For Nestle.com does not plan to sell direct. Nor does it plan to bypass current links in the supply chain to its customers. Nestle is, instead, interested in tying together disparate operations, creating partnerships with suppliers and customers to cut waste and to move food products more quickly from farm to factory and, finally, to the family dinner tables. Thus, more recently, established businesses are extending their Web presence to embrace transactions and to nurture relationships with the customers.

The terms of strategy and synergy were alien to the early rhetoric surrounding e-business applications. Dot-com companies sprung up overnight, capitalised on new business opportunities, experienced escalating capitalisation, generated fast wealth and then, as quickly as they came, dissolved in thin air. Meanwhile, traditional businesses more cautiously dipped their toe in the water with a low-level presence and investment while extending their technical, operational and marketing competence with this new medium. In both scenarios the relationship between e-business activities and other traditional activities was not the real issue and accordingly, the impact on corporate strategy was marginal.

Of recent, many of the business houses are investing millions of dollars for having their Web presence felt. In addition, a number of dotcoms are opening up brick-and-mortar stores and attending to the logistics of physical delivery in pursuit of customer value. Multiple parallel channels, with the Internet as one of them, are becoming the norm. It is becoming essential to understand how Internet presence can contribute to the achievement of corporate objectives, to the issues of integration and synergy of strategies and to the activities between e-business channels and other channels. And no business can afford to feel complacent without it.

This article explores the theme of synergy in relation to e-business strategy. After exploring the extent to which e-business strategy needs to be integrated with corporate and functional area strategies, the extent of integration between the functions of multiple channels need to be reviewed. Another dimension of synergy arises in the context of the supply chain. Issues such as alliances and disintermediation and re-intermediation contribute to the debate concerning synergy between companies. The central role of alliances in e-business is such that businesses need to consider the concept of the virtual organisation, and the implications of strategy formulation and delivery not only within an organisation, but also across the alliances that make the virtual organisation.

Integrating e-business strategy
In common with any other business activity, e-business needs to be guided by a business strategy. To achieve its e-business objectives, an organisation has a range of strategic options. Some options will be related to increasing volumes while others will relate to improving profitability in existing market segments. Typical options in this last category include reducing costs, increasing prices, streamlining operations and changing the product mix. The key feature of strategy is that it offers a clear statement of the basis for differentiation from competitors.

Strategy formulation for e-business has much in common with strategy formulation for other business contexts or functions. There is a danger that in the race to capitalise on fast-growing e-business markets, businesses may forget the fundamentals, overlook the fundamental business principles and neglect adequate strategy formulation. All business strategy in e-business or otherwise is concerned to focus on questions such as:
-> Which markets should we be in?
-> What can our organisation offer that is distinct from that offered by competitors or even collaborative partners?
-> Does the organisation have the skills, resources and other assets necessary to achieve objectives?
-> How will our marketplace position change over the next five years?
-> What would our competitors be doing in five years?
-> What benefits our customers may expect in five years?
On the other hand there are a number of factors that are unique to e-strategy formulation and they are as follows:
-> The interactive nature of the channel means that business has a direct connection with each and every customer. It not only knows who the customer is but can also collect significant profiles of customer purchasing activities and other customer characteristics.
-> New business models and new revenue gathering streams that arise from e-business.
-> The need to accommodate rapid change.
-> Multiple, new and evolving alliances, which on some occasions amount to a virtual organisation.

E-business strategy formulation must be aligned with other strategy formulation in a business. The relationship between e-strategy and other business strategies is dependent on whether the business is a pure-play or Internet start-up or whether e-business is one of the several channels through which the business delivers products and services. The extent to which e-strategy is integrated with other business strategies is also dependent upon the extent of integration of business activities. Some businesses have contained the perceived risk associated with e-business by creating separate companies for their e-business activities. Such a model inevitably leads to an independent e-business strategy.
The greater the impact of e-business on the overall business, the more significant is e-business strategy, and the more important it is for the organisation to understand and articulate clearly the relationships between e-business strategy and other strategies. Typically e-business strategy needs to interface with, accommodate, or be accommodated by:
* Corporate strategy
* Marketing strategy
* Information Systems strategy
* Financial strategy
* Operations strategy
* Research and innovation strategy
* Production strategy

The case study on Nestle (See Box "Integrating Internet Strategy: Nestle") demonstrates the range of different functional areas in which e-business can impact. The best model will vary with the nature of the business. E-business strategy may be embedded in one or more of the above areas, or, alternatively, a separate e-business strategy may be formulated. The biggest danger of the integrated strategy is that the e-business strategy may be incompletely articulated; inconsistencies between aspects of e-business in other strategies may not be tested out. A separate e-business strategy is appropriate when one or more of the following applies.

