Information & Management 43 (2006) 455468 www.elsevier.

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Strategic proles and Internet Performance: An empirical investigation into the development of a strategic Internet system
Charles H. Apigian a,*, Bhanu S. Ragu-Nathan b, T.S. Ragu-Nathan c
Department of Computer Information Systems, College of Business, Middle Tennessee State University, Business and Aerospace Building N355, MTSU P.O. Box 45, Murfreesboro, TN 37132, USA b Accounting Department, College of Business Administration, The University of Toledo, Toledo, OH 43606, USA c Information Operations Technology Management, College of Business Administration, The University of Toledo, Toledo, OH 43606, USA Received 28 January 2005; received in revised form 24 October 2005; accepted 13 November 2005 Available online 10 January 2006
a

Abstract Organizations continue to work on dening and developing better strategic Internet systems. The use of the Internet should not, however, adversely affect their existing business processes but rather incorporate and support them. Therefore, developing a strategic Internet system should support their strategic prole while providing high performance from its use. We took a new approach to Internet development by analyzing an organizations Internet use and performance by adopting Miles and Snows classications of business strategy: Defenders, Analyzers, and Prospectors. A sample of 257 IT managers and professionals helped in suggesting relationships between Internet use and performance; the consequent model was then validated. Further analysis was then conducted at the dimension level to highlight the differences between strategic proles and the appropriate Internet use. The results indicated identiable approaches for different strategic proles and their desired performance levels. # 2005 Elsevier B.V. All rights reserved.
Keywords: Internet use; Strategic proles; Internet Performance; Defenders; Analyzers; Prospectors

1. Introduction The strategic impact and relevance of the Internet has recently been questioned; the Internet allows all organizations the same access and may therefore offer no sustainable competitive advantage. Also, because of the speed of replication and the increased difculty in achieving long-term competitive advantages, companies do not try to develop a strategic advantage. This has led many organizations to react negatively to the use of the Internet rather than strategically planning its

* Corresponding author. Tel.: +1 615 898 2375; fax: +1 615 898 5187. E-mail address: capigian@mtsu.edu (C.H. Apigian). 0378-7206/$ see front matter # 2005 Elsevier B.V. All rights reserved. doi:10.1016/j.im.2005.11.003

deployment, thereby ignoring differences between organizations, business processes, and the Internets contribution to business strategy. When a competitive advantage is difcult to sustain, however, strategy becomes important. The Internet has offered companies the opportunity to introduce new ways to reach different markets and customers, as well as improve products, processes, and other modes of conducting business. However, its early adoption was not easy for organizations; many felt that the promised success was unobtainable. Some organizations assumed that technology alone would solve their systematic problems and developed stand-alone appendages to their business; these generally led to disappointing results. However some realized that e-business initiatives had to become an integral part of an organizations

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strategic objectives and that this business-driven approach included analyzing its external environment, internal resources, core competencies, and t between the new initiative and organizational goals before starting the new system development. Organizations are realizing that use of the Internet coupled with proven principles of business strategy can lead to a sustainable competitive advantage; they will succeed if they use the Internet as a complement to their current practices and strategy. The use of the Internet is not a generic solution that ts all organizations. Therefore, companies must understand their role and strategic position in the competitive environment, understand the level and type of performance it will achieve, and deploy Internet technologies to support and complement their business strategy and processes. 2. Literature review and hypothesis development 2.1. Business strategies and proles Most IT and Internet literature has considered investment to be an initial input. Using investment as the key antecedent to performance infers that technology is the precursor to success. However, though the use of Internet technology can easily be duplicated, integrating its use into the business processes requires competitors to replicate the entire business system instead of just the technology. Therefore, by analyzing strategy and integrating the use of the Internet into the fabric of business processes and their structures, competitors would need to replicate an entire business system instead of only a technological process. Business structures may categorize companies by examining their strategic focus. For example, Mintzberg [35,36] dened ve types of organizational structures: simple, machine bureaucracy, professional bureaucracy, divisionalized form, and adhocracy, with each a unique combination of organizational design and contextual factors. Porter [41] identied a typology based on three generic strategies: cost leadership, differentiation, and focus. These strategies have been used extensively, but have been criticized for their conceptual limitations, such as the assertions that each type is mutually exclusive and that the three types are exhaustive [30]. One of the more enduring typologies is that of Miles and Snow [22]. They [33] developed a dynamic and comprehensive framework that addresses the alternative ways that organizations dene and approach their product and market domains and

