Importance of Business Strategy in E-Business

Introduction

The purpose of this paper is to analyze the importance of business strategy in the electronic business, its inception, and its contribution. The current economic world requires businesses to be unique so that they can be able to settle scores in different situations especially in the competitive environment. The act of performing the same activities or offering products the same as that of the competitor at a cheaper way than other people is what is known as strategy.

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A good business strategy can be a competitive advantage in electronic business. There are so many articles that have been written about strategies and business models trying to give highlights about the overall picture, some of them represent classical thinking in processes and procedures governing the business environment. However, a number of these theories have gone under the revolution, making some to be completely irrelevant to the contemporary management of the business. (Porter, 1996)

The current evolving electronic business

Strategy in every business has changed. Competition in business has left business entrepreneurs gnashing their teeth. Big businesses survive because of the internally accruing advantages that are so strategic to performance. These advantages are attributed to their outstanding executive human resource management that is reviewed on a timely basis to determine whether they depreciate or are dragging behind. To prosper a firm must adopt different modern business models. Amazon Company employed the following models. (Alt & Zimmerman, 2001)

Cost leadership

This refers to the act of producing the same quality products and services at a cheaper price than the competitors. In this case, the company will be more concerned about the price and quality more than other elements. In the electronic business costing is an essential element in management. The firm must be able to reduce its operational cost increase its profitability by adding value to its clients as well as suppliers in the distribution chain.

Conducting business via the net is one such strategy considered by managers as instrumental. Amazon Company was the leader in America for having set an example in cost leadership management strategy, it focused on offering quality books and, magazines to its potential customers both domestic and international. Clients were able to access the company products through websites and therefore make appropriate decisions on what products to order and quantity to purchase. This saw it establishing a barrier for other firms in the industry that was unbreakable. (Afuah &Tucci, 2001)

The electronic business has revolutionized how most of the transactions are carried out in the business workplace; greater efficiency and effectiveness have been achieved through automating the production process and reengineering the business by the use of electronic commerce. Through cost leadership the firm must be able to identify its position in the value chain; it will be no basis for introducing a strategy whose effect is only felt by the company itself and not the stakeholders including potential customers and suppliers. (Afuah &Tucci, 2001)

The essence of any new strategy is to drive the company to meet its core objectives, one being customer satisfaction and public relationship. Remember that customers in the global world have become more sensitive to quality than price. It, therefore, follows that when a firm is considering making pricing decisions quality should be given a priority, if this is not taken into consideration then there will be no meaningful strategy achieved. (Betz, 2002)

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Product differentiation

Product differentiation refers to the process by which a firm decides to make its products appear completely different from its business rivals in the market. This can be achieved through adopting different product designs, presentations, packing, quality, and promotion. The firm will lock customers perceived to be potential by making its product more distinguishable and affordable. In an electronic business, the management must be able to vary its services in a manner that is easily recognized, user-friendly but at the same time unique that no competitor can ever think of. (Mahadevan, 2000)

Just like we have discussed the internet business is increasingly becoming common. The company must evaluate its internal systems if there is a value-added by choosing to use a different idea in the information technology that is still hidden from others in the industry. Product differentiation is a common strategy used by many organizations in the global world. Achieving a sustainable competitive advantage is always the objective of any enterprise; this can be brought by providing products with outstanding quality as well as services. If a firm wants to maintain its financial influence in an industry the design of the product becomes ordinarily vital, customers will be able to tell which products are genuine and which ones are not. This is the responsibility of every manager. (Afuah &Tucci, 2001)

Market focus strategy

In market focus strategy a firm will be able to evaluate either cost leadership approach or product differentiation; whichever is appropriate becomes the strategy in the marketplace. The firm will identify its position in the market and the prevailing market conditions and forces. Where circumstances are favorable to a particular method then it will not hesitate to apply. This requires knowledge about market niches. On the other hand, it may be convenient for a firm to provide the same methods simultaneously on a given market niche. (Betz, 2002)

Big organizations normally capitalize on market segmentation to reach every category of clients that could be in vast and potential segments. This strategy is situational in that it’s driven by conditions. The firm should be able to evaluate all conditions exhaustively to provide a comprehensive analysis.

When a firm is considering implementing an electronic business, it should weigh out all the existing market possibilities, where the conditions are in favor of their decision then they should go-ahead to implement it. It’s also equally important that the firm identifies its industry. Many firms enjoy certain advantages that are a result of them venturing into a given industry, these are economies of scale that are already created by existing firms in that industry however it may be difficult to maintain competitive advantage. (Applegate, 2001)

These are some of the strategies that can be used in an electronic business, but according to Michael Morris, the business strategy is defined through business models. He argues that a business model is simply the architecture and infrastructure that a business uses to earn revenue, margins, and, cost procedures necessary for the entire operations of the company. In the current modern world, nothing has slightly changed, when you take a critical analysis of high-performance organizations, the cost is highly prioritized, that with diminishing returns the organization can not survive in the long run.

Cost-benefit analysis is considered a very critical accounting procedure in most firms, there must be sufficient margins to keep the company going, linking this with the cost leadership approach there is little difference, in cost leadership the attention is focused on offering products and services at a reasonably lower price than the competitors in the same industry.

