FREE ESSAY ON MARKETIN STRATEGY IN E-COMMERCE

MARKETIN STRATEGY IN E-COMMERCE

Marketing Strategy and E-Commerce 
Introduction With the rapidly advancing technologies that are occurring in modern
business, organisations are required to be ready, and able to adapt within their
ever-changing environment. It is true across all diverse industries that in order to stay
competitive, organisations must be able to utilise the various tools that technology has
to offer. Technological factors have been of growing importance, particularly in recent
years. A major factor involved in these technology issues is the use of the Internet as a
major issue to modern organisations. The Internet has been rapidly growing since it's
inception and is now commonly used in all sectors of societies, in all corners of the
globe. The Internet has quickly become one of the most valuable assets in modern
technology, and as such, is developing as an integral part of modern commerce. As with
past technologies, the Internet will have future technological advances develop from its
own growth. The task the organisations of in the new century? Realise future
opportunities and threats, and base a strategy accordingly. Is it cliche to say that 'the
Internet changes everything': the challenge now is to say what, how and how quickly.
(When Companies Connect, 1999, p.19) The Internet has lead to the birth and evolution of
electronic commerce or E-commerce. E-commerce has now become a key component of many
organisations in the daily running of their business. Simply defined, electronic commerce
is a system of online shopping and information retrieval accessed through networks of
personal computers. (Reedy, J. Schullo, S. Zimmerman, K. 2000, pg. 29) E-commerce
challenges traditional organisational practices, and opens ups a vast array of issues
that the organisations must address. By focusing on the varying levels of an
organisation, it soon become apparent the effects that E-commerce can have. An
understanding of the implication E-commerce has on such organisational divisions can help
businesses gain understanding hence plan for it's inevitable continuing evolution. In
terms of marketing, the modern organisation must be critically aware of the development
of E-commerce, and the implications that it entails. Marketers develop their own recipe
of promotional tactics to fit the product lines or industries in which they compete. Now
electronic communications tools are and will continue to be
an important ingredient in the promotional mix (Reedy, J. Schullo, S. Zimmerman, K. 2000,
pg. 29) In assessing the implications of E-commerce in terms of marketing, it is
important to understand its impact in respect to marketing strategy formulation. As the
Internet, and in turn E-commerce has developed, and continues to evolve and grow, it is
vital that any organisation, in any particular industry, must base it's strategic
planning around such a rapidly growing medium. The growth of the Internet is an
environmental influence that must be embraced and understood so to successfully plan for
future marketing implementation. In order to successful realise the impact that
E-commerce has in terms of marketing, it is important to break the area of interest into
some key areas. As most of the issues that arise in terms of E-commerce represent
organisations entering the environment, it seems natural to base discussion around this.
Therefore, the bulk of the literature review relates existing organisations entering into
the E-commerce market environment. In successfully identifying the relationship between
E-commerce and strategy, the issues are categorised as follows: 1. Strategic analysis ?
Understanding the environment 2. Identifying the strategic options/SWOT analysis ?
Strategic Advantages/Disadvantages ? Advertising ? Electronic cost
cutting/publishing/Process 3. Corporate level, Business level, d Marketing level 4.
Retailing in E-commerce ? Implementation Issues ? Financial ? Performance monitoring 5.