construct structures and processes to achieve success in them. The premise of their research has three pivotal ideas: organizations act to create their environments, managements strategic choices shape their structure and process, and structure and process constrain strategy. Based on patterns of behavior in four different industries, four types of organizations resulted: Prospectors, Analyzers, Defenders, and Reactors. Prospectors continually seek to locate and exploit new product and market opportunities. Defenders tend to be the polar opposite of Prospectors. They attempt to seal off a portion of a market and create a stable set of products and customers. Analyzers tend to occupy an intermediate position between Prospectors and Defenders, by normally being second in a new product market, while protecting a stable set of products. Reactors do not have a consistent or stable strategy and thus cannot be categorized as one of the other types. This typology has been used extensively to show that a strategic focus will lead to better performance [51]. It has also been used for strategic alignment with functional strategies [44,49], and found that no specic strategic prole is best, but that the closer a companys t to an ideal prole, the better their probability of success [25]. 2.2. Internet strategy and its use Internet strategy is the policies and plans used to achieve business goals when information exchange facilitates execution of activities via value chains and supports the decision-making underlying these activities. The Internet has only been used for business applications since 1994, and strategies for using it have not been developed as much as they have in older organizational systems. Much research has concentrated on the marketing aspect of the Internet and has lacked analysis of its impact on all functions of the organization. Frameworks have been developed to show key aspects of marketing and business in which the Internet had an impact [14,40]; Willcocks and Plant [54] indicated that there are four drivers in Internet marketing: technology, brand, service, and market while other research identied processes, information orientation, and systems integration [13]. The literature pertaining to integrated strategies is conceptual and offers few overall frameworks that identify items and constructs for Internet use. Many authors have said that the Internet has and will continue to change the way organizations should approach and use strategy [21,52], with the Internet no longer an

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afterthought but a cause and driver [27]. Shama [47] developed a framework that includes key elements of an Internet marketing strategy: target customers, product, pricing, promotion, and distribution. Sadowski et al. [45] indicated three factors of strategic use: communication requirements, intensity of competition, and support and incentives. But though the literature has developed frameworks for Internet strategy and its use [4], few have been empirically tested. Gascoyne and Ozcubukco [17] indicated a need to align Internet strategy with business goals; however, their approach was a technology-driven approach. Brush [7] took a business-driven approach and Robert and Racine [42] suggested that the rst imperative of an Internet strategy was to clarify business strategies. Apigian et al. [2] developed measures of Business Internet Use that were based on Internet-enhanced processes and developed ve dimensions of Business Internet Use: Internet-driven market channels, Internetenhanced distribution, supplier Internet interactions, customer Internet interactions, and internal Internet operations, with Internet Performance consisting of revenue expansion, relationship enhancement, cost reduction, and time reduction. These dimensions and measurement for Internet Performance were used here, since the measures give an indication of the specic strategies that organizations will use to incorporate Internet technologies. Internet-driven market channels focus on the importance placed on the organizations ability to reach potential customers; this includes reaching new geographical locations, customers, and markets, as well as strategic market orientation. Prospectors compete based on their ability to exploit marketing opportunities that would benet by using the Internet. The ability to market new products and scan for new market opportunities would enhance the level of performance [43]. Defenders normally initiate little or no product development and have a narrow customer focus and therefore their use of the Internet is not of high priority. For Analyzers, the ability to exploit marketing channels while maintaining a rm core of traditional products and customers is vital to the organization. Therefore, we hypothesized as follows. H1a. Internet-driven market channels will have a direct positive relationship with a Prospectors Internet Performance. H1b. Internet-driven market channels will have a direct positive relationship with an Analyzers Internet Performance.