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Another modern business model is about knowledge base. For accompany to continue being the industry leader both globally and domestically there must be a mechanism to justify that. High-performance organizations insist on recruiting professionals who are technically competent as well as innovative. Highly qualified professionals can take the firm to where it should be. They will keep the firm ever-inventive on product design, quality, and pricing strategy. This will ensure that a firm is neither dormant nor outperformed in the industry. (Alt & Zimmerman, 2001)

Managing the skills already acquired and constantly making necessary adjustments through regular training and appraisals will ensure that a firm achieves its objective of being the best in the industry. This is called industry positioning. A firm that positions itself well in a dynamic environment can be assured of future performance no matter what may come, whether there is a major economic downturn or not. To achieve this existing knowledge must be improved regularly to take into the changing circumstances. (Applegate, 2001)

Still, on the model of management, any structure adopted by a firm must have a corresponding effect. That is to say that an organizational structure has a lot to do with the position of a firm in an industry, Michael Morris embraces a rule-based business model, there are quite many organizations that may use the same model but without rules. In this sense, the result will be different completely. (Stewart & Zhao, 2000)

Managers who insist on certain principles, adhere to them, and combine some level of flexibility has always succeeded. Morris says that the rule-based model defines the scope of performance by setting the limits of what constitutes strategy in the business environment. On the other hand, in an organization where there are so many channels of communication and reporting zones things tend to be slow. This is the type of firm that may not be able to survive in times of change. (Chesbrough & Rosenbaum, 2000)

To be able to maximize returns to assert tremendous influence in the industry, it is significantly important for a firm to adopt a suitable i.e. relatively flexible structure to enable it to adjust to the changing business environment. The firm can be able to tap the undiscovered potential of a market niche and translate it into a spectacular performance at the expense of its rivals, further exacerbating the situation. It’s equally important that managers also make good and sound decisions that will ensure that the objectives of the organizations are achieved without any difficulty.

Another business model realigns the information system needs with the organizational strategy. Information in business has become more important. Managers need the information to make decisions, employees need it to carry out tasks, and clients need to know more about the services offered by a firm. Aligning the information systems with the business strategy can help a firm maintain its competitive advantage. It is almost unlikely that small and upcoming enterprises will adopt this system and therefore whoever ventures into it will have diverse economic as well as strategic advantages. It is cost-effective means of ensuring maximum use of information technology in all business processes. (Applegate, 2001)

This model can be significant in ensuring that a firm is strategically placed to counter its rivals in the industry. Aligning the information systems with the business strategy will also ensure that a firm achieves its core functional objectives efficiently and that the lower-level managers understand the need for designing such information systems in the organization. Michael Morris did not address this in his writing about the forms of business models.

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The modern business environment is dynamic and must therefore incorporate this strategy if great benefits associated with information are to be achieved. When we were looking at the Amazon business strategy we realized that it was not easy for other firms in the same industry to break the barrier that was put by its professionals, it was achieved by greater use of information to align the business strategy with business information system needs. (Linder & Cantrell, 2000)

Drawbacks of Michael Morris Business model

It’s very difficult for most entrepreneurs to understand business model innovation. At the initial stage, you have to come up with a mechanism of determining what a model is and then proceed to determine the relative importance not knowing that the component innovation is not identical with a particular industry. These innovation components are not easily noticed. This is one of the biggest limitations of these articles on business components. In this model we see rules that can guide the stakeholders in the business industry, however, it’s not easy to determine what constitutes a genuine rule, what extent is one expected to apply these rules, and what specifically makes good rules. This is also another big limitation of this model. Well, rules are important but the biggest problem is determining the basis of selecting relevant ones, which guides the entrepreneur. (Timmers, 1998)

It is also very confusing for entrepreneurs to assess the quality of business models and get the difference. Certain techniques need to be employed to determine the viability of these models. This is why Michael met so many criticisms in his bid to enhance these theories of business models. Critics also argue that these models are possible but not practical i.e. translating the component models into operational decisions, how the corporate strategy can be broken into small objectives which are further broken into tasks and assigned to individuals. Even though Michael tried to advance these theories about the development of a business model he is not clear on how these are finally implemented. (Viscio & Pasternak 1996)

Conclusion

Michael Morris gave several approaches to business models; there are quite many research studies that have been built around his work. Though he is not clear as to the implementation of some of his work he provides a framework for other research work. His arguments are related to renowned management scholars like Peters F Drucker and Michael Porter. It would be wrong to say that he is irrelevant.

References

Afuah A &Tucci CL. 2001, Internet business models. New York: McGraw-Hill/Irwin.

Alt R & Zimmerman HD. Introduction to special section on business models Electron Mark 2001; 11(1):3– 9.

Applegate LM. 2001, Emerging e-business models, Harvard Business Review; 79(1):79–87.

Betz F. Strategic business models. Eng Management J 2002; 14(1):21 – 7.

Chesbrough H, & Rosenbaum RS, 2000, The role of the business model in capturing value from innovation (working paper) Boston: Harvard Business School.

Linder JC & Cantrell S. 2000, Changing business models. Chicago: Institute for Strategic Change, Accenture.

Mahadevan B. 2000, Business models for Internet-based e-commerce. Calif Management Review Vol: 42(4):55– 69.

Porter ME. 1996, What is strategy. Harvard Business Review 1996; 74(6):61 –78.

Stewart DW & Zhao Q. Internet marketing, business models, and public policy. Journal of Public Policy Mark 2000; 19:287– 96,

Timmers P. 1998, Business models for electronic markets. Electronic Commerce Europe pp.1– 6

Viscio AJ & Pasternack BA. 1996, Toward a new business model. Strategic Business Vol: 2(1):125 – 34.

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