-> It is necessary to manage significant innovation in the development of e-business activity in a way that cannot be replicated in other arenas.
-> E-business has a significant impact on business operations, customer relations and competitive market position
-> E-business is developed as a separate business
function

Whatever the level of integration between strategies, the strategy formulation process and issues such as the environmental context, the value chain, differentiation and market & channel structure must be considered.

The way in which e-business strategy integrates with corporate and other strategies cannot be cast in stone. There are stages in development of e-business. One perspective views these stages in terms of strategic stages of the business in e-business activity, as summarised in the Box titled "Strategic development of e-business". These stages take the business from the acquisition of e-business competence as a platform for developments, through to the optimisation of the contribution to core business. As the business moves through these stages, so the scope of e-business strategy and its relationship with corporate and functional area strategies will evolve.

Strategic options for the level of integration in business structures
There are a number of strategic options for companies in relation to the importance of the Internet as a channel. And they are as follows:
-> Use the Internet channel for information provision only
-> Use the Internet channel primarily for export markets
->Subsume the Internet channel as another channel in the existing business
-> View the Internet channel as another channel
-> Set up the Internet channel as a separate business
-> Develop a mixed system, using a number of parallel channels, with clear objectives for the contribution from the different channels, and the nature of their interaction
-> Switch fully to the Internet channel, taking out retail outlets

These categorisations are concerned with Internet as a channel for interaction with the customers and other businesses in the supply-chain. Another classification considers the areas of the business in which Internet and traditional business merge and diverge. Integration between the e-business arm and the traditional business can be considered in relation to functional areas such as production, sourcing, logistics, marketing and human resources, and financial decisions, such as investment, funding sources and performances criteria. The choices can be arrayed along a spectrum with a subsidiary (spin off) at one end, and a seamless operation at the other. There are pros and cons associated with both.

Spin-offs are best when:
* The company is willing to explore new business models and, to do this, needs to free itself of constraints of current operations
* The spin-off can be created without being constrained by current technology and legacy operations.
* The company bestows the spin-off with freedom to form alliances, raise capital, and attract new talent

Integration is best when:
* There is no meaningful way to separate digital and physical operations without confusing customers
* Senior management is committed to redefining the entire business value proposition
* The entire organisation can be mobilised to migrate to an e-business channel.
Effective management of Internet business alongside established business poses challenges for many businesses. The case study on Barnes and Noble (See box "Barnes and Noble: Competing channel dilemmas") illustrates the dilemma for the major US bookseller when faced with strong competition from Amazon.com. Many other organisations are also experimenting with ways to defend their market positions while developing a Web business, e.g. toysrus.com, walmart.com, tesco.com and sears.com. One of the challenges to complete translation to Web-based models has been the inability to identify a new business model with assured profitability. This is most evident in publishing, where the newspapers are hedging their bets and developing e-add-ons to paper-based publications.
Researchers have also discussed the necessity of accepting the cannibalisation of existing business channels when establishing an Internet channel. This is particularly likely to be an issue for information-based businesses, such as publishing and banking and financial services. These businesses, in particular, need to recognise that the Internet will cause a step change in their industry and the traditional good management practices of listening to shareholders and customers, and focusing investments and technology on the most profitable products, work well in evolutionary markets, but for some businesses, the Internet requires a suspension of rationality. Cannibalisation may mean encouraging an Internet spin-off company to charge lower prices or offer higher interest rates than the traditional channel.

Integrating through value chain
The steps in the value chain, supply, production, marketing, delivery and support are the areas in which e-business has the potential to impact on business value. To gain a competitive advantage, a business needs to be able to perform some function in its value chain better than its competitors. The e-business value chains concerned with the way in which information technology can be harnessed by businesses to generate competitive advantage. Information technology is allowing business to become more efficient through decreased costs in sales and marketing, and cost-saving is more efficient manufacturing, research and development, and purchasing. A business can gain advantages through the use of extranets, enterprise resource planning software and e-commerce. Long term competitive advantage is usually associated with customer value and customer satisfaction. The use of information technology in order to enhance the relationship with the customer may be achieved within marketing and sales, or through customer support.