H1c. Internet-driven market channels will not have a direct positive relationship with a Defenders Internet Performance. Internet-enhanced distribution includes the importance placed on providing and tracking products in an efcient and cost effective manner. The Internet can facilitate the integration of distributors, intermediaries, and retailers. It can also facilitate tracking of product distribution in real-time and in the selection of distributors. The ability to track and deliver products is vastly improved through the use of the Internet. An Internet strategy that incorporates integration of distribution will enhance performance for both Prospectors and Analyzers [31]. For Defenders, this may not be as important, since most have a narrow customer base. Therefore we hypothesized as follows. H2a. Internet-enhanced distribution will have a direct positive relationship with a Prospectors Internet Performance. H2b. Internet-enhanced distribution will have a direct positive relationship with an Analyzers Internet Performance. H2c. Internet-enhanced distribution will not have a direct positive relationship with a Defenders Internet Performance. Customer Internet interactions is the strategic positioning and implementation of ways to improve relationships with rapid response to current customers through use of the Internet. A company may offer complementary products, be the primary point of contact in their industry, facilitate direct communication, optimize customize services, or provide opportunities to clarify customer needs and wants. The use of the Internet can also facilitate timely response to customer needs. Hambrick [23] hypothesized that Prospectors are more forward-integrated than Defenders, but found the opposite to be true. He concluded that Defenders tend to handle more of their own selling, thus interacting more directly with customers, while Prospectors are reluctant to become involved in forward-integration because their offerings continually change. Although the levels of forward-integration or customer relationships were higher for Defenders, it was still considered important for Prospectors. Analyzers were also found to work closely with customers [50], which indicated that their ability to develop Internet systems to enhance the customer relationship would be important. Therefore, we hypothesized as follows.

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H3a. Customer Internet interactions will have a direct positive relationship with a Prospectors Internet Performance. H3b. Customer Internet interactions will have a direct positive relationship with an Analyzers Internet Performance. H3c. Customer Internet interactions will have a direct positive relationship with a Defenders Internet Performance. Supplier Internet interactions involves the importance of recognition, communication, and integration of suppliers in everyday plans and processes. Prospectors are normally reluctant to establish permanent processes and systems and tend to stress creativity and exibility; thus they do not develop longterm relationships with suppliers, limiting the need for integration [34]. Since Analyzers tend to try to imitate Prospectors ideas, a high level of supplier integration would create higher performance. Defenders reliance on suppliers includes receiving high quality raw materials in a cost efcient manner; they will also establish long-term relationships with their suppliers. Therefore, we hypothesized as follows. H4a. Supplier Internet interactions will not have a direct positive relationship with a Prospectors Internet Performance. H4b. Supplier Internet interactions will have a direct positive relationship with an Analyzers Internet Performance. H4c. Supplier Internet interactions will have a direct positive relationship with a Defenders Internet Performance.
Table 1 Hypothesized relationships based on strategic proles Dimension of Business Internet Use (BIU)

Internal Internet operations depend on the use of the Internet to improve the internal operations of an organization. Efciency of internal operations involves better order processing with reduction of administrative, materials, and order placement, and labor cost. Jabnoun et al. [24] identied different quality initiatives: for Prospectors, they dened a total quality learning approach to improve customer satisfaction; this is externally focused. Analyzers should implement a total quality management approach to satisfy customers [10]. Defenders should utilize a quality assurance system to provide conformance of products, services, and processes [37] and also provide lower price, better service, and a higher quality operations. Therefore, we hypothesized as follows. H5a. Internal Internet operations will not have a direct positive relationship with a Prospectors Internet Performance. H5b. Internal Internet operations will have a direct positive relationship with an Analyzers Internet Performance. H5c. Internal Internet operations will have a direct positive relationship with a Defenders Internet Performance. With these ve dimensions, organizations can determine their best strategic t. However, the organization must decide on the level and type of performance they can achieve through the use of the Internet (Table 1). 2.3. Internet Performance There are three levels of economic impact: application, function, and rm that can be addressed:

Strategic proles Prospectorsa Analyzersb Signicant Signicant Signicant Signicant Signicant Defendersc Not signicant Not signicant Signicant Signicant Signicant

Internet-driven market channels (H1) Internet-enhanced distribution (H2) Customer Internet interactions (H3) Supplier Internet interactions (H4) Internal Internet operations (H5)

Signicant Signicant Signicant Not signicant Not signicant

Note: Signicant implies that the dimension of BIU has a direct positive relationship with Internet Performance; not signicant implies that the dimension of BIU does not has a direct positive relationship with Internet Performance. No hypotheses were derived for the Reactors strategic prole. a Prospectors were hypothesized as an (a) for each of the ve hypotheses (e.g. H5a). b Analyzers were hypothesized as a (b) for each of the ve hypotheses (e.g. H5b). c Defenders were hypothesized as a (c) for each of the ve hypotheses (e.g. H5c).

