Key strategy factors to make a B2C
E –Business successful
Key strategy factors to make a B2C
E –Business successful
Catharina Hermanna Louise Maria de Visscher
University of Groningen, the Netherlands
Business Administration
November 2008
Spuistraat 175 1012 VN Amsterdam +31 6 2906 7974 C.H.L.M.de.Visscher@student.rug.nl Student ID: 1359177 Supervisors:This thesis presents the results of 6 months literature research and case studies on the University of Groningen and at INDG. It all began with an article in the newspaper about the many e-business failures in The Netherlands. The fact that surprised me the most was that the ranking of the most successful companies was unchanged for years. It is known that many e-businesses failed, but do we know how some e-businesses became a success? During this research I found two quotes that are very applicable. Compared to the results, the quotes emphasize the same points, be flexible and fast otherwise you are too late to catch up.
“YOU HAVE TO BE FAST ON YOUR FEET AND ADAPTIVE OR ELSE A STRATEGY IS USELESS”
CHARLES DE GAULLE (1890-1970)
“ SHOULDN’T HAVE A LONG-TERM STRATEGY ANYMORE, BECAUSE YOU WON’T BE ABLE TO MOVE FAST ENOUGH”ORIT GADEISH
What I present in this research is the result of the work I did with the support of many different people in different ways. I like to use this preface to thank all the people that contributed to this work.
First of all, I want to thank Prof. Dr. E.W Berghout he has been a very stimulating teacher and advisor. All the conversations were motivating, he taught me to look critical at every question and answer and to think about the reason why a question should be asked.
I also want to thank all the people from INDG, especially Frans and Bas. I was supposed to only do some research at your company, but because of the freedom and trust it became one of my most interesting work experiences in my life.
thank you for all the support a child can whish and even more than that.
Martine de Visscher
1.1 INDGDIGITAL COMMUNICATION... 4 1.1.1 GENERAL INFORMATION...4 1.1.2 THE ORGANIZATION...4 2 RESEARCH DESIGN... 6 2.1 INTRODUCTION... 6 2.2 RESEARCH BACKGROUND... 6 2.3 RESEARCH APPROACH... 7 2.3.1 PROBLEM DEFINITION...9 2.3.1.1 Objective ...9 2.3.1.2 Research question ...10 2.3.1.3 Preliminary conditions ...11
2.3.2 CONCEPTS & THEORIES...11
2.3.2.1 Subsidiary questions ...11
2.3.2.2 Theories ...12
2.3.3 DATA SOURCES...12
2.3.4 ANALYSIS AND REPORT...12
2.4 RESEARCH METHOD... 14
2.4.1 CASE SELECTION CONSIDERATIONS...16
2.4.1.1 Introduction ...16 2.5 RESEARCH PLANNING... 17 2.5.1 RESEARCH OUTLINE...17 3 LITERATURE REVIEW... 18 3.1.1 THE INTERNET...18 3.1.2 HISTORY...18
3.1.3 THE EVOLUTION OF THE INTERNET...19
3.1.4 HOW THE INTERNET IS WORKING...22
3.1.5 THE USE OF INTERNET...26 3.1.6 THE DOT-COM BUBBLE...27 3.1.7 EMERGING MARKET...29 3.2 E-BUSINESS... 30 3.2.1 INTRODUCTION...30 3.2.2 E-BUSINESS...30 3.2.3 BUSINESS MODELS...31 3.2.4 LIFE STAGES...34 3.2.4.1 Start up phase...34 3.2.4.2 Customer acquisition...34
3.3.2 SURVIVAL RATE...36 3.3.3 SUMMARY...37 3.4 STRATEGY OF AN E-BUSINESS... 38 3.4.1 INTRODUCTION...38 3.4.2 E-STRATEGY...38 3.4.3 FLEXIBILITY...39 3.5 TECHNIQUES... 42
3.5.1 TECHNIQUES WHO LEAD TO MORE FLEXIBILITY...42
3.5.2 DECENTRALIZED DECISION MAKING STRATEGY...42
3.5.3 EMPLOYEE STRATEGY...43 3.5.4 SCENARIO PLANNING...43 3.5.5 EXPERIMENTS...43 3.5.6 KNOWLEDGE STRATEGY...44 3.5.7 COLLABORATION STRATEGY...45 3.6 TRADITIONAL APPROACHES... 47
3.6.1 INDUSTRY STRUCTURE APPROACH...48
3.6.2 RESOURCE BASED APPROACH...51
3.6.3 DYNAMIC CAPABILITIES APPROACH...53
3.6.4 STRATEGY AS A PATTERN IN A STREAM OF DECISIONS APPROACH...54
3.6.5 STRATEGY AS SIMPLE RULES APPROACH...56
3.7 COMPARISON OF THE STRATEGIES... 58
3.7.1 LIFE STAGES AND DIFFERENT STRATEGIC IMPERATIVES...60
4 TOOL FRAMEWORK... 62
4.1 INTRODUCTION... 62
4.2 EXPLANATION OF THE FRAMEWORK... 62
5 CASE STUDY... 66
5.1 INTRODUCTION... 66
5.1.1 CHOICE OF THE CASE STUDIES...67
5.2 AMAZON.COM... 68
5.2.1 HISTORY...68
5.2.2 CASE TABLE AMAZON.COM...69
5.3 BOL.COM... 72
5.3.1 HISTORY...72
5.3.2 CASE TABLE BOL.COM...73
5.4 ETRADE.COM... 76
5.4.1 HISTORY...76
5.4.2 CASE TABLE E*TRADE...77
7 CONCLUSION... 85
7.1 CONCLUSION OF THESIS... 85
7.2 FURTHER RESEARCH... 86
8 REFERENCES... 87
8.1 BOOKS AND ARTICLES... 87
8.2 WEBSITES... 90
2
1
I
NTRODUCTIONThis research is conducted in order to investigate what the key factors in a strategy are to make a business to customer e-business successful. Strategies in theory and practice are investigated with the goal to develop a generic strategy for making a business to customer e-business successful.
News about e-business is hard to avoid, success stories of start-ups and even more stories about failures are written every day. The Internet is a
complex and an emerging environment1. The developments evolve faster than ever, people know what they want and their needs are changing all the time. This emerging environment is challenging organizations to formulate and implement strategies that can anticipate and react to the rapidly changes. Amazone.com is an example of an E-business who is adjusting to the needs of customers constantly. They started with selling books and nowadays selling almost everything what a customer can whish. Their market share is growing day by day. Their operating cash flow was $1.04 billion for the trailing twelve months in 2008, compared with $0.73 billion for the trailing twelve months in 20072.