Conclusion ? Based on current knowledge state To gain a clearer understanding of the
implication of E-Commerce in the formulation of marketing strategy, it is imperative to
gain a clear understanding of the environment and it's relevant effects. This helps in
understanding the rationale in a developing marketing strategy, particularly the
influences of E-Commerce on its make-up. The next crucial element is to gain an
understanding of E-commerce itself, as well as the current and possible future
developments. In understanding E-commerce's impact on strategic foundations, an
organisation's strategies can be more clearly focused. Once the organisation and
E-commerce's respective environments are clear it is then possible to understand
E-commerce's implications in regards to fundamental marketing strategies. By focusing on
tools such as the competitive strategy framework we can gain a better understanding of
strategy formulation. By now it is easy to link E-commerce ideals directly into the
strategic planning sequence, and hence understand its impact to the marketer. (Brown,
1997) By reviewing these traditional marketing theories and practices, it's possible to
see where, if at all E-commerce fit into current frameworks. This will provide relevant
conclusions that can be made based on the strategic implications of E-commerce, and it's
attributes in the marketing process. In doing so, this adds a vital dimension to the
marketer in an ever-growing technology based society, of which must be clearly
understood. Strategic analysis Understanding the Environment In order to gain an
understanding of E-commerce's impact to the modern organisation it is imperative that the
environmental issues are analysed and understood. The understanding of the environment in
which an organisation is involved is a fundamental element of its strategic plan. In
order to be successful in any industry the organisation must have a sound understanding
of influences that effect its product or service offer. When conducting an environmental
analysis in regards to the Internet, it may seem that many of its attributes are present
in traditional consumer markets. However, E-commerce provides organisations with a unique
medium to analyse, requiring information relating specifically to it's environment.
(Strauss, J. Frost, R., 1999). E-commerce ideals place particular emphasis on
environmental factors, due to the high rate of change and development it constantly
undergoes. An understanding of both environmental influence on the Internet and
E-commerce, and that of a particular organisation is imperative basing any strategic
formulation. Strauss, J. Frost, R. (1999) includes these macro and micro environmental
factor as key issues, and they are extremely useful in constructing a basic for strategic
planning. Macro Environment Technology Obviously technology is a key environmental issues
that must be addressed when analysing and understand E-commerce. Technology is
ever-changing, and as such E-commerce is absolutely influenced by it's evolution. Rapid
changes in recent technological advances have bought about the Internet and in turn
E-commerce, and such dramatic evolution is likely to continue. In terms of strategic
formulation, technology is a huge issue that any organisation must be aware of when
realising E-commerce' s strategic implications. For example, an organisation thinking of
developing a Web site must be strongly aware of technological issues that pertain to such
initiations. The decision to develop a web-site internally or externally would be a key
issue for any organisation. Internal web-site development would require a vast
understanding of technology and require this environmental factor to be constantly
reviewed and analysed. In any case, awareness of technology is vital in planning
marketing and business strategies, and should be closely followed. World economies
Another key environmental influence is an awareness and understanding of global activity
such as world economies. As the Internet provide a basis for global communication, the
awareness of world economies must be understood in regards to E-commerce. The linking of
the Internet world-wide, in turn effects the way in which E-commerce behaves, and
therefore makes an understanding of world economies imperative. Legal/Political As with
the need to understand world economies, global integration of E-commerce highlights
fundamental environment issues such as legal and political influences. As independent
countries operate different legal and politic systems, it is obvious that an
understanding of such ideals is also important in addressing E-commerce. For example, a
recent precedent-setting court case in New York recently, a judge ruled that New Yorkers
were breaking the
law by gambling on the Internet, even if the gambling companies were based in other
countries. State Supreme Court Justice Charles Edward Ramos stated, The act of entering
the bet and transmitting the information from New York via the Internet is adequate to
constitute gambling activity within New York State. (Public Agenda Online, 2000) Such
example highlights issues that organisation must be aware of when developing a marketing
strategy formula. Failing to recognise possible repercussions of E-commerce use, in a
political or legal manner could prove catastrophic for an organisation. It is imperative
it is carefully looked at, particularly in regards to E-commerce. Micro Environment
Market environment The growth of E-commerce has transformed the way in which consumers
purchase products as well as how organisations operate. The Internet provides the
necessary tools; easy operation and exchange of information; and therefore effects all
diverse industries and organisations. The Internet has become a useful tool for selling,
buying and distributing goods and services globally in a rapidly growing supply chain.