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1. The application level deals with all end-users, both employees and customers, and encompasses a complex and wide array of analysis making it difcult to dene and collect reliable data. Torkzadeh and Dhillon [53] identied factors that inuence the success of Internet commerce, such as shopping errors, online payment, and other factors depending on the experience of the end-user; the factors were reexamined and conrmed [8]. Other studies have added measures that relate to the design of websites, such as transaction throughput, video and sound quality, availability [26], time spent on activities [39], and overall consistency [38]. However, success does not directly imply good performance. An organization can have a great website, with an excellent approach to commerce, but without adequate fulllment capabilities or with poorly run operations, an organization may not perform up to high levels. Therefore, Internet Performance should be viewed at a different level of performance. 2. The function level of an organization measures the success within a given function or area. For the Internet, this infers that measures should be developed to identify how it has beneted the organization. 3. Firm performance involves nancial measures, such as sales growth, market value, sales per employee, gross margin, and economic value-added. It attempts to aggregate the impact of IT over many applications from all activities of an organization. Also, it takes all aspects of an organization into account, and assumes that each area contributes the same amount to the bottom line. Most organizations have not, however, been able to show nancial success due to use of the Internet, and performance at the rm level has been unreliable [32]. According to Brown [6], there are four benets of ecommerce: hard, intangible, indirect, and strategic. Hard benets are measured at the application level, indirect benets are measured at the rm level, and strategic and intangible benets, as well as partial direct and indirect benets, are measured at the function level. Therefore, in our study, Internet Performance was viewed at the function or Internet level. Function-level Internet Performance refers to the success of an organization that can be directly attributed to the use of the Internet. Garciano and Kaplan [16] identied process/indirect improvements and marketplace benets as directly related to the Internet function, but their research pertained to transaction costs only. Frohlich [15] measured the percentage of sales and procurement using the Internet, which is a usage rather than

performance measure. Zhu and Kraemer [56] identied specic dimensions of Internet Performance (protability, cost reduction, and inventory efciency), but used rm level analysis to empirically test their theories. Zhuang and Lederer [57] identied ve business benets (back-end efciency, market expansion, inventory management, cost reduction, and customer service), but only used the retailing industry as their sample. Chang et al. [9] said that the Internet or e-commerce could enhance both organizational efciency and effectiveness. Sawhney and Zabin [46] proposed that all Internet initiatives are categorized in four sets of performance measures: revenue expansion, relationship enhancement, cost reduction, and time reduction. Each of these encompassed a specic aspect of function-level performance. Therefore, for our study, the four sets of Internet initiatives were the basis for Internet Performance (see Table 2). These dimensions encompass the four main areas of performance at the function level and were used as a framework in our study. Dimensions and items for this construct pertained to the four dimensions of Internet initiatives, and were used as an aggregate measure of Internet success in order to test the hypotheses. 3. Research methodology The questionnaire had two major parts: Business Internet Use and Internet Performance, with descriptions of terms used in each. The questions for Business Internet Use and Internet Performance were measured on a 5-point Likert scale from 1 (strongly agree) to 5 (strongly disagree) with NA for not applicable. Descriptions were given of the terms: Prospector, Analyzer, Defender, and Reactor, based on material in other studies [12]. Demographics were also captured on the type of organizations. Since response rates for mailed questionnaires have proved poor, email and web-based survey techniques were used. An initial e-mailing was sent to 5217 IT professionals and managers in the United States through an opt-in email list management service; it provided basic demographics and the offered the opportunity for potential respondents to give reasons for not responding. An opt-in or permission list included the names of only those individuals that had given permission to use their e-mail addresses; this ensured the integrity of the list. The target respondents were IT managers and IT professionals, and included a wide range of companies and industries. The initial email gave a brief description of the study and provided a link to a website that allowed responders access to the online survey.