The dilemma of an emerging environment is that there seems to be little value in a clear business strategy because one thing is for sure, it will become obsolete in the very near future. But the danger of not having a business strategy is that success will most likely be achieved only by accident3. In practice and theory there is no preferred strategy when starting up an e-business or which strategy to use in the next life stages. It is unknown if traditional strategies still can be used or new strategies should be used to survive in the emerging Internet environment. The result of this approach has become clear in the past through failure of many e- business start- ups. So every start-up e-business is facing the same problem of not
1 Flanagin AJ, Metzger MJ, Internet ise in the contemporary media environment, Human communication research, vol. 27 issue 1 pages 153-181 2006
2 www.amazone.com
3
knowing what strategy to use to survive and become successful.
The traditional approach towards flexibility tended to focus on the ability of firms to adjust their manufacturing volumes to varying market demand. But recently the meaning of flexibility has been adjusted, flexibility is the ability of firms to develop new products, enter new markets and industries.4A lot of
researchers demonstrated the importance of flexibility for firms to survive in emerging environments.5
• INDG in general
• INDG the organization
4 Dryer B. and Gronhaug K, Uncertainty, Flexibility and Sustained Competitive Advantage, Journal of Business Research, 2004, 57, p.484-494.
4
1.1 INDGDIGITAL COMMUNICATION
1.1.1 GENERAL INFORMATION
INDG is specialized in 3D images and 3D applications and works with an international team of 30 staff members for clients, such as Philips, the Rijksmuseum, KLM, KPN and a number of advertising agencies at home and abroad. Their company mission is to develop 3D visualizations and 3D applications with the highest standards regarding visual quality and ease of use. INDG differentiate themselves with the following factors that are summarized below:
• Quality. Quality, at INDG they are making every effort to achieve the absolute highest quality. A cliché, but only the best is good enough.
• Ambition. Ambition, they don’t measure their performance against that of the advertising agency on the corner. They measure themselves against the top: the Dutch top and if possible, the European or global top.
• Professionalism. Professionalism has to be maintained to match the ambitions INDG exude. They always meet deadlines and agreements without any exceptions and work in a structured fashion.
• Dedication. Diligent, work with conviction. An independent and critical view has to be maintained until the project is finished even if the client is already satisfied.
1.1.2 THE ORGANIZATION
INDG comprises four business units. Staff is moved between units on a project basis, but in themselves, there are four different units:
5
• Websites/Internet solutions (WEB), they have been producing websites at INDG since the early days, but our focus has shifted to 3D flash sites.
• (3D) Software & applications (S&A), this comprises more complex/programming-intensive productions. The most important application among these is the ‘Woonplanner’ for Heijmans.
• (3D) Film & animation (F&A), all moving images they make belong here; motion graphics, commercials, character animations; name it. Only architectural animations are excluded.
Figure 1. The organizational chart of INDG (www.indg.nl) Board of advice Management team
Frans Vriesendorp Bas Gal
Sales: Diederik van Gelder
Office manager/ project support: Britt Swagerman
6
2
R
ESEARCH DESIGNThis section describes how the research is built up. The method to conduct the research is described afterwards. In the end the outline of the research is given.
2.1 INTRODUCTION
During the research a work-along internship of five months within INDG Digital Communication in Amsterdam is completed. The author has been involved in several projects as a project manager. A literature and case study has been conducted during this period. Interviews are not included this through the severe resistance of many e-business to cooperate.
2.2 RESEARCH BACKGROUND
The e-business market is an emerging market. A strategy is important and has to be able to keep up with all the environmental changes in an emerging market. But why are some businesses more capable than other e-businesses to become successful? What kind of strategy do they have?
Without doing research a logical thought about a strategy for a successful E-business could be; sell what costumers need and want, at a profitable level. The needs and wants are changing all the time, so a strategy is not really needed because it is very short term. Conclusion: Selling products people need and want make you profitable so you will be successful when you use a very short-term strategy or no strategy. Well not exactly E-business without a clear strategy failed in big numbers in the 1999’s.
7
shorter.6
With this research the author aims to investigate various forms of business strategies in both theory and practice and develop generic strategies for making business to customer e- business website successful supported by scientific literature and studies. According to Johnson and Scholes (2008) "Strategy is the direction and scope of an organization over the long-term: which achieves advantage for the organization through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfil stakeholder expectations". But strategy is also the adjusting of the organization to its environment (Rietdijk & Van Winden, 2003). But the Internet market is a constantly changing market, so are the traditional long-term strategy approaches still applicable?
This research will explain the importance of having a strategy through explore the characteristics of the emerging economy and outline the implications to the need for flexibility in various areas of e-business strategy.
There also will be a search for techniques that will lead to more flexibility in strategy formulation and implementation.
The research should form a founded recommendation which strategy INDG has to use to make an e-business successful. A desk research is compared with three case studies to address the various forms of key factors in a successful e- business strategy.
2.3 RESEARCH APPROACH
To conduct this study the research model of De Leeuw (2003) is used. It has its origins in the management and organisation field. The classical approach of research consists out of the following 5 steps:7
8
1. Problem definition
2. The broader research design 3. Data collection
4. Analysis 5. Report
This chapter is a combination of the problem definition and the broader research design. The research model is used to explorer the problem definition and the broader research design. The clip joint is a useful expedient for making the right choices within a research.8 Using the model helps to procure the main features of the research approach.9 The research model consists of several circles:10
Data sources Problem statement Concepts & theories Analytical methods Measure- & observation methods Data sources Problem statement Concepts & theories Problem statement Concepts & theories Analytical methods Measure- & observation methods
Figure 2. Elements of conceptual models” (Leeuw de AJC, 2003)
The research approach exists now out of decisions about:11
8 Ibid, p.87 9 Ibid, p.87 10 Ibid, p.88
9
• Problem definition What is investigated? Why is it investigated?
• Concepts and theories
What theories and concepts will be used? Which concpets will we use?
Which expedients will we carry out?
• Data sources
Where is the information gathered? • Measuring & observation methods
How is the data gathered from measuring or observation? • Analytical method
How the gathered material will be analysed? How will the results be reported?
