Managing Electronic Commerce: Assignment 2
The CITY.ZA Network
Assignment Number: / 02
Name: / Richard Byrom
Student number: / 750-163-3
Group Code Number: / BOT1000
MBL 426-B Student No: 750-163-3
Table of Contents
Assignment task 4
Introduction 4
Portal Overview 6
Generation 1 6
Generation 2 6
Generation 3 6
Generation 4 6
Analysis of the business plan 8
1. Articulate the business strategy 8
a. Framing the Market Opportunity 8
b. Determining the appropriate business model 11
c. Customer Interface 12
d. Market Communications and branding 13
e. Implementation 13
2. Translate strategy into desired outcome and devise metrics 15
a. Market Opportunity 15
b. Business Model 17
c. Customer interface and outcomes 17
d. Branding and Implementation 18
e. Financial 18
Evaluation of Pros and Cons 19
Pros 19
Cons 19
Recommendations for improvement 21
Analysis of the Budget for Income and Expenditure 23
Expectations 23
Findings 24
Revised Budget 25
Non – monetary indicators/metrics 25
Financial Indicators 26
a. Detailed Sales/ Cost of Sales and Payroll 26
b. Summary Profit and Loss 27
Bibliography 28
Table of Figures
Figure 1: Evolution of Portals (Source: Sood, R. 2001. Portals and Branding. GartnerGroup. Available from: http://www.doleta.gov/whatsnew/portals&branding.ppt Accessed [29 July 2002]) 7
Figure 2: A framework for electronic commerce (Rayport and Jaworski, 2001: 18) 8
Figure 3: Framework for Market Opportunity (Rayport and Jaworski, 2001: 27) 9
Figure 4: Customer Interface (Rayport and Jaworski, 2001: 17) 12
Figure 5: Market space evolution and need for continuous improvement (Rayport and Jaworski, 2001: 215) 14
Assignment task
Read the business case of the CITY.ZA network. Analyse every aspect of the business plan, from strategy to finance to the business model to the implementation of strategy. Evaluate the pros and cons of the Business Plan and give recommendations for improvement. Analyse the Budgets for both income and expenditure. Provide your own budget based on the knowledge you have gathered thus far.
Introduction
The word portal means gateway and portals are really information gateways. They open doors to organisations and people. According to the Net and Digital Media Measurement firm Media Matrix Inc., seven of the top ten most heavily trafficked Web properties are portals[1]. This emphasizes their importance in our newly wired world. The idea is to offer everything that a surfer needs under one roof so that the surfer is trapped forever. As more users become trapped, this in turn generates more advertising revenue[2].
Since the possession of knowledge and information translates into capabilities and profits the primary goal of management today is to discover relevant information and knowledge in a timely manner and convert it into a competitive advantage[3]. One way of achieving this is via a Portal. The enterprise portal is one of today’s corporate certainties, a software market that will have grown from $30 million in 1998 toward US$1.75 billion in license revenue by 2005, according to the Gartner Group[4].
The CITY.ZA network is effectively a community Portal that incorporates B2B and B2C principles. It is aimed at vertical, horizontal and diagonal market segments. In terms of portal development it can be classified as a generation 4 portal as seen in figure 1. It contains elements of the services shown in all generations mentioned in the diagram but still has plenty of room for growth as service offerings can be extended when new generations introduce new functionality and capability.
I used the Performance Dashboard and Framework for Electronic Commerce [5] to analyse the multi-media strategy and implementation from the articulation of the business strategy to the calculation of current and target performance. This includes market opportunity analysis, the business model, customer interface, branding and market communications and implementation.
My conclusion is that CITY.ZA has implemented a sound business model with strong market communications and branding. The customer interface is particularly strong as it offers a number of integration options to the customer and also ensures that retrieval options can be customised to the particular user. Implementation capability is high due to a strong delivery system, however ways to innovate need to be established. Access to the site is enhanced via a number of different mediums, namely Internet, phone and traditional media. Introducing a transaction-based model can increase the number of different revenue streams. A more detailed look needs to be taken at the budget and implementation plans together with how these should be linked together. CITY.ZA has early on identified the key to the success of the project which is developing strategic partnerships and alliances. It’s first mover advantage should contribute considerably to it’s success and this advantage should be sustained by developing long terms contracts with all parties in the supply chain.