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Table 2 Literature review summary of Internet Performance variables Dimensionsa Internet relationship enhancement Description The improvement of communication and relationships based on the use of the Internet. This would include customer and supplier lock-in and an easier mechanism for customers, suppliers, employees, and the community to give feedback and communicate on a more frequent basis The increase in revenues or sales volume based on the use of the Internet. This can be achieved by increasing the customer base, becoming more visible and easily accessible to current and new customers A reduction in transactions costs between customers and suppliers and a reduction in cost to communicate. The use of Internet may also reduce internal costs with real time information being readily available throughout an organization A reduction in the time to place or receive orders, as well as the reduction in the time to process orders, which is a by-product of real-time transmission of data. Information can travel via the Internet almost immediately to any given destination; therefore an element of time is an aspect of Internet Performance Relevant research Customer and supplier lock-in [19,48]; Improved customer service levels [20]; Impact on customer/supplier relationships [55]

Internet revenue expansion

Increased customer base [55]; Increased sales volume [1,9,20,28,55]

Internet cost reduction

Reduction in purchasing/coordination costs [5,29]; reduced cost [1,19,20,55]

Internet time reduction

Reduced cycle time [20,55]; order fulllment reduction [19]; transaction throughput [26]

Internet Performance is based on the conceptual framework of Sawhney and Zabin [46].

Through three separate e-mailings, a total of 265 responses were received. Of these responses, 8 were unusable due to incomplete information. This resulted in a response from 257 individuals, a 4.9% response rate. Although low this is considered normal for email surveys [11]. The use of email and websites allowed us to reach a broader audience. Of the 257 respondents, 35.9% were top-level management, 31.9% were mid-level management, and the remainder had no supervisory role. The companies were mainly in manufacturing (42.7%), with some involved only in IT (22.3%). Other industries included nance/insurance/real estate (5.5%), business services (6.5%), wholesale/retail (12.5%), etc. The majority of the companies had revenues of less than 5 million (52.6%); 21.6% had sales between $M5 and 25 per annum, 9.5% had sales between $M25 and 100, 6.6% had sales between $M250 and 500, and 9.7% had sales of $M500 or more. A problem that arises in surveys is non-response bias. To check for this, a time-trend test technique was used [3]. This assumes that non-respondents resemble later rather than early respondents. Respondents from the rst e-mailing were considered early respondents and those from the second and third were the late ones. x2-Tests were calculated for corporate position, industry type, and company sales. Corporate position had a x2 value of 3.63 ( p-value = 0.457 with d.f. = 4), industry type had a x2 value of 11.53 ( p-value = 0.247 with d.f. = 9), and company sales had a x2 value of 2.79

( p-value = 0.733 with d.f. = 5). None of the demographics showed a signicant difference between samples, which indicates a lack of non-response bias. To further ensure non-response bias, we also tested for differences between early and late respondents based on the means of the aggregated construct items. For the ve dimensions of Business Internet Use and the four of Internet Performance, t-tests were conducted. In each the results showed no signicant difference, further indicating a lack of non-response bias. 4. Construct validity and reliability The next step was to assess the construct validity and reliability of the two constructs. Gerbring and Anderson [18] outlined a paradigm for assessing unidimensionality; this ensured that all items converged correctly on their theoretically specied construct and did not factor into other external constructs. Since the items were developed specically for each dimension and construct and had previously been validated, our study utilized factor analysis at the construct level. For Business Internet Use, all ve dimensions and their items were factored using principle components analysis with Varimax and an eigenvalue of 1 (see Appendix A for a detailed list of the survey questions and factor loadings). From the construct-level factor analysis, three items (CUST5, CUST8, and MARK7) did not have a loading of 0.50 or higher for any of the ve dimensions. Also, MARK8 had a cross-loading on

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customer Internet interactions and CUST9 loaded on Internet-enhanced distribution only. Therefore these ve items were dropped and a nal factor analysis conducted to ensure discriminant validity. The nal construct factor analysis had each item loading correctly on its respective dimension, with 81.1% of the variance explained and a Cronbachs a of 0.978. The same analysis was conducted for Internet Performance. Four items were dropped: REL3 did not load on any factors; TRED1 loaded on time reduction and cost reduction, and CRED1 and CRED2 cross-loaded only on time reduction. A nal constructlevel factor analysis was conducted with all items loading on their respective dimensions, with 79.2% of the variance explained. Therefore, Internet Performance was developed with four dimensions and a total of 16 items with a Cronbachs a of 0.965. 5. Results and discussion With each dimension and construct indicating a high level of unidimensionality, items for each of the dimensions of Business Internet Use were aggregated as ve separate variables and all items for Internet Performance were aggregated into one variable to test each hypothesis. Of the 257 respondents, 63 indicated that they were Prospectors, 67 were Analyzers, 90 were Defenders, and 27 were Reactors. 5.1. Results for hypotheses Based on regression analysis specic to Prospectors, three of the ve hypotheses were supported (H3a, H4a, and H5a) (see Table 3). The two hypotheses that were not supported did not have a signicant relationship to Internet Performance. Internet-driven market channels
Table 3 Regression analysis for hypotheses Dimension of Business Internet Use (BIU) Internet-driven market channels (H1) Internet-enhanced distribution (H2) Customer Internet interactions (H3) Supplier Internet interactions (H4) Internal Internet operations (H5) Mean and S.D.