2.3.1 PROBLEM DEFINITION
The problem definition consists out of a reproduction of the questions attempted to answer by the research, the reasons why the answer is important and the preliminary conditions.12 Therefore the problem definition is to be divided into three components:13
• Objective
• Research question • Preliminary conditions
2.3.1.1 Objective
The objective for this research is formulated as follows:
10
To investigate forms of business strategies in both theory and practice and to develop generic strategies for making a business to customer e- business
website successful.
Explanation about the objective is given here:
Successful is a very tricky term and it has to be specified. What determines the success of a business to customer e-business? One could state that a customer to business e-business is successful when it achieves a certain profit level. A time frame of five year is used because out of the research of Birch it was proven that fifty percent of the e-business start-ups are going bankrupt in their first five year of existence.14
In this research a successful customer to business e-business is an e-business, which exists at least for 5 years, it in the top 25
of the biggest market shares
The part ‘To investigate various forms of business strategies in both theory and practice and to develop generic strategies’ is addressing to five traditional strategy approaches that will be discussed in theory and to three business cases that will be explored in practice.
2.3.1.2 Research question
A research question should give an answer to the objective, however in a clear formulation for research. The question composed for this research is:
What are the keys factors in a strategy to make a business to customer e-business successful?
This question is too complicated to answer. The next step of the classical research approach is to work out the concepts and theories this to answer the research question.
11
2.3.1.3 Preliminary conditions
The research has the following set of restrictions:
• This research is focused on customer to business e- businesses
• The e- businesses have their origin online and are only active on the Internet they don’t have a click and mortar shop.
• Full cooperation of people who are involved in the business cases and this research
• The research will take place between 1 March and the end of September 2008
• The research has a value of 20 ECT’s
2.3.2 CONCEPTS & THEORIES
To answer the research questions in a founded way some sub questions should be composed. In the clip joint model the subsidiary questions are continuously adjusted during the research.
2.3.2.1 Subsidiary questions
All the subsidiary questions together should give the solution to the research question and accomplish the stated objective. The following sub-questions are defined:
• What is strategy?
• What is successful?
• What is an e- business?
• What is an emerging environment?
• What kinds of strategies are there?
• Which techniques are leading to more flexibility in strategy formulation and implementation?
• Which organization has applied which successful strategy?
• Which organization has applied which techniques that led to more flexibility in strategy formulation and implementation?
• What factors are dominant in business success?
12
2.3.2.2 Theories
The theory, which is used for this research, is scientific. The strategy literature is bases on books and scientific articles. Due to the lack of up to date scientific research on Internet and e-businesses some parts of the theoretical part is conducted from professional literature. The literature is a selection of different sources like (online) research institutes and annual reports.
2.3.3 DATA SOURCES
Six different data sources can be distinguished for practice research: documents, media, reality, imitation of reality and experience of researchers.15 For this research are used:
• Documents
Primary sources (library, books and magazines) Secondary sources (theses, articles)
• Media (press-releases) • Databases (Internet)
These sources are combined with a desk- and field research. For the desk research primary and secondary documents are used but also media and databases. Theses from other students and scientific articles have been used as secondary sources.
In the field research three different case studies have been conducted by the primary document sources.
2.3.4 ANALYSIS AND REPORT
Analysis is necessary to separate relevant information from a busload of raw material. The expedients for practical management administrative research are16:
15 Leeuw de A.J.C, Bedrijfskundige methodologie – Management van onderzoek”, 5th ed., 2003, p.89
13 • Statistical expedients • Simulation • Schematizing • Attentive study • Consideration
In the following parts of this research several schemes and models have been used to get better insight in particular relations. Reports can be distinguished in the following ways17:
• Written reports
• Oral presentations
• Teaching
• Perform research together
The report of this research is a written document and produced under the supervision of INDG Digital Communication and the RuG.
14
2.4 RESEARCH METHOD
The research method exists out of two parts: desk research and field research. The desk research will give an answer the sub-questions from a theoretical perspective. The field research will deliver real world information through conducted case studies. There are three case studies of successful business to consumer e-businesses. For the case studies archive documents have been studied.
15
16
2.4.1 CASE SELECTION CONSIDERATIONS
2.4.1.1 Introduction
The quantity and especially the quality of case information is a critical factor regarding the comparisons and conclusions that will draw up on them. Due to the nature of the e- business and Internet, strategic information is not easily available and sometimes hard to access. Annual reports are used to gain more information.
Based on a set of selection criteria the three cases have been selected for this study:
• Market share
• Availability of information
• Existence period (at least 5 years)
• The E-business has no origin in a brick and mortar store
• The E-business is business to consumer orientated
The market share is conducted through a survey of 3000 Dutch online shoppers measuring the three latest online purchases in 2006.18 The volume of products that are bought at the e-business store decides the popularity, not the profit. E-businesses are selling product in different price ranges, but an e-business who sells more luxury and expensive products isn’t more popular than a cheap online store that sells five times more products with less profit.
The three successful E- business cases that have been selected for this study are:
• Bol.com
• Amazon.com
• E-trade.com
17
2.5 RESEARCH PLANNING
In this paragraph the planning of the research is showed in a figure to give a clear overview. Due to the limited time for graduation this is the research schedule:
Month Chapter
April Research and brainstorm
May Introduction
May Research design
June Literature review
June Methodology
July Research model
August Case studies
August Results
September Conclusions
Figure 4 – Research schedule
2.5.1 RESEARCH OUTLINE
The outline of the research is done is a simple but clear way, this to not get lost in a big bulk of information. The first chapter will give an introduction to the research, how it is designed, what methodology is used and how the research model looks like. In the second chapter the theoretical background is given with five traditional strategy views and flexibility techniques. Chapter three is about the three cases studies: Amazon.com, E-trade.com and Bol.com. In chapter four the literature and the cases are compared to each other and conclusions are made. In the final chapter, chapter five, the references that are used are named. The research outline is as follows:
Chapter Title
Chapter 1 Introduction
Chapter 1 Research design
Chapter 1 Methodology
Chapter 1 Research model
Chapter 2 Literature review
Chapter 3 Case studies
Chapter 4 Comparisons and conclusions
Chapter 5 References
18
3
L
ITERATURE REVIEWThis chapter describes the different aspects and the terminology of the Internet, strategy and e-business.