E-business may not always be able to create sufficient value alone, but may instead prefer to engage in alliances or acquisitions in order to complete the e-business value chain. The case on Merrill Lynch (See Box "Merrill Lynch: Partnership for intermediaries") demonstrates the typical collection of partnerships that may be necessary to support Internet presence. While online-only merchants have a number of advantages over brick-and-mortar businesses, in the areas of established on-line brand names, and mastery of the technology necessary to contact customers, they may have weaknesses in the delivery components of the value chain. E-businesses without warehouses have experienced difficulties in controlling the delivery of products. Brick-and-mortar stores, on the other hand, are able to leverage the Internet as an alternative selling channel. Alliances allow partnering companies to pull expertise, enter new markets, share financial risks, and get products and services to markets faster.
There has been considerable discussion about the impact of the Internet on channel structure. Channel structure is a path through which manufacturers deliver products and services to their customers. Typically, the channel structure, or distribution chain will consist of one or more intermediaries, such as wholesalers and retailers. If the value that an intermediary has traditionally offered to the distribution chain is undermined then businesses will be squeezed out of the distribution chain. Manufacturers may deal directly with consumers or bypass a wholesaler and work directly with a retailer. The process of the removal of intermediaries in the chain between a producer and consumers is known as disintermediation. The elimination of channel members may reduce distribution cost, which can result in an improved proposition for the customers. The challenge for business under threat of being disintermediated is to identify a new value proposition.

While disintermediation may be possible in market places in which the manufacturer can identify a clear customer base, the range of offerings available over the Internet, and the richness of the information base provide opportunities for buyers to consider a wide range of options, and to gather extensive product-related and other information. Buyers need assistance in negotiating this information-rich area. The role of providing this assistance is performed by new organisations, described as cybermediaries. Examples of such intermediaries are:
* Directories, search engines and shopping bots
* Malls (e,g. Indigosquare.com)
* Virtual resellers (a business that owns its own inventory and sells direct; e.g. Amazon, CDNow)
* Financial intermediaries (offering digital cash and cheque payment services)
* Virtual communities (e.g. The Well)
* Evaluators, in various sectors (e,g. Financial Services Screen Trade
(www.screentrade.co.uk),
MoneyExtra (www.moneyextra.com), UtilityBuy.co.uk (www.buy.co.uk),
ravel (Co-op Travel, www.holidaydeals.co.uk)

There is discussion about the impact of Internet on the quality and nature of business relationships. There are essentially two opposing views:
1. Networks may foster marketplaces in which it is easy to establish and easy to break business relationship; relationships will become more ephemeral. The switching of supplies that is implicit in the stands will be mediated by cybermediaries.
2. Networks may be used to lock in suppliers or customers; switching will be prevented by high switching overheads or risk. EDI solutions certainly had the effect of locking businesses together, because the ERDI Technology Solutions were between specific businesses but this technological fusion is less necessary with the open technology of the Internet.

These two positions reflect the technological possibilities. Business and marketplace factors will determine how businesses capitalise on these opportunities to form an appropriate collection of ephemeral and tightly-linked business relationships that allow them to deliver customer value.

Tightly coupled alliances may exhibit the characteristics of a virtual organisation. A virtual organisation is a temporary network of independent companies-suppliers, customers, even rivals linked by information technology to share skills, costs, and access to one another's markets. It will have neither a central office nor an organisation chart. It will have no hierarchy, and no vertical integration. Virtual organisations are viewed as on recipe for survival in fast moving and turbulent business environments. Virtual organisations need to feature speed, flexibility and fluidity, sometimes described as agility. Internet technologies make its easier to form and re-form alliances, and to create blurred boundaries for the organisation. The purpose of such alliances is to command speed and flexibility in order to:
* Gain access into new markets and technologies and
* Break down market barriers to new products by rallying the required skills and expertise from groups, individuals, and even rivals from outside organisational boundaries

The opportunistic nature of such alliances suggests that they will generally be short-term and exist only until after their objective has been achieved. The member companies may then disband and proceed to create new partnerships. In reality, the permanence of alliances, and the way in which virtual organisations mutate, will depend on the interdependencies between the members, and the extent to which original objectives evolves into new shared objectives.

E-business is revolutionising the way that business is conducted. It is no longer an alternative; it is an imperative factor for any business success in the future. And the major benefit of e-business is to gain advantage and increase efficiency in the multi-functional areas of management information, to integrate suppliers and vendors, to improve distribution, to lower down transaction costs and to better marketing coverage. Thus, the themes of strategy ought to be interwoven with integration at different levels of the business process to allow e-business to help you serve your consumers like never before.

The above article has been abstracted /condensed from the following articles/websites and all the rights of the authors and publishers of the respective articles are absolutely reserved.
1. Synergy and strategy in e-business, Rowley, Jeniffer, Marketing Intelligence Planning, Vol. 20, Number 4, 2002
2. E-business E-commerce Evolution: Perspective and Strategy, Damanpour, Faramarz, Department of Finance and Business Law, James Madison University, Harrisonburg, Virginia 22807
3. Developing e-business; a strategic approach, Rodgers, john A., Yen, David C., Chou David C., Information Management and computer security, Vol. 10, Issue 4
4. http://www.bcg.com
5. Creating value through e-commerce business models,
http://knowledge.wharton.upenn.edu/articles.

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