(H1a) and Internet-enhanced distribution (H2a) are normally found valid in a Prospector organization. However, most Prospectors have a hard time establishing in-depth relationships with customers due to their continuous entry into other markets. Therefore, as indicated by H3a, the Internet may improve customer relations by improving communication, and thus enhancing Internet Performance. Supplier Internet interactions (H4a) and internal Internet operations (H5a) were not found to have a signicant relationship to Internet Performance. Analyzers were expected to have a signicant relationship to all dimensions of a Business Internet Use, due to their comprehensive approach to strategy. However, only two of the ve hypotheses were supported: H2b and H5b. For the other three, the same phenomena for Prospectors may occur with Analyzers. Defenders have a narrow customer and product base and try to provide a niche in the marketplace. Their approach is internal and emphasizes perfecting what they do at the best possible price; thus using the Internet for marketing channels (H1c) is not of high importance. Also, Defenders have their own distribution processes and do not benet from third-party or Internet-enhanced distribution (H2c). However, they would place a high level of importance on customer Internet interactions (H3c), supplier Internet interactions (H4c), and internal Internet operations (H5c). All ve hypotheses for Defenders were supported. 5.2. Dimension level analysis of Internet Performance Analyzers may only want to enhance revenue expansion and the independent variables or Business Internet Use dimensions may be different from the

Regression coefcients of strategic proles Prospectorsa Analyzers b 0.152e (0.258) 0.312f (0.008) 0.153e (0.171) 0.003e (0.977) 0.310f (0.021) Defendersc 0.165f 0.030f 0.244f 0.413f 0.195f (0.125) (0.777) (0.010) (<0.001) (0.049) Reactorsd 0.180 0.081 0.096 0.556 0.443 (0.429) (0.727) (0.620) (0.062) (0.043)

2.934, S.D. = 1.21 2.73, S.D. = 1.23 3.31, S.D. = 1.20 2.67, S.D. = 1.25 3.00, S.D. = 1.37

0.135e (0.278) 0.081e (0.461) 0.514f (<0.001) 0.185f (0.077) 0.083f (0.414)

Note: p-values are in parentheses; regression coefcients with a p-value <0.05 are in bold. S.D. refers to standard deviation. a Prospectors were hypothesized as an (a) for each of the ve hypotheses (e.g. H5a). b Analyzers were hypothesized as a (b) for each of the ve hypotheses (e.g. H5b). c Defenders were hypothesized as a (c) for each of the ve hypotheses (e.g. H5c). d No hypotheses were derived for the Reactors strategic prole. e Hypothesis not supported. f Hypothesis supported.

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results indicated by the aggregated Internet Performance construct. Also Prospectors may strive to only expand revenues and this would not be captured in an aggregated measure. Defenders may only be interested in using the Internet to improve relationships and become more efcient, and not expand market opportunities. To evaluate this, further analysis was conducted for each of the four dimensions of Internet Performance as the dependent variable (Table 4), which also contains a regression analysis for each dimension of Internet Performance for all the respondents. For revenue expansion, each of the strategic proles indicated that customer Internet interactions (excluding Reactors) and Internet-driven market channels are signicant for both Analyzers and Defenders. Prospectors did not show a signicant relationship between
Table 4 Regression coefcients for each dimension of Internet Performance Dimensions of Business Internet Use (BIU) Prospectors (r = 0.724; p < 0.001) Internet-driven market channels Internet-enhanced distribution Customer Internet interactions Supplier Internet interactions Internal Internet operations Analyzers (r2 = 0.479; p < 0.001) Internet-driven market channels Internet-enhanced distribution Customer Internet interactions Supplier Internet interactions Internal Internet operations Defenders (r2 = 0.627; p < 0.001) Internet-driven market channels Internet-enhanced distribution Customer Internet interactions Supplier Internet interactions Internal Internet operations Reactors (r2 = 0.442; p = 0.018) Internet-driven market channels Internet-enhanced distribution Customer Internet interactions Supplier Internet interactions Internal Internet operations All organizations (r2 = 0.579; p < 0.001) Internet-driven market channels Internet-enhanced distribution Customer Internet interactions Supplier Internet interactions Internal Internet operations
a b c 2