3.1.1 THE INTERNET
The Internet is a worldwide network of computers that allows the "sharing" or "networking" of information at remote sites from other academic institutions, research institutes, private companies, government agencies, and individuals19. The Internet and the World Wide Web are not the same. The Web is a collection of interconnected documents and other resources, linked by hyperlinks and URLs20. The World Wide Web is one of the services, which are available via the Internet.
3.1.2 HISTORY
The founder of the Internet is J.C.R. Licklider his vision was that "everybody could use computers anywhere and get at data anywhere in the world". He worked at Harvard for designing better communication channels for Air Force crewmen. At MIT he helped to create a national air defense system against the Soviet Union and at an architectural acoustics design firm he developed the first computer timesharing system. In 1962 he joined the Advanced Research Projects Agency of the United States Department of Defense. Licklider transformed ARPA's "Command and Control" department, into the "Information Processing Techniques Office". Which coordinated computer research among ARPA, corporate contractors and universities21. The network, first deployed in 1969 as ARPANET, grew to 46 members by 1974, and 213 by 1981, at this time one new host joined every twenty days. In 1983, the U.S. Military designed a separate network, MILNET. Short after that ARPANET became known as the Internet.22
19 www.uakron.edu/library 20 www.uakron.edu
21 Leiner B.M, Cerf V.G, Clark D.D, Kahn R.E, Kleinrock. L, A Brief History of the Internet, published on the internet, 1999
19
The number of Internet users and applications is still growing every day. The Internet was developed for sharing information and communication between people but nowadays it is used more and more for doing business as showed in graph one.
Graph 1. Growing volume of trade of e- business in the Netherlands (www.thuiswinkel.org)
3.1.3 THE EVOLUTION OF THE INTERNET
There are three patterns of exchanging information between people, applications or on a network according Bill Burnham (2006)23. These
patterns of information exchange are very old and exist as components in almost every computer system:
1. Messaging: a one-way transmission of information from A to B. Examples are: e-mail and text messages.
2. Request/Response: a question followed by one answer A to B and back to A. Examples are: “What time the bus is leaving?” database queries and client-server architectures.
Number of products
20
3. Publish/Subscribe: one question but many answers. The question is e.g. “tell me whenever…”. An example is and alerting system, they are based on publish/subscribe including e.g. Google news alerts. The evolution of the Internet can be explained through making a comparison to these three patterns of information exchanging in the different Internet decades. In the seventies the main part of the time was spent on realization of TCP and TCP/IP and connecting computers together. In the eighties messaging was implemented, email is the application which came out of that. During the nineties request/response was implemented the application which came out this is the World Wide Web.24
Nowadays the publish/subscribe decade is reached. The information on the web is still largely passive; the user has to look it up with a browser or search engine. The next step in the Internet evolution, and it already started, is that the information will become active and tells the user when something will happen. Blogs and RSS-feeds are the first applications of the publish/subscribe phase. The popularity for RSS and blogging is growing strongly through the ability to subscribe to a blog or feed and be told whenever the information is wanted. It is expected to dominate the next several years of the Internet. The following table gives an overview of the evaluation of the Internet from 1969 till the future.
Period Year Happening
1969
The first message is sent over ARPANET. The University of Utah and University of California Santa Barbara now have ARPANET nodes, bringing the worldwide total to four.
1970 The ARPANET has grown to 10 nodes and 19 host computers.
1971 The first network e-mail system is created.
1973 Hawaii joins the network via the first satellite link.
1974 Telenet, the first commercially available version of ARPANET, is introduced.
B u il d in g t h e n e tw o rk
1977 ARPANET grows to 111 hosts.
M 1980 A virus temporarily disables the network.
23 http://salimismail.com/?p=12
21 1982
Transmission Control Protocol (TCP) and Internet Protocol (IP) established as system by which different networks can communicate. These linked networks come to be known as the internet.
1984 ARPANET grows to 1,000 hosts.
1985 All Canadian Universities are now connected to a shared network known as
NetNorth.
1988 Canada joins NSFNET this is an international backbone of computing centres that
enables more network connections.
1989 Tim Berners-Lee of the European Organisation creates the World Wide Web for
Nuclear Research (CERN). There are 100,000 internet hosts Worldwide.
1990
ARPANET ceases to function it is giving way to the internet. Tim Berners-Lee authors the first browser-editor, called World Wide Web. He also authors the communication language of the internet the Hypertext Transfer Protocol (HTTP) as well as the standard by which web pages were to be written, known as Hypertext Markup Language (HTML).
1992 The first audio and video are broadcast over the internet and has already one
million hosts.
1993 There are now 15 million people online worldwide and the CBC reports that the
internet is growing at a rate of 10 per cent a month.
1994 Netscape releases the beta version of the world's first commercially available web
browser called Mozilla.
1995 Sun Microsystems introduces the Java programming language, RealAudio is
introduced this allows users to listen to audio over the internet in almost real time.
1998 The search engine Google is introduced also Open Diary is launched it is an early
blogging service
1999
The online music sharing service Napster it popularizes peer-to peer file sharing and makes the recording industry, they accuse Napster of massive copyright violation. Napster is shut down in July 2001.
R e q u e s t/ r e s p o n s e 2000
In January AOL buys Time Warner for $162 billion US, forming AOL Time Warner in the largest-ever corporate merger. From January till March the Dow Jones Industrial Average reaches a record of 11,722.98. Two months later, the tech-heavy Nasdaq Index also reaches an all-time high, marking the bursting of the dot-com bubble.
2001
Dave Winer the author of the RSS feed, included a song in a blog post, what would later be called podcasting. The English edition of Wikipedia is launched. The online encyclopaedia, which invites users to edit and add entries, grows to include approximately 7.8 million entries in 253 languages in 2007.
2002 There are more than 150 million internet hosts and 840 million users worldwide.
P u b li s h / s u b s c ri b e
2003 Apple launches its iTunes music downloading service. Internet company eUniverse
22
2004 January, for the first time since its launch Amazon.com is making a full-year of
profit. November, the Mozilla Firefox web browser is launched.
2005 February, Youtube.com a video-sharing website goes online. November, Myspace is
bought through News Corp for $580 million US.
2006 Google buys YouTube for $1.65 billion dollar. Regarding to the popularity and influence of sites with user-generated content such as Wikipedia, MySpace and YouTube, Time Magazine names "You" the 2006 Person of the Year.
