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Business Essays | Developing Internet Strategy

E-commerce has in many ways been like a tornado in the business and left many businesses and people ruined when all the hype blew over. We have now progressed 4 years since the so-called e-commerce bubble burst. Before this time the dot.com companies were the darlings of the stock exchange, when a new company formed their stock would rocket, no matter what the prospects were, or even their business plan. Now 4 years after the e-commerce bubble burst, a firm will need a strong business plan that incorporates e-commerce into its main business purpose. This project will look at different e-commerce firms that have been called successful, Amazon, as well as others that have failed, such as Boo.com. What did these companies do to make them a success and failure and to what extent has Amazon and the other e-commerce companies been successful?

Before these questions can be answered there needs to be a definition of how to measure the success of a dot.com company, there are many ways to do this and are shown by the different graphs charting e-commerce growth on the Internet statistics website http://cyberatlas.internet.com. These include:

" Profit
" Percentage change in loss
" Reach
" Unique audience
" Sales
" Share Price
" Market capitalisation

The last 2 are dependent on the company being listed on a stock market, which may be a rarity with the new types of dot.com companies.
Using these measures and others we will be able to conclude how successful a start-up Internet business is compared to the bricks and mortar equivalent within the sector.

It is important to use companies that have been successful, this is very hard to judge as the definition of a successful Internet company changes frequently. In 2000 the idea of a successful Internet company was one that was still trading a year later. Today the list has grown more detailed and the outward signs of a robust and thriving business are:

" Revenue increases
" Ability to generate profits
" Success in creating meaningful alliances
" Success in expanding into new markets
" Differentiating itself [1]

Looking for a company that fits into all of these categories is very difficult even though there are thousands of e-commerce companies trading on the Internet. On the same website there are listed 7 companies that do fulfil these criteria,

1. eBay
2. HomeStore.com
3. Oracle
4. CISCO
5. Amazon.com
6. DoubleClick.com
7. YAHOO!

To this list we can also add Dell, Tesco.com and lastminute.com. It has recently been reported that 'Online travel agencies are the outstanding success stories of the Internet. They generate cash and their business models work. Travel bookings are ideal for Internet sales. The inventory is virtual, bookings do not need physical delivery to the customer and they move fast. Business is brisk with thousands of punters booking late holidays, having been put off earlier because of the war in Iraq. Martha Lane Fox and Ben Hoberman's lastminute.com traded above 200p for the first time since July 2000, closing 10p up at a years peak of 204p. Turnover swelled to 5m-plus as takeover rumours did the rounds again.' [2]

This information suggests that the most successful Internet companies come from the online travel and book sectors. E-commerce and the related areas of home shopping and home delivery continue to be hot topics for the food retail sector, with most of the major multiples investing substantial sums into developing new channels to market[3]Tesco.com is now claimed to be the world's largest e-grocer and one of the world's top three e-tailers overall. By March 2001, Tesco.com had achieved sales of £300 million through 300 stores. There are now almost a million registered customers, 600,000 of whom are regular users of the site. The company takes 70,000 orders a week, giving weekly sales of over £6 million [4]

In this report we will be looking at some of these 'successful' e-commerce companies and see how they have implemented a strategic business plan in the medium to long term. We will also be looking at UK plc and compare the state of UK e-commerce to that of the US, to see if the governments of these respective countries are doing enough to encourage organisations to implement an e-commerce solution.

Many lessons can be learnt from the K-Mart and Wal-Mart case studies, out of the five big mistakes made by K-Mart, as identified by Joanna L. Krotz, three were to do with technology and culture. K-Mart failed to embrace technology when Wal-Mart was computerising everything. Only now does it show, because Wal-Mart with turnover of $200 billion annually, does five times the amount that K-Mart does.[5] Too often, management teams don't focus on the financial fundamentals. They're too busy installing new strategies[6]. Inside and out, established companies only change slowly, if at all, "It took decades to put Kmart's culture in place," says Wally Bock, publisher of Monday Memo, an electronic business strategy newsletter. "It didn't help that Conaway brought in lots of outsiders at the top, from different companies, with different cultures." [7]

Aims and Objectives
By setting out clear aims and objectives it will easier to follow the process of thought throughout this report. They will also aid in the conclusion when summing up how successful this report has been in meeting the intended objectives. By setting these aims and objectives at the beginning of the report the research and discussions can be more focused and lead into one another.