The potential market that the Internet provides has little or no restrictions by either
geography or time, and therefore poses a huge impact on any organisation considering
E-commerce in it's strategic marketing formulation. Opportunities in E-commerce are
enormous, as present growth and development have proved. (Kay, E. 2000) The Internet
provides a virtual marketplace, providing huge opportunities in the marketing strategies
that an organisation my wish to develop. Forecasters have projected that the world wide
E-commerce revenues will be over $350 Billion in the year 2000. (Jones, I. 1999) User
trends The trends of Internet users and in fact the use of E-commerce in general is
extremely valuable information that the organisation must be aware of. By knowing how the
advances of the Internet are being used, a marketing strategy can be focused keeping
these ideals in mind. As E-commerce provides different uses to varying companies or
industries, user trends and their relative importance differ. For example business to
business electronic communication would represent different characteristic than
communication relating directly to the end-consumer. Ideals such as customer tracking can
be found as an integral advantage in the use of Internet based marketing. Information
regarding users use of resources can be tracked reasonably easily on the Internet, and is
a direct result of the information-based platform the Internet provides. For example
Amazon.com provide e-mail announcements when a new product or service become available to
its customers. (Reedy, J. Schullo, S. Zimmerman, K. 2000). Such understanding and
manipulation of user information is beneficial to both consumer and suppliers. (Fig 1.)
is an example of user information that may be pertinent in designing a strategy based
using research of Internet use. The Graphics, Visualisation, and Usability (GVU) Centre
conducted the research of this information that was found in on an information-based Web
site. Such information may be particularly useful when implementing strategic
formulation, however should not be treated as sacred. Because of the limited
nature in which this research is presented, it is hard to gauge its validity as a neutral
and independent source. Organisation must be aware of such information's credibility, and
clear of its context and meaning. Without doing so, an organisation risks initiating a
strategy that is based on inaccurate information. In keeping in mind the limitations of
various consumer analysis information, it should be understood that there is still a
place for its use in strategic formulation and planning. Having an awareness of the
varying user trends aids in strategy formulation in a number of ways. By understanding
how the users of information tools such as the Web act, for example, it is possible to
forecast or predict future behaviour and base strategies accordingly. Therefore user
trends are an integral environmental issues that FIG 1. INTERNET USER PROFILE must be
identified, in order to achieve successful marketing success. Consumer analysis Possibly
the major factor in understanding the effects of E-commerce towards marketing within an
organisation is the awareness of who in fact has access to such resources. By having an
understanding of users of the Internet and E-commerce resources, the marketing strategy
can be further advanced, and tailored in a favourable direction to the organisation.
Various factors make-up the analysis of the consumer when addressing both E-commerce and
the more tradition means of commerce. Ideals such as demographics and cultural influences
must be identified when assessing the characteristic of any market. It is important that
the users of Internet technology are identified, and the relevant consumer attributes
understood. In terms of E-commerce, this aspect of the environment provides a basis for
how an organisation would structure their marketing strategies based on the attributes
that make up the general Internet consumer. It is important to get some idea of the
degree to which the marketing approach will be accepted by potential customers (Higgins,
1999, p.47) It is also imperative that awareness of the consumer does not limit
organisations to just the end-consumer. Business-to-business relationships must also be
taken into account when planning strategy based around the E-commerce framework. By being
aware of how industries and organisations utilise tools such as the Internet, a marketing
strategy can be further guided in the right direction. Identifying the Strategic
Options/SWOT analysis Having provided a situation analysis and environmental analysis, an
organisation must use the information, in order to implement its strategic plan. In
implementing a strategic plan is it appropriate to identify the four key elements in an
organisation's environment. They are: the internal strengths and weaknesses; and the
external opportunities and threats. (Or SWOT analysis). By matching the organisations