2007 Total worldwide number of internet users is 1.17 billion, according to InternetWorldStats
2008 March 31, 2008, 1.407 billion people use the Internet according to Internet World Stats A c ti v e i n fo rm a ti o n Till 2020
The internet will be a global network and will be available to most people around the world at low cost. And they agreed that a tech-abetted “flattening” of the world will open up opportunities for success for many people who will compete globally. those who are connected online will devote more time to sophisticated, compelling, networked, synthetic worlds. people who will remain unconnected to the network because of their economic circumstances and others who think a class of technology refuseniks will emerge by 2020. Asked what their priority would be for future investments of time and money in networking, 78% of the respondents identified two goals for the world's policy makers and the technology industry to pursue: building network capacity and spreading knowledge about technology to help people of all nations.
Figure 6. Evolution of Internet (www.pewinternet.org)
3.1.4 HOW THE INTERNET IS WORKING
The Internet infrastructure exists out of four different sorts of infrastructures25:
• Hardware infrastructure: e.g. computers, cables, power lines and power supplies
• Software infrastructure: e.g. IP addresses, HTTP, FTP and SMTP
• Intellectual infrastructure: e.g. content of the Internet created by users
• Social infrastructure: e.g. human-to-human relationships over the Internet
23
follows: the message will be translated from alphabetic text into electronic signals and then it will be transmitted over the Internet when the receiver it is translated back into alphabetic text receives the message. This is possible through the use of a protocol stack, which is usually built into the computer's operating system. The protocol stack is referred as the TCP/IP protocol stack because of the two major communication protocols used26.
Figure 7. The message path (www.theshulers.com/whitepapers)
There are many communication protocols required for the Internet to function. One of the most commonly used services on the Internet is the World Wide Web. The application protocol that makes the web work is Hypertext.
The TCP/IP stack Protocol Layer Comment
Application Protocols Layer Protocols specific to applications such as WWW, e-mail, FTP, etc.
Transmission Control Protocol Layer TCP directs packets to a specific application on a computer using a port number.
Internet Protocol Layer IP directs packets to a specific computer using an IP address.
25 www.nestor.rug.nl
24
Hardware Layer Converts binary packet data to network signals and
back e.g Ethernet network card, and modem for phone lines.27
Table 1. TCP/ IP stack protocol layer (www.theshulers.com/whitepapers)
The Internet exists out of many large networks, which are interconnected with each other. The large networks are known as NSP (Network Service Providers). They are connected with each other to exchange packet traffic. Every NSP is required to connect to three Network Access Points (NAP), which is also connected with a Metropolitan Area Exchanges (MEA). The purpose of a MAE is similar of that from a NAP, the only difference is that they are privately owned.
Figure 8. Internet infrastructure (www.theshulers.com/whitepapers)
Figure eight is not a true representation of the Internet. It is only demonstrating of how the NSPs could interconnect with each other and smaller ISPs. To model a actual map of the Internet is almost impossible due to its size, complexity and ever changing structure.
25
Figure 9. Internet routing hierarchy(www.theshulers.com/whitepapers)
When a packet with information arrives at a router, the router examines the IP address put there by the IP protocol layer on the originating computer. The router will check the router table. When the network, which is containing the IP address, is found the packet will be send to the certain network. The routers who are connected to the NSP backbones are holding the largest routing tables and here the packet will be routed to the correct backbone until it finds its destination.
Domain Name Service or DNS is a distributed database, which keeps track of computer's names and their corresponding IP addresses on the Internet28. Many computers connected to the Internet host part of the DNS database and the software that allows others to access it also known as DNS servers. No DNS server contains the entire database; they only contain a subset of it.
26
Figure 10. Domain name service (www.theshulers.com/whitepapers)
3.1.5 THE USE OF INTERNET
Internet can be used for many different uses, users can share information or buy product online. Nowadays there are many ways to access the Internet; dial-up, landline broadband Wi-Fi, satellite and 3G-technology cell phones. Some uses of the Internet are:
• E-mail, a store-and-forward method of writing, sending, receiving and saving messages over electronic communication systems29.
• The World Wide Web, discussed earlier.
• Remote access, the Internet allows computer users to connect to other computers and information stores easily wherever they may be across the world30.
• Collaboration, the low cost and nearly direct sharing of ideas, knowledge and skills has made collaborative work easier.
• File sharing, providing and receiving of digital files over a network, usually following the peer-to-peer (P2P) model, where the files are
27
stored on and served by personal computers of the users.31
• Streaming media, with streaming media, a user sees a continuous, animated image without having to download a large file. This is achieved by sending the sequence of moving images in small packets that are displayed as they arrive32.
• Voice telephony (VoIP), is a protocol optimized for the transmission of voice through the Internet or other packet-switched networks. VoIP is often used abstractly to refer to the actual transmission of voice rather than the protocol implementing it33.
• Instant messaging, Instant Messaging (IM) is a rapid means of online communication. Instant Messaging programs often allow people to control whom they communicate with and who can see their availability.
• Online shopping, the term used for selling or purchasing goods and services over the Internet from a website.34
3.1.6 THE DOT-COM BUBBLE
The Dot-com bubble was a speculative bubble during 1995 till 2001. The absolute peak was in the spring of 2000 the NASDAQ was peaking at 5132.5235. The founding and many failures of Internet start-up companies marked the bubble. The failures were caused through a combination of: fast increasing stock prices, individual stock speculation and widely available venture capital. The consequence was that many of the Internet start-ups dismissed standard business models and strategies and only focused on increasing their market share. During Spring in 2000 the change of business
31 www.njcu.edu 32 www.people.bu.edu 33 www.tig.lsc.gov 34 www.eshopsetup.ca
28
mood led to the collapse and bankruptcy of thousands of internet start-ups.
29
3.1.7 EMERGING MARKET
Internet is an emerging market, it has a very high growth rate, which yields enormous market potential and it’s in the early stage of development36. The e-businesses are finding themselves in an environment of rapid changes, short product life cycles, less loyal customers and fiercer competition.37 Porter is stating that the Internet caused lower switching costs, lower barriers to entry, more substitution threats and increased competition due lower differentiation and increased geographic reach. 38 Almost all e-businesses have the potential for global reach but the networks are determining the boundaries. These factors caused the following e-business challenges39:
• Hyper competition, due economic societal, legal and technological factors
• Frequent and significant changes in markets, the necessity to perceive and respond quickly to the changing environment
• Increase power of consumers, uncertainty in the nature of product and service offerings
E-businesses also must define their industry, competition, customers and boundaries in different ways from the traditional strategy approaches40. There is also more need for innovations, this can be done through e.g. customization, creating new products or provide the customer an outstanding service.
