ACCA Strategic Professional · Strategic Business Leader

E-business: value chain: formula sheet

Full chapter guide

Key formulas

E-business: E-business = digital technology applied to all organisational activities (internal and external); The widest term. It includes e-commerce and e-marketing.
E-commerce: E-commerce = electronic buying and selling (buy-side and sell-side) and related transactions; A subset of e-business. Focus is the transaction.
E-marketing: E-marketing = use of digital media and data to attract, understand and keep customers; Focus is promotion and relationships, not only sales.
Relationship: E-commerce and e-marketing are both parts of e-business; E-marketing may support e-commerce but can exist without online sales.
Margin in the value chain: Margin = Value to the customer − Total cost of value activities; Advantage comes from widening this gap, by cutting cost or raising the value customers see.
Primary activities: Inbound logistics → Operations → Outbound logistics → Marketing and sales → Service; These are the five activities directly involved in creating and delivering the product.
Support activities: Procurement + Technology development + HR management + Firm infrastructure; These support all primary activities. Procurement covers purchasing of all inputs, not only raw materials.
Linkages: Linkages = links between activities within the chain and with the value system; Look for trade-offs and for ways coordination lowers cost or lifts value.
Value chain activities (Porter): Primary: inbound logistics, operations, outbound logistics, marketing and sales, service. Support: firm infrastructure, HR management, technology development, procurement; Use this as a checklist when asked how e-business changes the organisation's own activities.
Value network idea: Value network = organisation + suppliers + partners + distributors + customers, and the links between them; Stress that value is created across the whole network, not only inside one organisation.
Main e-procurement tools: E-catalogues, e-tendering, e-auctions, e-marketplaces, e-ordering and e-invoicing; Name the tool that fits the scenario instead of writing about e-procurement in general.
Benefit and risk lens: Cost, speed, quality, information, relationships, security and dependence; Use these headings to structure a balanced answer on benefits and risks.
Reach: Reach = number of customers or partners you can access; Digital channels extend reach across regions and time zones at low extra cost.
Richness: Richness = depth and quality of information exchanged with each customer; Includes personalisation, data collected and quality of service. Use it with reach, not instead of it.
Disintermediation: Removing an intermediary from the supply chain; Gains margin and customer data. Risk: you take on the intermediary's work.
Reintermediation: New online intermediaries enter the chain; Examples: comparison sites, marketplaces. Can reduce the benefit of going direct.
Option test: Suitability, Acceptability, Feasibility; Use it to evaluate any e-business strategy choice.
Suitability, acceptability, feasibility: Evaluate option on: Suitability, Acceptability, Feasibility; Use this to judge an e-business proposal. Suitability is strategic fit, acceptability is returns, risk and stakeholder views, feasibility is resources and skills.
Net present value: NPV = Σ [cash flow ÷ (1 + r)ⁿ] − initial investment; Accept if NPV is positive. Include system running costs, upgrades and security spend, not just the build cost.
Risk response (TARA): Transfer, Avoid, Reduce, Accept; Use for e-business risks. For example, insure against cyber loss (transfer), use encryption and access controls (reduce).

Quick revision

E-business covers all internal and external processes done electronically; e-commerce is only buying and selling.
E-marketing uses digital channels to promote, reach and retain customers.
Porter's primary activities: inbound logistics, operations, outbound logistics, marketing and sales, service.
Porter's support activities: firm infrastructure, human resource management, technology development, procurement.
Technology can cut cost, add differentiation or both, so state which one applies to the case.
A value network shows links with suppliers, partners and customers, not just internal activities.
Electronic supply chain management shares data to reduce stock, delay and error.
Link every model to evidence in the scenario.
Benefits to name: wider reach, lower cost, speed, better customer data.
Risks to name: cyber attack, data protection breaches, system failure, channel conflict.
Implementation issues: cost, staff skills, integration with legacy systems and resistance to change.
Finish answers with a clear recommendation and the reason for it.

Common mistakes

Treating e-business and e-commerce as the same thing. Fix: State that e-commerce is only the buying and selling part. Add internal and supplier activities to show e-business is wider.
Describing e-marketing as only social media posts. Fix: List the range: website, search, email, advertising, social media and customer data. Link it to attracting and keeping customers.
Listing the nine activities with definitions only. Fix: Spend most of your answer applying activities to the scenario facts. Definitions earn little on their own.
Treating e-business as just online selling. Fix: Cover the whole chain: procurement, logistics, operations, HR and service, not only marketing and sales.
Describing the value chain when asked about the value network. Fix: State clearly that the network covers links with suppliers, partners and customers outside the firm, then discuss those links.
Listing e-procurement benefits with no risks. Fix: Always give at least two risks, such as security weaknesses and supplier resistance, and say how to reduce them.
Treating e-business and e-commerce as the same thing. Fix: Say e-commerce is online trading, while e-business covers all internal and external processes. Then apply the right one to the case.
Defining disintermediation without applying it. Fix: Name the intermediary in the case, say what the firm gains and loses by removing it, and mention possible reintermediation.
Listing generic advantages and disadvantages with no link to the scenario. Fix: For every point, add a scenario fact or consequence. Drop points that do not fit this business.
Treating e-business as only online selling. Fix: Include supply chain links, procurement, internal processes and customer service where the scenario allows.

Exam tips

Define the terms briefly, then spend most of your time applying them to the scenario. Application carries the marks.
Use the exact scenario facts and names to show professional skills and commercial awareness.
Show the hierarchy clearly: e-business includes e-commerce and e-marketing.
If asked to assess or recommend, add benefits and risks and link them to strategy. Do not stop at definitions.
Plan your answer in short labelled points so the marker can follow it, even when time is tight.
Apply the model to the scenario. Name the firm's own facts in each point to earn application marks.
Pick the most relevant activities rather than covering all nine thinly. Say why you chose them.
Always mention linkages and the wider value system. Many students miss this.