Step 1: Analyze the company’s external and internal environments

In the traditional strategic planning model, managers identify their company’s strengths and weaknesses, as well as the obstacles and opportunities in their business environment. They are then ready to make strategic decisions that seek to balance their company’s competencies with the business opportunities around them. This step is equally crucial for e-business planning.

The main barriers to e-business adoption

A wait-and-see attitude and scepticism on the part of clients and partners can put up barriers that discourage e-business solutions. In other cases, the nature of the company’s product can make it more difficult to introduce e-business. Consider the example of Moules Industriels, a Sherbrooke, Que., firm that manufactures rubber and plastic moulds-a customized product that is generally unsuitable for Web-based sales because transactions cannot occur without prior personal contact. Moules Industriels can, however, use the Web to foster initial client contact, and when an agreement is reached with a client, the Internet can make further contact easier during the prototype development phase.

For SMEs located outside major urban centres, it is sometimes hard to find simple, economic solutions for distributing the products they sell on-line. La Ferme Martinette, a maple-product business in Quebec’s Eastern Townships that markets its merchandise on-line, must rely on Canada Post to deliver goods to its customers. La Ferme Martinette operates at a disadvantage because merchandise pickup is not an option for many customers, and because it does not have personal contact with customers at the time of sale or product receipt. The Web makes it possible for SMEs like La Ferme Martinette to increase their customer base, but it cannot solve all the logistical difficulties related to the sale.

However, our study found that by far the most important obstacle to e-business adoption among small- and medium-sized enterprises was lack of financial resources. The size of the investment and the long and sometimes uncertain payback period frequently cause SMEs to postpone investing in e-business. For example, 20 per cent of Polar Plastic’s customers wanted the Montreal-based plastic-ware manufacturer to adopt an electronic data interchange (EDI) system, which was too costly, given the company’s small client base. Polar Plastic knew that it would be very difficult to pay off the $30,000 cost of the system over the short term. Instead, the company opted for EDI Gateway, a technological solution offered by an external supplier that processes customer orders and lets Polar Plastic transmit information to its clients’ EDI systems. Through this intermediary company, Polar could receive and transmit information by fax to clients like McDonald’s Restaurants. Until recently, the cost of contracting this particular EDI solution through an intermediary was a few hundred dollars per month.

What conditions enable e-business adoption?

When developing their e-business strategic plan, managers must take into account the number and nature of external factors that are compatible with the adoption of e-business.

Depending on the industry, government financing may be an incentive for adopting e-business. Other proven incentives are the time spent with SMEs to understand their needs and the investments in technological infrastructure made by the leaders of sector-based associations like the QICG (Quebec Institute of Graphic Communications) and the funding and technological expertise of partners such as government agencies and large corporations. Many companies know how to identify and take advantage of such arrangements. In our study, the triggering factor was usually the initiative of managers who realized the potential advantages of e-business. For example, the vision and technological know-how of managers at Auberge de La Fontaine, a small hotel in Montreal, and Colibri Tours, a travel agency, led these companies to develop a Web site. After many years of negative growth, Revue Gestion, a magazine for business practitioners and academics, also sought to boost readership by going on-line.

Step 2: Select an e-business strategy

The selection of an e-business strategy requires solid knowledge of how e-business can create economic value for the firm. Successful SMEs know how to identify the scope of their activities and determine which products, clients and geographic markets they should target. They also know how to set clear and measurable goals.

How can e-business create economic value?

The ultimate goal of any strategic decision is to create value. Amit and Zott identified four opportunities to create value with the help of e-business: efficiency, complementarities, novelty and lock-in. (R. Amit and C. Zott, “Value Creation in E-Business”, Strategic Management Journal, 22, 2001, p.493-520.) Efficiency is mainly derived from lower costs due to faster transactions, increased automation of the company’s operations, and the ease with which clients can research relevant information. Novelty refers to the design and adoption of new operational methods in a given sector that link up new or existing participants, or introduce new products and services. By locking in to a particular, reliable technological solution, a company gains approval and trust among its client base.

Complementarities are mainly concerned with the bundling of resources and technological capabilities, as well as the bundling of products and services, of various partners in one electronic network. In our study, the principal value driver was efficiency for the firm and the customer. Using e-business allowed SMEs to reduce costs and find new clients, as was the case with Montreal’s Auberge de La Fontaine, whose Web presence boosted the inn’s revenues by 30 per cent. The inn was also able to save on advertising costs by reducing the number of promotional flyers it printed. Its trilingual site (French, English and Spanish) allows customers to view available rooms and obtain information on Montreal’s tourist and cultural offerings, adding value for its patrons and streamlining the booking process.

Value can also be created through complementarities and lock-in. Caractéra-Neomédia, a Quebec-based printing and new-media company, retains clients by providing them with comprehensive content-management services and alternative publishing methods.

How can the SME position itself in the industry?

To create value, companies seek to improve their positioning vis-à-vis their competitors. The SMEs in this study were seeking primarily to improve their client offerings by making their products or services more attractive. Revue Gestion, for instance, established an on-line database for individual and corporate clients. The search engine on its Web site allows readers to conduct speedy, targeted searches through its collection of 1,000 articles published within the past 28 years. By offering an electronic database of articles as well as a print version, Revue Gestion is adding value in ways that will strengthen its customer base.

Colibri Tours chose to develop a Web site in order to reach clients directly rather than through intermediaries. The travel agency was able to improve the speed and quality of its services, reduce its promotional costs and lock in customers. RECF, a French-Canadian group of editors, inexpensively expanded its product range, enhanced its exposure and increased sales by making its plays and poetry publications available on-line. Some of the less profitable cultural products that RECF was unable to include in a printed catalogue are now offered on-line at lower cost.

Thanks to e-business, SMEs are consolidating and expanding their geographic market. For example, GLP Hi-Tech, a plastics processor in St. Jean-sur-Richelieu, Que., created a Web site to attract international clients to its GLP Power division. The company now sells its products in over 20 countries to clients who would have been expensive to reach without the Internet. La Ferme Martinette draws customers from the Montreal area by advertising its sugar-shack activities on-line, and is also hoping to reach a more international market for its maple-sugar products. Auberge de La Fontaine focuses on the North American market, but is also attempting to attract international clients through its Web site.

Step 3: Implement the e-business strategy

After defining the targeted client base and geographic markets for new or traditional products, SME managers should plan the implementation of their e-business and decide what type of technological solution and supply chain to adopt.

https://iveybusinessjournal.com/publication/the-strategic-management-process-in-e-business/