36 www.finance.gov.ab.ca
37 Dryer B. and Gronhaug K, Uncertainty, Flexibility and Sustained Competitive Advantage, Journal of Business Research, 2004, 57, p.484-494.
38 Porter M.E, Strategy and the Internet, Harvard Business Review, 2001, 79(3), 62-78 39 Whinston A.B., Stahl D.O. and Choi S.Y, The Economics of Electronic Commerce, Macmillan Technical Publishing, 1997, Indianapolis.
30
3.2 E-BUSINESS
3.2.1 INTRODUCTION
E-business is defined in this research as: the use of electronic networks and associated technologies to enable, improve, enhance, transform or invent a business process or business system to create superior value for current or potential customers41. It is about new business models, strategies and tactics. These new forms are made possible with the capabilities of the Internet and other Internet related technologies. The technologies exist out of different technologies; web browsers, web sites, search engines and many others. The “E” affects all aspects of a business: the development of new products, working methods, the way of working with suppliers and distributors, delivery of goods and services to customers.42
3.2.2 E-BUSINESS
A lot of misunderstanding exists about the precise meaning of an e- business. An e- business is conducting the buying and selling of goods and services and also serves customers. Also the collaboration with business partners and conducting electronic transactions within the e-business are included. 43
The nature, transaction or interaction is used to class the following types of e- business44:
• B-B: transactions between business partners
• B-C: transactions between business organizations and individual shoppers
• C-B: transactions in which individual sell products and services to business
• C-C: transactions between individual consumers
41 Sawhney M. and Zabin J, The Seven Steps to Nirvana: Strategic Insights into e-Business Transformation, 2001, McGraw- Hill, New-York
42 Anonymous, E-business Strategies a Mainstay, Information Week, 2001, 869, p.60 43 www.scribd.com
31
3.2.3 BUSINESS MODELS
The different types of e-business apply different types of business models. The business models are explained in order to research the case studies. In other words the e-businesses have a certain method of doing business by which they can generate revenue to sustain themselves. Weill and Vitale (2001)45 distinguished the following business models:
Business model Explanation
Online direct marketing Selling online from a manufacturer to a customer Electronic tendering system Byers request would be sellers to submit bids for
an item /service/project and the lowest bidder wins
Name-your-own price A buyer sets the price he wants to pay for a product/ service
Find the best price A buyer submits its needs and an intermediate
matches it against a database of sales, locates the lowest price and submit it t the buyer to accept or reject
Affiliate marketing Marketing partner refers consumers to a selling company’s website for a commission
Viral marketing Web based word of mouth marketing in which a
customer’s promotes a product or service to friends or other people
Group purchasing Quantity purchasing that enables groups of
purchasers t obtain a discount price on the products purchased
Online auctions Bidding for products and services with the
highest bidder getting the item
Product and service customization Creation of a product or service to meet the buyers specifications
Electronic marketplaces and exchangers A space in which sellers and buyers exchange goods and services for money electronically Online Retailers of Physical Goods Newly manufactured products that the company
sells, often relied on third party providers
Table 2. Business models (Weill P, 2001)
These business models must specify their revenue model, the way they actually earn their money e.g. transactions fees, subscription, advertising
32
fees, affiliate fee and others.
Revenue models Explanation
Sales Revenue from selling on a website or
providing services
Transaction fees Commission based on the volume of
transactions made (fixed / incremental)
Subscription Payment of fees usually monthly or quarterly
to get some type of service
Advertising fees Company charge other for placing ads on
their site
Affiliate fee Companies get paid for referring customers
to other sites
Others Game sites, licensing fees etc
Table 3. Revenue models
Also their value proposition has to be specified, the unique added value an organization offers customers through their operations46 Amit and Zott (2001) identified 5 sets of value propositions.47
Value propositions Explanation
Search & transaction cost efficiency Enable faster and more informed decision making, wider product and service selection
Complementarities Bundling some goods and services together
to provide more value than when offered separately
Lock –in High switching cost that ties customers to
certain.
Novelty Developing innovative ways for structuring
transactions, connecting partners and fostering new markets.
Demand & supply aggregation Affords suppliers with wider market access
46 www.balancedscorecard.org
33
and buyers with more choices and both with competitive
34
3.2.4 LIFE STAGES
An e-business is walking through different stages of maturity as shown by Rayport and Jaworski (2001)48. The focus is on the first four to five years because if this period is survived, the changes of survival go way up. This will be further explained in paragraph 2.3. In this paragraph the different periods will be compared on their market expansion possibilities and their power to influence the industry and environment.
Stage Period
Start-op ( Beta) 6 months – 1 year
Customer acquisition 1 year – 2 years
Monetization 2 years – 5 years
Maturity >5 years
Table 5 Life stages (Rayport J.F. and Jaworski B.J 2001)
3.2.4.1 Start up phase
Market expansion. Expansion and grow by exploiting opportunities in the changing environment with new products that fulfill unknown or unmet needs. There is a high degree of product and technological uncertainty. These two combined with the limited size of the products that who are offered, exposes the business to high risks. Influence power. There is very little power to influence the industry/ environment in which they operate due to their small size. They are very vulnerable to changes in their environment.
3.2.4.2 Customer acquisition
Market expansion. When the first product is successful launched the e-business reached the customer acquisition phase. The market expansion is through extending the product offering. Influence power. There is knowledge about the existing market space and technology exists with new uncertainties around the areas planned to grow into. In this phase the e- businesses have little power to change the rules in the industry. The business model is mostly a low- cost negative profit margin to get big very fast (Oliva, 2003).49 A known scenario is that the success has drawn the
E-35
attention of larger firms who are operating in the same industry. And who are entering the same market as the young firm is in. The entering of a new entrant can bring radical changes to the business environment.
3.2.4.3 Monetization
Market expansion. In this phase the market expansion takes place trough
marketing efforts, offering complementary products and expanding into new markets. Influence power: There is a good understanding of the markets, technology and industry gained through the history of operations. Their degree and power to influence their industry is medium because of threats from niche serving competitors and from the giants in their industry.50
3.2.4.4 Maturity
Market expansion. Grow through defending the market share, the introduction of complementary products and acquisitions of smaller businesses that are fitting into the portfolio. Typical for these firms is that they have a wide range of products and a high degree of knowledge about their customers and markets. The consequence of this is that they manage their operational efficiency in minute detail.51
Influence power. The company size is now substantial and that allows them to become the price maker. This doesn’t mean there are no threats they are still vulnerable to rival specialist businesses that focus on the more profitable market segments. 3.2.5 SUMMARY
After this paragraph it can be assumed that an e-business can have different business and revenue models, value propositions in the four different life stages. The cause of this is the difference in the market expansion possibilities, the power to influence the environment and industry in the life stages.