Portal Overview
A portal provides a single point of personalized online access to business information and knowledge sources. Their central goal remains to filter and provide relevant information to the users of portals. They are about customisation (push), making timely, useful data available to the user community; and personalisation (pull), allowing users to filter information in a way that improves their satisfaction and productivity[6].
A Portals main strategy should be to: -
1. Accumulate as many visitors as possible.
2. Keep visitors their for as long as possible[7].
In the portal arena the name of the game is market share. The more users, the more money from advertising. Factors that influence successful execution of the portal strategy include: -
q Access route.
q Strategic Alliance.
q Content Route – content driven portals need to invest heavily in brand building.
q Alternative content route.
q General versus Specialised portals.
In terms of the progression of portals a number of generations can be recognized as shown in figure 1.
Generation 1
Homepage on steroids with basis searching capabilities
Generation 2
Introduced more of a customer focus, also contained links to other sites
Generation 3
A more integrated approach was adopted. B2E portals began to develop as well as support for collaboration like E-mail and chat.
Generation 4
Adds features like contextual personalization, "So I can personalize the context of the interaction, not just the role of the user," says Pfifer. Other new features coming to market include better process integration, cascading portals, (portals within portals), federated portals, (multiple portals working in concert), knowledge management, e-learning, shared team spaces and proactive notification of problems and offline support.
Figure 1: Evolution of Portals (Source: Sood, R. 2001. Portals and Branding. GartnerGroup. Available from: http://www.doleta.gov/whatsnew/portals&branding.ppt Accessed [29 July 2002])
The key to portal power lies in two powerful capabilities. The first is as an information consolidator for data, applications, and geographies that speeds access to information and enables organisations to put new work processes into play. The second is a contextualiser - a technology, finally, puts data into actionable form specific to the goals of your corporation[8]. Some basis services that should be provided by a portal are: -
q Management of heterogeneous databases
q Structured Access
q Customised interfaces.
q Collaborative Working
q Multi Level security
q High Levels of Currency
q Future Proof[9].
No matter what the goals, the key to a successful portal is to offer an oasis of organization within the tangled web[10].
Analysis of the business plan
The Performance Dashboard and the framework for electronic commerce will be used in the evaluation of the business plan.
The Performance Dashboard consists of five steps: -
- Articulate Business Strategy
- Market Opportunity Analysis: Framing the market opportunity.
- Determining the appropriate Business Model.
- Customer Interface Design.
- Branding and market communications.
- Implementation
- Evaluation (ties in with steps 2 and 3 mentioned below)
Theses stages of step one form the six interrelated, sequential decisions of the Framework for Electronic Commerce as seen below in figure 1.
Figure 2: A framework for electronic commerce (Rayport and Jaworski, 2001: 18)
- Translate Strategy Into Desired Outcomes
- Devise Metrics
- Link Metrics To Leading And Lagging Indicators (catered for under the analysis of the budget and provision of new budget)
- Calculate Current and Target Performance Indicators (catered for under the analysis of the budget and provision of new budget)
1. Articulate the business strategy
This corresponds with the six stages of the framework for electronic commerce as in fig. 1 above.
a. Framing the Market Opportunity
Any firm (according to the framework – see figure 2) should satisfy five conditions to determine the financial, technological and competitive attractiveness before going into an industry: Seed opportunity in existing or new value system[11], identify unmet or underserved needs (the opportunity nucleus), identify the target segment, declare the company’s resource-based opportunity for advantage, assess competitive, technological and financial opportunity attractiveness and make a “Go/No Go” assessment.