Aim 1
To investigate successful and failed e-commerce companies
Objective 1
By using the measures above to judge which e-commerce companies have been successful and what they did different to those that have failed or are failing
Aim 2
To investigate how a strategic business plan incorporates a successful Internet business plan
Objective 2
By looking at both successful and failed e-commerce businesses we can look at why they succeeded or failed by using case studies
Aim 3
To investigate how e-commerce in the UK is fairing against that of the US
Objective 3
By conducting a case study using a company with interests in both markets such as Amazon which has both a .com and .co.uk businesses, to judge which economy has caused e-commerce to thrive.
Aim 4
To investigate the difference in strategic business plans between companies that have a solid business and those that are Internet start-ups.
Objective 4
By studying the business plans of at least two e-commerce companies, one based on the high street and the other based in hyperspace to see if they plan to, or do, utilise ICT in different ways.
Aim 5
To see if implementing an e-commerce solution has any effect on turnover.
Objective 5
By studying the financial results of an organisation that has recently implemented an e-commerce solution to see if their turnover has increased by more than expected.

At the conclusion of this report we will have looked at all types of e-commerce companies, both e-commerce start-ups like Amazon and others that have a solid business background like Tesco and Dell, coming from all sorts of e-commerce model including; auction, content providers and product sales. We will have studied their strategic business plans and their annual reports to see how successful they really are and what the successful e-commerce companies are doing to be successful. We will also have looked at their market places to see what makes them unique and comprise their core competencies. Finally we will have looked at a company that has operation in both the UK and USA and see which country has the better environment for e-commerce and the potential for e-commerce growth.

Literature Study
It must be realised, especially by decision makers within organisations of any size, that the Internet is an integral part of business, and that e-commerce has integrated itself into regular business and is no longer a peripheral to traditional business. Business must also realise that e-commerce is no longer a fad which will automatically generate a huge Return of Investment (ROI) and must be treated as part of normal business plans.
This literature study will be a basis for the rest of the report, the reports, books and journal articles identified here will be the major articles used through out this report, although there will be more as the searching process is ongoing and evolutionary.

It is important to ensure that the literature search will find literature that will be capable of answering the question that is being investigated. A literature search is concept-centric. Thus, concepts determine the organizing (sic) framework of a review. In contrast, some authors take an author-centric approach and essentially present a summary of the relevant articles. This method fails to synthesize (sic) the literature[8]. The question will need to be put into terms where it is possible to create a search term to use when searching the Internet, search engines, databases, journal abstracts and other information sources. The question that is being addressed is; 'How should a business develop its Internet strategy?'

The literature search here will be twofold featuring on two different aspects of this question, which will be strategic business plans and Internet businesses.

The first aspect is the financial and other aspects of the companies that have been identified. These will be based on the financial reports of the e-commerce companies that will be used in this report, which include

" Amazon
" Dell
" E-Bay
" Lastminute.com
" Tesco.com.

These companies are all from different market sectors, the book, computer, auction, travel and grocery markets respectively, so they therefore have different, customers business models and core competencies. We will be able to examine these factors and see what they have done to ensure that they are market leaders in their market sector. There are many things that may have contributed to their success including marketing, integration or diversification, wise investments or a superior brand name. This will all be investigated. The first port of call for this information will be in the annual reports of each company, this information is situated on the websites of each company. The annual reports are always situated within the Investor Relations (IR) section of websites and are listed with the share price and other interesting financial and company information. Having studied the annual reports there will need to be extra information extracted. The best website for the Internet statistics is based on the http://cyberatlas.internet.com website. This site is an invaluable source as it includes many different tables and charts based on different measures of e-commerce and is searchable back to 1997. Although the website is heavily US based it does have European and UK based Internet statistics. There are plenty of case studies on these companies as there are lots of analysts who have used these companies as examples of successful B2C e-commerce companies. It cannot be said that there is one prolific writer in this field, as it is such a wide and emerging field, and as a range of companies will be used. The annual reports will have more than enough information to be able to carry out an in-depth study. It will then be the work of the author to carry out the analysis.