Commerce, 2003, System Dynamics Review, 19(2), 83-117
50 Lumpkin G., Droege S. and Dess G, E-Commerce Strategies: Achieving Competitive Advantage and Avoiding Pitfalls, Organizational Dynamics, 2002, 30(4), 325-340
36
3.3 SUCCESS OF E-BUSINESSES
3.3.1 INTRODUCTION
The successful e-businesses, Amazon.com, Etrade.com and Bol.com are dominant players with a very big market share in the e-business market already for years. Interesting to know is how they became so successful. A successful customer to business e-business is defined in this research as an e-business who exists at least for 5 years and is in the top 25 of the biggest market shares. A lot of e-businesses who tried to copy the success of e.g. Dell.com didn’t survive. A well-known example is Compaq it was selling direct like Dell but didn’t have the success Dell had. Recent surveys show that many companies do not have an e-business strategy.52
3.3.2 SURVIVAL RATE
In this research an e-business must survive its first 5 years to be called successful. This because Birch studied and calculated the survival rate of e-business who survives the first ten year of their existence53:
Graph 3. Survival rates
52 Anonymous, E-business Strategies a Mainstay, Information Week, 2001, 869, p.60 53 www.utah-business.com
Survival rate
Survival rate of E-businesses In %
37
3.3.3 SUMMARY
38
3.4 STRATEGY OF AN E-BUSINESS
3.4.1 INTRODUCTION
Strategy is according to Porter (1996) having a sustainable competitive advantage with:
• A unique position for the company
• Activities tailored to strategy
• Clear trade-offs and choices vis-à-vis competitors
• Sustainability comes from the activity systems not the parts
• Operational effectiveness a given
The strategist has to understand and cope with competition. Internet is an emerging market which can be compared to an evolutionary system where continuing development is needed this to maintain a company its fitness compared to the businesses which are co-evolving with. This is also known as the red-queen effect.54 E-businesses have to be able to react to radical changes in their changing environment; there is need for flexibility. According to Wargin and Dobiey (2001)55 the Internet has altered the business environment by redefining business processes and changing the dynamics of relationships with customers, partners and suppliers.
3.4.2 E-STRATEGY
An e-strategy of an organization is the organizational strategy to strengthen their operation in digital space. According Kanungo (2003)56 an e-strategy also has to consider both the external and internal environment of an organization. The external environment consists of suppliers, channel partners, customers and competitors and the internal environment consists of internal processes, organizational culture, beliefs and values, norms and its employees.
54 Kauffman, S.A, Escaping the Red Queen Effect, The McKinsey Quarterly, 1995
55 Wargin J. and Dobiey D, E-business and Change: Managing the Change in the Digital Economy, Journal of Change Management, 2001, 2 (1), 72-82.
39
3.4.3 FLEXIBILITY
According Shi and Daniels (2003) is flexibility, within an e-business context: an effective mean by which an e-business can hedge against uncertainty in a swiftly changing environment. Management literature argues that flexibility in organizations can enhance corporate responsiveness and can create competitive advantages. Flexibility is particularly important in an increasingly volatile business environment characterized by intense, global competition, short product life cycles, increased technological innovation and time-sensitive customer demand. The focus of competition in global marketplaces is increasingly shifting from cost, quality, and service to delivery, flexibility and innovation.57 Organizations need an appropriate e-strategy framework to gain competitive advantage58
A lot of research is conducted about strategy and emerging environments and the importance of flexibility.5960 Most e-businesses are steeped in a
tradition of optimization, efficiency, predictability, control, rigor and process improvement.61 E-businesses are facing an emerging environment, which
poses a constant challenge to formulate and implement an e-business strategy that is flexible enough to anticipate and react to external changes as well as provide the strategic direction needed for success.62 The emerging
e-business economy requires adaptability, speed, collaboration, improvisation, flexibility, innovation and suppleness. In addition to general business flexibility, e-business flexibility reflects an organization’s ability to react to those environmental variables that are particularly associated with information technologies and new ways of doing business, which are enabled by these technologies.
57 Shi D, Daniels R.L, A Survey of Manufacturing Flexibility: implications for E-Business Flexibility, IBM Systems Journal, 2003, 42(3), 414-427.
58 Sabherwal and Chan (2001). 59 Ibid.
60 Knot M., Van D.E.J. and Vergragt P., Flexibility Strategies for Sustainable Technology Development, Technovation, 2001, 21, 335-343.
61 www.jimhighsmith.com/articles/patterns.htm
40
According Hagel and Singer (1999)63 e-businesses must be flexible in three main dimensions to meet the challenges mentioned above:
• Product/service offering or value proposition. To fulfil the different needs, tastes and expectations of the global customer base, these are changing all the time. Flexibility in this point can be the capacity and speed of product innovation. An expertise like this is also a competitive advantage according Porter (2001)64 it cannot be easily imitated.
• Technology infrastructure. Technology in the new economy has not only the role of production but also as service, relationship building and collaboration. A lot of studies showed that organizations can use technology as a resource to gain competitive advantage 65 According Byrd and Turner66 several dimensions of technology flexibility are: data transparency, compatibility, application functionality and connectivity.
• Collaboration strategy. Collaboration is necessary according Hagel and Singer (1999.67 This because e-businesses cannot do everything themselves. The right form of collaboration will gain trust of consumers and other players in the market. 68
According to Pan et al.69 (2001) there are several dimensions to becoming a flexible organization including the following:
• Responsive internal environment, this to quickly react to any change in the marketplace, planned or unforeseen, a threat or an opportunity.
63 Knot M., Van D.E.J. and Vergragt P., Flexibility Strategies for Sustainable Technology Development, Technovation, 2001, 21, 335-343.
64 Porter M.E, Strategy and the Internet, Harvard Business Review, 2001, 79(3), 62-78 65 Clemons E.K. and Row M., Sustaining IT Advantage: The Role of Structural Differences, MIS Quarterly, 1991, 15(3), p.275-292.
