A framework for evaluating the impact of the internet on business‐to‐business e‐commerce value delivery options
| Date | 01 June 2003 |
| Pages | 129-152 |
| Published date | 01 June 2003 |
| DOI | https://doi.org/10.1108/13287260380000777 |
| Author | Leslie W. Young,Robert B. Johnston |
| Subject Matter | Information & knowledge management |
Journal of Systems & Information Technology 7
129
A FRAMEWORK FOR EVALUATING THE IMPACT OF THE
INTERNET ON BUSINESS-TO-BUSINESS E-COMMERCE
VALUE DELIVERY OPTIONS
Leslie W. Young
Robert B. Johnston
Department of Information Systems
University of Melbourne, Australia
ABSTRACT
There are a number of traditio nal business strategy theories that have been used to
discuss business-to-bu siness (B2B) e-commerce strategy: Transaction Cost Economics,
Resource-Based View, Porter’s Market Forces Theory, and Channel Theory. However,
there currently exists no comprehensive framework linking these theories into a method
to rigorously a ssess value delivery strategies, and in particular to determine how to
maximise the impact of the I nternet as a value delivery channel. This paper answers this
shortcoming by introducing a framework that draws together the ma in theories of
strategic choice in a systematic fashion. In particular, the paper examines how different
ways of delivering the sa me form of value (rather than particular products) from
producer to customer may allow exploitation of the desirable features of the Internet to
different degrees. By using a novel distribution business model from a real-life case
study to illustrate this framework, the paper un covers several n ovel ways the Internet
can enhanc e B2B strategy. The main contribution of the paper is the development of a
formal, semi-quantitative model of value delive ry strategy evaluation, which can be
used as a starting point for practical evaluation of strategy choices in particular
settings, and also as a theoretical tool for discussing the role of the Internet in B2B e-
commerce in a more rigorous way.
INTRODUCTION
In recent years, the advent of electronic commerce and Internet technologies has
created oppo rtunities to generate sophisticated and novel business-to-business (B2B) e-
commerce strategies. These strategies have incorporated concepts such as
disintermediation (Bakos, 1998; Yao, Palmer, & Dresner, 2002), infomediation (Peet,
2000), cybermediation (Giaglis, Klein, & O'Keefe, 19 99), reintermediation (Chircu &
Kauffman, 1 999, 2000), and deconstruction (Evans & Wurster, 2000). A major
motivation for developing these types of strategies is the potential to minimise
transaction co ordination costs, costs associated with searching for price, products, and
suppliers. However, research in supply chain management strategy has shown that
developing effective B2B strategies is more complex than just considering transaction
coordination costs. Other important aspects of strategy building include enhancing
competitive advantage (Porter, 1979, 2001), sustaining competitive a dvantage (Barney,
1991; Clemons & Row, 1991), building market share (Arthur, 1989; Child & Faulkner,
Journal of Systems & Information Technology 7
130
1998), and scaling business models (Young & Johnston, 2001). Currently, there is no
overall framework that organises these important aspects of strategy in a systematic
approach to assist in strategy selection. Such a framework would enable a full
understanding of how the Internet can be used effectively in B2B strategies. It is only by
looking through the lens of various known theories and models of strategy that the
potential impact of electronic commerce and Internet technology on strategy formulation
and evaluation can be rigorously assessed on multiple levels ( Kauffman & W alden,
2001; Skjoett-Larsen, 1999; Young & Johnston, 2001).
This paper add resses this shortcoming in e-commerce strategy research by extending
our previous work (Young & Johnston, 2001) which used Transaction Cost Economics,
Resource-Based View, and Network theory to examine strategic choices of a case
company. From this examination new specific roles of the Internet were revealed. This
paper extends this work by o rganising these and other theories of strategy selection in a
systematic fashion within a framework for evaluating strategic options for the delivery
of value from suppliers to customers within a B2B value chain.
We define these strategic options as specific business models that outline the
essential details of how an organisation can deliver value to a target customer (Seddon
& Lewis, 2003). These business models are a key component to an o verall strategy that
determines the long-term position of the organisation (Porter , 1996, 2001). In this paper,
particular emphasis is placed on articulating how the desirable characteristics of the
Internet as a value delivery channel can be maximised.
Unlike previous work, this paper concentra tes on evaluation of options for the
delivery of value categories (rather than particular products) to customers. In particular
it examines how d ifferent ways of d elivering the same form of value may allow
exploitation of the desirable features of the Internet to different degrees. A value
category groups different value forms that may share similar characteristics or provide a
similar “value” to customers. These value forms include single products, product
categories, or combinations of products and resources that are delivered to a customer
by a supplier.
For e xample, if a cycle manufacturer were to sell its cycles to a reseller, the value
distributed would be the ability of the reseller to provide an end-consumer with the
experience of riding a cycle. This value c ould be distributed in various forms: the design
of a specialised cycle could be sold as a license using the Internet (an informational
value form), generic cycles could be sold as partial kit-sets of key components to be
ordered via the Internet (a commodified physical value form), or a complete range of
assembled cycles could be distributed physically to re sellers (a pure physical value
form). Although these value forms have different characteristics, in particular different
potentials for making use of the Internet in a delivery business model, they all share the
same value category. Alternatively, different value for ms can be combined together to
provide a single value category. For example, an air-conditioning equipment
manufacturer may distribute a design for the unit along with its proprietary heat
exchangers (two value forms) as an alternative to distributing a complete system (a
single value form). The manufacturer might even give away the unit design but sell the
heat exchangers specifically designed to make the system work. The design could be
delivered via the Internet and as a result to avoid large distribution costs associated with
distribution of a complete system and additionally lock customers into the strategy.
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