The golden era of long range planning has long since vanished into the mists of time. Yet few companies worth their reputation these days are without a strategy document filled with numbers which purport to describe a (sometimes remarkably) distant future. The paradox continues to challenge and confuse even the brightest boardroom brains. Has the recent dot-com episode, and have the terrible events of September 11th, somehow changed the rules of the game? Is the idea of strategy founded on an illusion of rationality and the possibilities of control? Is there a geographical context to strategy making that somehow informs those who do business in Europe? Are 'visions' and missions' now more appropriate ways of thinking about corporate navigation?[9] Strategy is obviously an important now in the 21st century and has overtaken some other management trends as a way of predicting business for the future. Businesses are now focused on the new economy and how they can leverage the knowledge within the organisation to make it into a competitive advantage.

The most important author in the field of strategic business management for the Internet is the renowned author and professor Michael E. Porter, who has produced models and many papers regarding business planning for the Internet. Porter's models include his model of competitive advantage (the five forces model), value chain and his generic model, all of which are used when in the design process of a strategic business plan. He also writes that 'Many have written that the Internet renders strategy obsolete. In reality, the opposite is true. Because the Internet tends to weaken industry profitability without providing proprietary operational advantages, it is more important that ever for companies to distinguish through strategy. The winners will be those who view the Internet as a complement to, not a cannibal of, traditional ways of competing.'[10] He also goes on to state that 'Internet technology provides better opportunities for companies to establish distinctive strategic positioning than did previous generations of Information Technology.[11]' Porter also goes on to dispel some myths that were widely held by the early adopters of e-commerce. They thought that if they were first to market then they had an unattainable advantage over their competitors or potential competitors. The belief that strategy needs to be adopted for the 21st century is also supported by Javalgi who states that 'Global e-commerce, created by the convergence of information and communication technologies, transcends business boundaries while changing the landscape of the twenty-first century global economy. Although still in an infancy stage its impact has already been colossal in just a few years.'[12] The exponential growth of worldwide Internet adoption and the rapidly increasing use of the World Wide Web as a platform for e-commerce dictate that companies of all sizes rethink and redesign their strategies to target buyers differently, whether consumers or businesses.[13] So far we have confirmed that the Internet has definitely caused organisations to rethink their strategic business plans for business in the 21st century. Noi goes into detail about how to create a strategic business plan that will fit in with the corporate culture of an organisation. He has a five point plan that helps organisations to align their strategy to their culture and if there is not a match then there needs to be a realignment of the two. [14]

E-commerce in general is a very hard field to describe, it covers many fields of research including, computer science, information science, Human-Computer Interface, usability testing and networks. Each of these fields has a different spin on this. The computer science side focuses on the technological side of e-commerce and how bits and bytes are represented and sent to the website owner to complete an order. Whereas information science is involved in topologies of websites, user dictionaries and information policies, such as the paper written by Oppenheim and Muir. [15]


The field of e-commence is rapidly being adopted by many other academic fields and so the field is ever increasing in literature size, meaning that the field is getting bigger month by month. This makes searching the field of e-commerce very difficult to refine and search and that although some relevant articles will be found in the literature search, no matter how thorough you are some important articles will be missed.
Ngai and Wat surveyed the field of e-commerce and found that broadly speaking the field can be broken down into four fields, coming from the fields that contribute to it.[16] Although their survey was pretty limited, only surveying seven journals, it did seem to be a pretty comprehensive literature survey of the field. There were no completely dedicated e-commerce journals nor were their e-commerce articles dedicated to strategic business plans of organisations. As mentioned earlier the field of e-commerce is a very dynamic field and anything published about e-commerce is out of date when it is published. This is why the Internet is the best place to extract statistics about the Internet from, as content can be published immediately. This does not always mean that the information is the most authoritative and can be in stark contrast to a similar survey taken at the same time. This is why the cyberatlas website is one of the best websites to extract information about website statistics and usage. Although there are more issues with using websites as a primary source of data and that is they can be wrong, be moved, taken off the Internet without notice or they can be old. This does not help when trying to investigate a matter such as the success of e-commerce companies. This has been the case with websites such as http://www.ecommerce.gov, which suddenly disappeared without notice, even though 1 month previously it was described as '[a] boon for both public sector and private sector electronic commerce researchers…[17]'