66 Byrd T.A. and Turner D.E., An Exploratory Examination of the Relationship between Flexible IT Infrastructure and Competitive Advantage, Information and Management, 2001, 39, p.41-52
67 Hagel J. and Singer M, Unbundling the Corporation, Harvard Business Review, 1999, 77(2), 133-144.
41
• Variable cost structures, this to manage costs in proportion to growth of the organization or change in demand. They need to be focused on what is profitable and what is the core of the enterprise success.
42
3.5 TECHNIQUES
3.5.1 TECHNIQUES WHO LEAD TO MORE FLEXIBILITY
In this paragraph some techniques will be discussed as being tools for expanding the knowledge base of e- businesses, yielding them more strategic options that are leading to more flexibility. From the previous chapter can be understood that flexibility in strategy is very important concerning the emerging environment. In the subparagraphs it will be explained specifically in what way these techniques can create more flexibility.
The following techniques will be discussed:
• Decentralized decision making, Cowling K, Sugden R (1998)
• Employee strategy, Kalleberg, A.L (2003)
• Scenario planning, Ogilvie D. (1998)
• Experiments, Venkatraman N. (2000)
• Knowledge strategy, Menke (1997)
• Active environmental scanning (Menke 1997)
• Cross- functional team (Menke 1997)
• Customer focus (Menke 1997)
• Collaborative strategy, MacCormack, A, Forbath, T,(2008)
3.5.2 DECENTRALIZED DECISION MAKING STRATEGY
Decentralized decision-making will boost the flexibility of an e-business.70 The management is forced to increase the scope of their solution sets of acceptable decisions that fulfill the criteria embodied within the guidelines provided by upper management. It is short-term problem solving by easing away from the long-term planning and the traditional need for accurate forecasting.
43
3.5.3 EMPLOYEE STRATEGY
Organizations can be differed in three ways regarding their responses to become more flexible71:
• High road, adopted high performance work organizations and functional flexibility
• Low road, cut costs by treating workers as disposable
• Mix of both forms of flexibility, through simultaneously protecting a core of functionally flexible workers with a buffer of numerically flexible workers.
These flexible employer strategies generate a great diversity in employment relations and there has been a creation of nonstandard work arrangements. The arrangements represent a potential source of employment flexibility and uncertainty for employers as well as workers.
3.5.4 SCENARIO PLANNING
Ogilvie (1998)72 is stating that creativity is valuable to the overall quality of strategic decisions in fast-changing and ambiguous environments. Scenario planning is an example of a creative approach. It aims to explore possible outcomes of actions and in the process; it develops assumptions about the dynamics of competitive environments. Venkatraman (2000) supports the importance of scenario planning and strategic experimentation. He states that “Past success is no guarantee of future success, and calendar-driven strategic planning is giving way to strategic experimentation and rapid adaptation. The challenge is to pursue experiments that not only augment current business models but also create new ones and rules of competition”
3.5.5 EXPERIMENTS
Organizations should not focus all their efforts on experimenting with
71 Kalleberg, Arne L., Flexible Firms and Labor Market Segmentation, Work & Occupations, 2003, Vol. 30 Issue 2, p154-175
44
predictable opportunities but should also explore probable ones73. The fact that e-business firms today are already performing countless experiments has two main consequences on the competitive environment. They increase the rate and magnitude of change in the industry and competitive rules in the near future, and according to Malone (2001)74 these experiments will enable companies to eventually determine the details required to build more stable and profitable business models. This will not happen for several years though; in the mean time e-business companies must continue to learn from their experiments and those of others to keep abreast with environmental changes. Activities such as experimentation, scenario planning and technological forecasting increase the knowledge base of firms allowing them more flexibility in setting and updating their strategies on a regular basis to remain competitive especially in turbulent environments.75
3.5.6 KNOWLEDGE STRATEGY
Companies have to regard knowledge as their key strategic resource and align its strategy with its knowledge acquisition and the management strategies Winter (1987)76. Important knowledge can be gained through the strategic management mechanisms proposed by Menke (1997)77:
• Active environmental scanning: monitoring developments of competitors, suppliers and distributors.
• Cross-functional teams: projects should promote cooperation and mutual learning by members from technology, marketing and financial backgrounds.
• Focus on customers: from an e-business perspective this poses opportunities as well as challenges e.g. online personalization, rapidly changing customer preferences and low switching costs for
73 Venkatraman N. (2000) Five Steps to a Dot-Com Strategy: How to Find Your Footing on the Web, Sloan Management Review, 2000, 15-28
74 Malone T.W, The Future of E-Business, Sloan Management Review, 2001, 104
75 Knot M., Van D.E.J. and Vergragt P., Flexibility Strategies for Sustainable Technology Development, Technovation, 2001, 21, 335-343.
76 Winter S.G, knowledge and competence as strategic assets, Ballinger Publish company, 159 – 184, 1987, Cambridge
45
customers. The knowledge gained from these activities needs to be disseminated throughout the organization in such a way that managers receive it and can act on it on a timely fashion.
3.5.7 COLLABORATION STRATEGY
Companies that excel in using partnerships to innovate and collaborate are known for doing many things well78. They research out how collaboration
can improve the top line as well as the bottom line. Leading firms make significant investments to develop their collaborative capabilities e.g. experimenting to learn what processes and practices work best. Mac Cormack and Forbath (2008) are stating that that leading firms make strategic investments in collaboration, into the following three crucial areas79:
• People, the organization has to alter their recruitment, training, evaluation, and reward systems to focus on “soft” skills such as communication so that managers can better learn to motivate and coordinate team members who are outside the firm and, sometimes, in vastly different cultures.
• Processes, the organization needs to use a learning-driven approach to designing collaborative processes. Teams from different cultures have different strengths and working methods, which must be matched to their assigned tasks; and formal requirements are no substitute for frequent, high-bandwidth communications, which are critical for resolving unanticipated problems.
• Infrastructure, important is to have an infrastructure – a set of tools and standards for sharing data – that allows dispersed teams to work together seamlessly.
According to Rayport and Jaworski (2001) flexibility in forming alliances must address two issues:
(Sept-Oct), 1997, 42-47 78 www.businessmirror.com
46
• The nature of collaboration: as the nature of competition becomes increasingly based on rapidly reconfigurable value chains the e-businesses must decide on the nature of the collaboration with different partners e.g. short-term or long-term and the organizational structure that will govern such collaborations. They also must examine how the collaboration will affect the brand image.