resources, and any apparent opportunities it may be possible to conclude an effective
match, and hence, a favourable outcome. (Brown, L. 1997) These four major environmental
factors are important for the organisation, and are vital in assessing its strategy in an
E-commerce situation. For example a farming supplier whom currently possesses an e-mail
ordering system may be thinking about developing a web-site. As they currently already
operate basic E-commerce facilities, they may identify this as a strength in their
business. Hence, in doing so, their strategic formulation has been based around the
fundamental practice of SWOT analysis. These ideals keep with common literature and
practice, however they can be further explored by looking at some of the external forces
that E-commerce poses. As such, E-commerce provides strategic advantages and
disadvantages that have been widely discussed and challenge. As opportunities and threats
can often be rather blurred, these E-commerce or Internet advantages or disadvantage pose
some interesting question. Strategic Advantages/Disadvantages In having a comprehensive
analysis of the environment in which the organisation is face with when dealing with
E-commerce, the task is now rather simple. The organisation must identify how to use the
Internet towards a useful business advantage. (McEarchern, T. O'Keefe, B., 1998) There
are huge amount of interesting approaches to achieving such an ideal, and the basic
ideals varying across different industries and organisations. For example, CD Now and
Amazon.com are building businesses based on immediate availability and ordering of,
respectively, any CD or book. (McEarchern, T. O'Keefe, B., 1998, p.62) While this may be
an ideal medium for companies such as Amazon.com it may prove rather less successful for
different organisations. Unless clearly define objectives are set when approaching
E-commerce, strategic ideals may prove derogatory to an organisation. (Higgins, J. 1999)
While it is obvious that dynamic organisation possess varying attributes, there are some
general advantages and disadvantages that E-commerce offers across all different
industries. As E-commerce advances at it rapid rate, it is clear that no industry will be
exempt from its impact. Therefore key issues in its possible uses must be address across
all diverse industries. Advertising Advertising on the Internet presents a significant
opportunity for an organisation to enter the world of E-commerce. As part of strategic
planning any organisation must be ready to develop it's brand image and as such, the
Internet offers a wide range of opportunities. Such as the use of billboards in the real
world, the Internet can provide ideal locations to further developing their offer.
Obviously the information received on site hits and relevant user data acquired, helps to
focus such ideals towards the appropriate target market. There are, however many views
that Internet advertising will not gain distinctive popularity because of the difficulty
in assessing it effectiveness (Ottman, 1996 cited Johns, R.,). While Strauss, J. Frost,
R. (1999) believes that advertising on the Internet helps reach its revenue objectives,
Johns, R. (1996) suggests that Internet advertising is full of clutter, and therefore
proves difficult to gain the attention of the target market. Virtual stores are another
significant ideal in which strategic planning can base significant interest in, when
addressing E-commerce. Virtual store can provide an inexpensive form of direct sales or
help to supplement existing sales channels. (Strauss, J. Frost, R., 1997) By using the
Internet, manufacturers are possible to reach the end-consumer without going through
intermediaries. (Turban, E. et al, 2000). Successful exponents of such strategies are
organisations such as Amazon.com, and their success in the distribution of books. When
aligning a strategic plan based around the development of a virtual store, there are some
key issues that must be addressed. As with any strategic development, there are usually
threats, and virtual stores pose considerable threats due to intense competition. In a
marketplace such as the Internet, other company can apply huge pressure, perhaps due to a
sustainable competitive advantage. (Strauss, J. Frost, R., 1997) Electronic Cost-cutting
By replacing existing print and publishing cost, organisation can use E-commerce for
their electronic publishing. Distribution on the Web, as opposed to mail, for example can
have a huge impact on cost, and may be a strategic driver. The initial strategy might be
for lowered cost of the product offer, and hence lowering cost in documentation
distribution may help in the financial control of such a strategy. FIG 2. THE STRATEGY
HIERARCHY (Brown, L. 1997, p.10) The Strategy Hierarchy As a vital aspect of
understanding the implications of E-commerce to marketing strategy, it's vital to look at
all levels of the strategic hierarchy. The strategy hierarchy (Fig 2.) identifies the: ?