Worldwide the speed that e-commerce is rolled out is dependent on the technology providers and the governments of the countries. These philosophers of cyberspace may yet be proven wrong. Governments are not helpless when it comes to regulation of the Internet, and it is very possible that they will be more successful in this endeavour than they were in the past in regulating the printing of books, pamphlets and newspapers, and their distribution through the postal systems. In fact, the Internet provides new tools for governments that are willing to use them. [18]
E-commerce in the UK took off following the e-commerce@its.best.uk report and the creation of the e-envoy, these two fact points do not occur in any journal articles, and so academic viewpoint covering the implementation of an e-commerce policy in the UK is non-existent. Although it is clear that the UK government wanted the UK to be the best in the world for e-commerce, many analysts believe that this is not the case currently, but the UK is level with the US according to the e-readiness ranking table from the Economist Intelligence Unit. The UK does have issues when trying to rollout e-commerce in the UK, with the infrastructure and user involvement both low. We will be able to see if the actions taken by each government are helping or hindering their country e-commerce marketplace.

UK e-commerce is monitored by the government and other external agencies, the e-envoy produces monthly reports about the progress of e-commerce in this country. Also the Information Age Partnership in co-operation with the consultancy firm Booz, Allen and Hamilton have produced a yearly benchmarking report entitled the worlds most effective policies for the e-Economy. Professor James Norton, who at the time worked for the Institute of Directors, produced the first e-commerce report in this country entitled e-commerce@its.best.uk, which set out the aims of objectives for the UK to become the best country in the world for e-commerce by 2002. There are also various organisations within the UK that are stakeholders with respect to UK e-commerce, they are mostly government based and include:

" EU
" ICT industry
" International organisations
" Private sector
" UK government

These organisations all contribute when e-commerce policy in the UK is concerned and help the UK government to realise its aim of creating the best environment in the world for e-commerce. One other factor that relates to e-commerce are the Economist Intelligence Unit e-readiness rankings, which rank 60 countries on how ready their country is to go electronic. This includes e-government and business and customer readiness.
The e-commerce scene is the United States is much more confusing than in the UK. The main site that was the first place to look for e-commerce information in the United States has disappeared and it seems that the US, more importantly George Bush, seem less interested in e-commerce and seemingly concentrate on other more important factors. The US was quick to realise and it was under Bill Clinton 1997 that they realise the economic boost business could receive from e-commerce and started to increase their e-commerce awareness. There are also many stakeholder groups within the US that have an interest in e-commerce, these are:

" Congress
" ICT Industry
" International organisations
" Private sector

The way to determine which country out of the UK and the US has created the better framework will be a case study of one company that has operations in both countries. The organisation that fits this bill is Amazon, it will be possible to calculate the spend per head of population on the Amazon website recorded in each country. This information is freely available in the Amazon Annual report. In may be possible to carry out this information on Dell as well, although it depends on how Dell reports its financial figures for its web sales. If the sales are combined with high street sales then it will be impossible to calculate the spend per head of population on the website.

E-commerce statistics are unreliable and liable to go out of date very quickly. Some results are in stark contrast to others and other analysts have very differing opinions about how e-commerce will grow in the near future. This because different analysts have different definitions of what e-commerce actually is and whether they should include just B2C or include B2B as well. This had lead to some consultancies predicting wildly different totals for global e-commerce spending up to 2004, with Ovum predicting sales of $1,400 billion and Gartner Group predicting worldwide sales of $7,290 billion.
Bharati and Tarasewich carried out an investigation to find the top 5 electronic commerce journals according to academics, although the results from the Ngai and Wat showed that there were no fully devoted journals to the field of electronic commerce. The top 10 journals were:

It is clear to see that there is not one prominent author in the field of e-commerce, as it is a young and rapidly expanding field, the same can be said about strategic business planning but this is because there are many opinions and ways of creating a strategic business plan, but they only work depending on the organisation. Strategic business planning could be seen as a management fad, but it always make sense to plan for the future especially in business. Michael Porter can be seen as a prominent author who writes on e-commerce strategic business plans so his work will feature prominently in this report.
After the methodology we will be looking at case studies of the selected companies to try and prove or disprove what has been hypothesised and to see if the successful companies have heeded the warnings from the previously unsuccessful businesses. We will then be looking at what they have planned for, their core competencies, what gives them a competitive advantage and why they are still operating and comparing this to what has been written in the literature. This will help us in judging if there is one strategy for a successful Internet business or if it depends on the type of business market that they operate in, or if there is a greater deciding factor to Internet survival

