metrics 726 Summary 732 Exercises 732 References 733 Further reading 734 Web links 735 Glossary 736 Index 754
Supporting resources Visit www.pearsoned.co.uk/chaffey to find valuable online resources Companion Website for students A study guide to reinforce key ideas and topics Multiple choice questions to test your learning Links to relevant sites on the web An online glossary to explain key terms Flashcards to test your understanding of key terms A smarter online searching guide Link to Dave Chaffey s blog with a collection of articles and links Link to Dave Chaffey s Twitter feed For instructors Complete, downloadable Instructor s Manual PowerPoint slides that can be downloaded and used for presentations Testbank of question material Also: The Companion Website provides the following features: Search tool to help locate specific items of content E-mail results and profile tools to send results of quizzes to instructors Online help and support to assist with website usage and troubleshooting For more information please contact your local Pearson Education sales representative or visit www.pearsoned.co.uk/chaffey