corporate strategy ? business strategy ? And at a functional level, the marketing
strategy. It is imperative that when addressing the strategic implication of E-commerce,
that all three areas of the organisation must be addressed. In doing so, the marketing
role within the organisation is not isolated, and is in keeping with the overall
organisations core objectives. The first step is to address the corporate strategy and
define the its link to the strategic development of E-commerce. The basis for the
corporate strategy identifies where the business wants to focus its attention in regards
to the scope of the organisation. In doing so bases it's mission and vision to align with
key objectives. (Brown, L. 1997) Paxton, B. Baker, T. (1997) suggests that it is
essential that the Internet planning process is not divorced from the corporate strategic
management process but is integrated into each stage of your company's existing process.
The focus of the corporate strategy is to develop synergy between the various Strategic
Business Units (SBUs). This is a vital element to any organisation that is evolving its
strategies into new domains, particularly as a result of environment shifts. Therefore
when formulated a strategy based around the use of E-commerce, it is imperative that the
SBU planning is in synergy with the core corporate objectives. In doing so, the other
relevant SBUs will follow the corporate strategies lead. As the varying SBUs are aligned
within the corporate strategy, they too have influence over their relative functional
levels. The business strategy possesses more defined objectives as well as a clearly
defined competitive strategy. Because the SBUs operate in their relevant markets, such
clearer focused goals are possible. At this level the focus is on building, defending and
maintaining competitive positions through the development and implementation of
competitive marketing strategies. (Brown, L. 1997, p.11) The role of the SBU strategy is
clear, and is also highly relevant to
E-commerce issues. This drive to maintain competitiveness in a SBU's market may be the
foundation for a move into E-commerce development. As the core goals are to sustain a
competitive position, an organisation may decide that E-commerce provide this and
inherits it's use in their strategic planning. However, some organisations may find that
E-commerce provide them with no significant competitive offering, and hence chooses to
ignore it as part of their strategic formulation. The decisions must follow a well
prepared business plan and require a thorough understanding of the impact of the bottom
line. (Higgins, J. 1999, p.48) The marketing strategy level of strategic planning
identifies some key functional issues that the organisation must implement. This
identifies the relevant marketing objectives that the organisation wishes to implement as
well as the product market strategies. This level gains a clearer focus on the consumer
in each particular target market. This integrates many key marketing ideals, and is used
to co-ordinate marketing resource and the marketing mix to reach the desired markets in
which are targeted. The Marketing strategy is by far the most relevant in measuring the
impact of E-commerce on the marketing strategy formula. While the upper levels in the
hierarchy shapes the direction in which various marketing strategies are planned; it is
this level that develops the functional elements of this strategy. Retailing in
E-commerce A major shift in the evolution of E-commerce is it's impact on the traditional
retailing system, in particular the shift of intermediaries from the distribution
channel. In theory, the Internet allows manufacturers to sell directly to the consumer,
cutting out the traditional ideals of a middleman or intermediary. (Turban, E. et al.
2000). Turban (et al. 2000) describes this phenomenon as disintermediation. Turban, E. et
al. (2000) also identifies an emerging electronic middlemen such as e-mail and product
selection agents. This is quite naturally classified as reintermediation. (Fig 3.) Shows
the prevalence of the two as a result of E-commerce developments. The evolution of the
second phenomenon is commonly believe to the basis for future E-commerce practices.