Figure 3: Framework for Market Opportunity (Rayport and Jaworski, 2001: 27)
Value System
CITY.ZA will unlock trapped value they will do this firstly by creating more efficient markets in the sense that will be improving customers and suppliers coming together. Secondly they are creating more efficient value systems by compressing or eliminating steps in the current system. The speed at which buyers and suppliers come together should be enhanced by this system. Thirdly ease of access is promoted by using multiple media channels in which access to CITY.ZA can be obtained, namely, telephone, Internet, newspaper and CD-ROM. Lastly they will definitely disrupt current pricing power. The simple fact that customers will be able to search a wide variety of sites means that they will be able to compare prices amongst a larger number of suppliers than before. This should effectively drive prices down.
CITY.ZA will also create new value by firstly customising their offerings both to suppliers and customers. Persons gaining exposure on CITY.ZA can choose the level of exposure that they want and persons searching for products to purchase can customise their searches. Secondly they radically extend reach and access by extending the boundaries of existing markets. Thirdly they are building a virtual community that is centered around a bricks and mortar community as well as enabling collaboration amongst multiple people, locations and time by bringing the offering to the internet as well as ensuring that traditional media forms. Lastly they are introducing new to the world functionality and experience as this project is one never seen before in South Africa.
Unmet or undeserved needs (the opportunity nucleus)
This usually entails asking yourself a number of questions about your customers or actually surveying the potential customers and then establishing their needs. There is no evidence in the case that there has been any market analysis conducted. It looks as though the need has been assumed based on other similar offerings available in the market.
Target Segments
We need to determine what target segment CITY.ZA caters for by looking at their demographics[12], geography[13], behavioural[14], psychographics[15], benefits[16], beliefs and attitudes[17]. According to the case the target markets can be identified as: -
· Horizontal markets – all players in all industries
· Vertical markets – specific industries
· Diagonal markets – specific players in specific industries
· Municipalities
Therefore the market is segmented based on industry and geographic lines with the aim of reaching 1,200 domains within South Africa.
Resource based opportunity for advantage.
At a company level I believe that the resource that CITY.ZA offers is exposure to varying degrees for its customers. These levels of exposure can be leveraged in such a way that buyers on the domain can also view or sort their information according to these levels of exposure. The levels of exposure provided by CITY.ZA are: -
· Local exposure
· Regional exposure
· Provincial exposure
· National exposure
· International exposure
In terms of partnerships the company is successfully partnering with other portals to enhance exposure to a national and international level.
Assess Competitive, Technological and Financial Opportunity Attractiveness
CITY.ZA is one of the first initiatives of this type within South Africa. Although there are other portals in existence this is the only one that provides such a high level of exposure for potential users. Certainly at regional, local, provincial and municipal level there is a lot of white space. By partnering with other portals at national and international level CITY.ZA has effectively made sure that it is not competing in the market space. In appropriately segmenting the market, CITY.ZA has effectively reduced the level of competitive intensity it will experience at the outset. However, this does not prevent other competitors from entering the market place and therefore, appropriate barriers to entry for other competitors to enter the market need to be built.
The level’s of technology adoption in South Africa are sufficient to ensure success of their strategy. Where technology adoption is not high CITY.ZA has also put in place measures to deal with the non-technology aspects such as using newspapers and CD-ROMs. The continued deregulation of the telecoms industry in South Africa should also ensure that customers which were previously unreachable can now be attracted. This deregulation should also enable improved growth in the telecoms infrastructure which forms the backbone of the internet upon which CITY.ZA’s strategy is built.
The market size is very large with a potential customer base of eleven million by 2005. This is as a result of the market space being in all geographical regions. Although profitability should initially be low due to high costs and slow customer adoption all signals indicate that the margins should be very high once a large customer base has been established.
Make go/no-go assessment
Based on the assessments made above it is clear that CITY.ZA has a unique offering with massive potential to create new markets by ensuring that each person or company can be a given any level of exposure they require.
b. Determining the appropriate business model
“The New Economy business model requires four choices on the part of senior management that include the specification of (1) a value proposition or a value cluster for targeted customers, (2) a market space offering – which could be a product, service, information or all three, (3) a unique, defendable resource system, and (4) a financial model.” “Construction of a value proposition requires management to specify the following three items: (1) Choice of target segment, (2) choice of focal customer benefits, and (3) rationale why the firm can deliver the benefit package significantly better than competitors in the same space[18].”