Generic Strategies and Stages

What is it that makes an e-commerce strategy interesting to develop and deploy? Given the relatively high levels of standardization in Internet technologies, the technology-enabled barriers to entry and exit are almost nonexistent for e-commerce. From a market-based perspective (i.e., if we apply Porter's model to e-commerce) we find that:

• Ease of entry of new competitors has increased. Switching costs have decreased for both customers and suppliers.

• The bargaining power of buyers has increased. This is especially true of the end consumer (e.g., in the auto industry).

• Bargaining power of suppliers has decreased. This is because of asymmetry that tends to exist in terms of information and bargaining power between the buyer and suppliers increases when portals are perceived to accord even greater leverage to larger players (for example, Ford and suppliers and Cisco and manufacturing partners).

• The threat of substitutes has increased if seen in the context of new forms of intermediation.

• Rivalry among existing competitors has increased because of the increased ease of entering into new markets and using information to differentiate between products.

Based on these five dimensions, three well-known generic strategies can be discussed. They are overall cost leadership (attempts to offer the lowest cost product or service to customers relative to a firm's rivals), differentiation (positions for a company to compete on the uniqueness and the value of its products or services) and focus (used to position an organization in a market niche). It is useful to see how the Internet is affecting each of these strategies—and in doing so, we gain some insight into generic e-commerce strategies (Cho & Hau, 2001). Table 1 summarizes how Lumpkin et al. (2002) describe these generic strategies.

Table 1: Generic Strategies for Leveraging E-Commerce Opportunities.

Cost leadership	Differentiation	Focus
Web-based inventory control systems that reduce storage costs by providing near-real-time ordering and scheduling to manage demand more efficiently; Direct access to status reports and the ability for customers to check work-in-progress to minimize rework; Online bidding and order-processing to eliminate the need for sales calls and decrease sales force expenses; Online purchase orders for paperless transactions to decrease costs of both the supplier and purchaser; collaborative design efforts to reduce the cost and cycle time and increase efficiency of new product development On-line testing and evaluation of job applicants by human resource departments	Internet-based knowledge management systems linking all parts of the organization to shorten customer response times; Real-time access to manufacturing status such as scheduling and delivery information to empower sales forces and channel partners; Personalized on-line access to provide customers (both upstream and downstream) with their own "site within a site" to track orders and process new orders; Rapid on-line responses to service requests and fast feedback to customer surveys and product promotion to improve marketing efforts; Access to real-time sales and service information to continually update research and development efforts; Automated procurement and payment systems to provide suppliers and customers detailed status reports and purchasing histories	Permission-marketing strategies that narrow sales efforts to specific customers who opt to receive advertising notices; Chat rooms, discussion boards, and member functions for customers with common interests; Niche portals targeting specific groups with specialized interests; Streamlining browsing capabilities to focus customer search efforts within a specific domain; Virtual organizing and on-line "officing" to minimize infrastructure requirements; Procurement efforts using techniques to match buyers with sellers.

It is clear that what is happening outside the organization becomes increasingly important in an e-commerce context. Buyers and sellers are reinstated as important stakeholders, collaboration and rapid response become important keywords and transparency and information sharing become critical success factors. Table 1 provides actionable opportunities that appear obvious and do-able for any organization. Later in this chapter, we will present a framework that helps to prioritize some such strategic dimensions and help the organization chart out a path toward e-commerce maturity.