Hutchinson, A. (1997) suggests that this middleman effect with combine with global
integration and widespread network connections. Once again Amazon.com provides are useful
example of a strong electronic intermediary. When devising a marketing strategy an
organisation must be aware of this shift in E-commerce structures. The awareness of how
intermediaries in the distribution channel is absolutely vital to marketing strategy, and
the implications of how this is changing could have a profound effect on marketing
strategy formulation. FIG 3. DISINTERMEDIATION AND REINTERMEDIATION BY EC (Turban, E. et
al. 2000, p.64) Implementation Issues Financial The development of Web site is
fundamentally used to result in some level of revenue or a decrease in the cost. Revenue
is typically based around increase sales, and decrease cost could arise due to
elimination of intermediary forces. (Strauss, J. Frost, R. 1999) Therefore the basis for
integration into E-commerce has an effect on financial issues, and may perhaps be the
basis for the strategic formulation. As with almost any strategic plan, there are
associated costs that derive, and this is reflected also in E-commerce. Such cost could
be identified as follows: ? Connecting to the Internet (The Internet Service Provider) ?
Hardware and software ? Web site and advertising designers ? Staff to maintain the Web
sites and manage e-mail with stakeholders. Performance monitoring As with any strategic
formulation, E-commerce requires appropriate performance monitoring to ensure that is
place in the organisation continues to be in sync with the functional goal and objectives
put in place. This includes ensuring that any adaptation to E-commerce is monitored,
including staff training and awareness. The use of E-commerce in an organisation must be
carefully monitored to ensure that it remains productive, and that they generate some
sort of gain. As well as these functional aspects, it is imperative that the actual
strategies that are formulated as constantly review, and future developments are adapted
into such strategies. Conclusion E-commerce is revolutionising the way in which an
organisation thinks, and in particular how an organisation bases it's future goals and
objective. An understanding of the critical make up of organisations, and how they
develop their strategies, helps to close the gap between E-commerce and strategic
marketing. An organisations strategic planning process helps to cover the vital issues
that any new paradigm may invoke. This structure helps provide a basis for assessing the
impact of E-commerce and it's relationship with marketing strategy. By understanding the
organisation as a whole, it becomes clear what initiates strategic development, and hence
provides clear reasons why E-commerce may become prevalent in strategy formulation. Such
an understand allows the organisation to develop E-commerce strategy that is in sync with
the organisations corporate strategies. Such fundamental comparisons help to gauge the
effect E-commerce has and will have on modern organisations. If Organisations gain an
understanding of E-commerce and its relationship to marketing and operational strategies,
they will be better ready for future development and technological change. (Baty, E.
2000) In order to be competitive in modern business it is imperative that the
organisation's corporate strategies are constantly review, and environmental influences
addressed. One of the major shifts in recent years is the technological shift towards the
Internet, and as a result E-commerce. E-commerce has developed into an enormous aspect of
the Internet and as such, organisations have been required to address this in their
strategic planning. For example, the University of Otago's strategic plans would be to
look forward to technological changes, and be ready to adapt to these. As such, perhaps
the introduction of an E-commerce Degree may be a resultant of their strategic plans.
Organisations that are looking towards E-commerce as a strategic option are met with
numerous issues that must be addressed. Analysing theories and thoughts on E-Commerce
helps to gain a better understanding of how an organisation would approach such a
strategy. As with any strategy, many attributes must be considered, and carefully
evaluated. As a fundamental component of strategic planning is to envision future
development, perhaps these ideals could be advanced further. While E-commerce does and
will have a profound effect on marketing strategy formulation, what will the future of
E-commerce hold? As organisations implement their strategic plans in respect to
E-Commerce, it must be realised how this will effect other part of the organisations. It
is also important to understand how society is impacted as a result of their strategic
plan. Is promoting a greater number of Internet users irresponsible? Perhaps promoting
regular use of computers is affecting the general health of the consumer. While such
suggestion seen rather extreme, it is feasible to assume that such ideals warrant further
investigation. In keeping with these future ideals, research may be sought on
developments in technology and the potential for total media packages and what they would
mean to the advertiser. Perhaps the next step in the Internet, is total home
entertainment, and identification of this early, could lead to a sustainable competitive
advantage in E-commerce. Such forward thinking epitomises the fundamentals of formulating
a successful