Methodology
The major method of research for this project will be desk-based research, this will include searching webpages, journals abstracts, annual reports, books, databases, government white papers and other reports originating from stakeholder groups. It is difficult to use one technique to search all the sources as they all have different index terms and user thesauri. The search strategy used will determine the quality and appropriateness of the documents returned. To avoid having to look through hundreds of results the search strategy will also have to narrow the amount of hits returned while leaving enough to be able to cover the topic(s). By identifying the key sources it will be easier to search through them and find relevant documents. The ability to conduct primary research, including the conducting of questionnaires and interviews is limited, as the strategic business planners within the organisations identified earlier in this report will be unwilling to let anyone know their strategic business plan for the next 3 to 5 years. This would be a major competitor advantage for anyone to know, especially rivals in the same market sector, as they would then be able to tailor their strategic plan accordingly. The only piece of primary research that could be carried out would be interviews with executives of failed Internet companies such as boo.com and the business planners that had implemented strategic business plans within these companies. Although it would be very difficult to track these people down and they would most probably be unwilling to co-operate in a study of this size.
To search for government papers and other government related information the first port of call is the official government portal, which is available on http://www.ukonline.gov.uk. This website has a search engine and will allow the user to download documents that are free of charge otherwise the user is redirected to the Stationary Office website where they can purchase the document or report. A lot of time will be sent searching the selected companies websites looking for information regarding the ratings of success mentioned earlier in the report. These figures are likely to be available in the Investor Relations section of websites, although if they are not it will be possible to gather or infer these results via these websites:

http://www.nua.com
http://www.cyberatlas.internet.com
http://www.forrester.com

Using all these sources to find information about the companies and how successful they have been in implementing an e-commerce website it is important to also judge if there has been any difference from before and after they operated an e-commerce policy. This will focus on an organisation that has recently implemented an e-commerce solution such as Tesco, to see if their profits and turnover has increased by more than can be expected in the time since they started their e-commerce solution.
To search for information on strategic business plans a more academic stance was needed, this involved searching academic journals. It is easier to search academic journals if an abstracting service is used, this will search many journals using the same search term, this reduces the problems experienced before where many different sources have to be searched but they all have different searching techniques. The easiest abstracting service to use and the one that produced the best results was Emerald Fulltext, which searches many business-related journals. There are other abstracting services like LISA but these are aimed at specific fields and do not give the user access to the articles if they are subscribed, whereas Emerald Fulltext does.
To find articles written on e-commerce is very hard and confusing, this occurs, as shown by Wat and Ngai, that e-commerce has a large body of text, although it is broken down into 4 sub topics and not many of the articles focus onto the business strategy focus of e-commerce. Another factor with e-commerce is the many terms that it can be called, which all basically mean the same thing. These terms are:
E-commerce, electronic commerce, Internet commerce, online buying or EDI, these all have to be factored into a search strategy to ensure blanket coverage of the subject area. While some search engines will not accept e-commerce as the dash means return articles containing the first word but not the second, so to search for e without commerce.
When searching for information it is best to have a search strategy, this can be either a pearl or building block approach. Both are effective but depend on what type of documents there are before full searching starts. Pearl searching depends on finding a core piece of research and using terms from that can help to start to build a more complex search strategy based upon the first document found. The search strategy that worked best in this case was a pearl searching type of search, as a key document was found for the searches and allowed the search terms to be expanded.
Initially, each search was ran differently, the first search was based on e-commerce, the second search was used to look for case studies of the companies that have been listed earlier and the third search was to look for strategic business plans and the effect that they have on business. The results provided many useful hits although there were still many redundant hits that were not related to the subject area that we wanted to cover. There also needs to be a cut off date within the field of e-commerce as it is rapidly expanding, once the initial search as carried out there will only be a check to see if any new articles have bee published. If these are of interest they may be included within the project but there will not be any big changes because of any articles that are found once the literature search has been completed.
The search terms are all important to a methodology that is a desk-based researched report, as it will be the search terms that identify the important and relevant documents that have been discussed in the literature search and any further ones that come to light.

The following table highlights the search strategies that were used in the literature search, trying to use synonyms to ensure 100% coverage of the fields:

Some search engines allow for the use of special characters including * to pick up any words that have the prefix e.g. electr* will find electronic, electric and electrical etc.