Internet-driven market channels and revenue expansion as the hypothesis suggested. For all organizations, these two dimensions were found to be signicant as well and indicate a uniform approach to revenue expansion. Most organizations, excluding Reactors, which try to expand revenues with the Internet, should concentrate on developing Internet applications that enhance the customer experience and exploit new marketing opportunities. Establishing increased internal operational efciency, better supplier relationships, and enhanced distribution systems through the use of the Internet will not signicantly increase revenues. The results for relationship enhancement show that each strategic prole should be different in its approach to Internet use with each of the three strategic proles signicantly related to different Internet use variables,

Dimensions of Internet Performance Revenue expansion 0.073 0.078 0.636a 0.085 0.054 0.320b 0.153 0.467a 0.182 0.024 0.420a 0.093 0.436a 0.109 0.010 0.211 0.078 0.122 0.524 0.244 0.252a 0.084 0.462a 0.023 0.059 Relationship enhancement 0.430a 0.189 0.437a 0.380a 0.161 0.165 0.245c 0.187 0.106 0.168 0.066 0.085 0.160 0.622a 0.176 0.405 0.090 0.456c 0.888a 0.515c 0.184b 0.082 0.163b 0.290a 0.055 Cost reduction 0.334b 0.092 0.335b 0.016 0.163 0.116 0.336a 0.062 0.084 0.5461 0.070 0.102 0.049 0.394a 0.278b 0.056 0.207 0.044 0.220 0.221 0.114 0.184a 0.088 0.174a 0.319a Time reduction 0.269c 0.269b 0.531a 0.242b 0.207c 0.186 0.331a 0.001 0.164 0.292a 0.027 0.204c 0.221c 0.313a 0.506a 0.142 0.059 0.119 0.442c 0.620a 0.052 0.105 0.149b 0.253a 0.359a

p < 0.01. p < 0.05. p < 0.10.

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with the exception of supplier Internet interactions. Prospectors that look to enhance relationships should seek to improve communication by developing systems that will incorporate marketing channels and improve customer and supplier interactions. Prospectors have a lot to gain in this aspect of performance, since in normal circumstances they have a hard time establishing strong relationships with customers, due to their broad and changing customer base. For example, an organization such as 3M Corporation, which is categorized as a Prospector, offers products that are applicable for any type of consumer. However, in most cases they tend to have a distant relationship with the individuals who are using their products. By publicizing on the web and by offering real time information to consumers, they not only can let their customers know more about their organization, but they allow consumers to learn and understand more about the wide variety of products and services offered. The Internet can be used in unique and different ways for organizations that tend to have a better relationship with their customers (Analyzers and Defenders). For Analyzers, the only signicant relationship found between relationship enhancement and its Business Internet Use dimensions was Internet-enhanced distribution. Defenders tend to have a superior relationship with their customers due to their narrow customer base and their ability to concentrate on their needs. Therefore, enhancement through Internet applications may be more subtle; with supplier Internet interactions is the only dimension that was signicantly related to relationship enhancement. This offers Defenders a better opportunity to respond quickly to questions or concerns that should be answered by suppliers and have a better idea of production times and capabilities. Cost reduction also showed unique antecedents to Internet Performance for each of the strategic proles. For Prospectors, not reaching their full market potential is more disconcerting than achieving lower costs. As shown by the analysis in Table 4, Prospectors should look to incorporate Internet applications that stress Internet-driven market channels and customer Internet interactions which are more indicative of not failing to be rst to market, than of controlling costs. Analyzers and Defenders look to control processes and standardize systems in order to become the most efcient and effective possible. Analyzers try to maintain a stable set of products, but also look to attain some exibility to exploit new market opportunities, which blurs an Analyzers vision between cost efciency and market effectiveness. For reducing costs through the use of the Internet, Internet-enhanced

distribution and internal Internet operations were the only antecedents to cost reduction. Internal Internet operations and Internet-enhanced distributions signicance can be explained by the dual role that an Analyzer plays within its markets, and by alleviating itself of everyday distribution and internal problems and using Internet enabled distributors and operations, cost savings may be attained. An important measure for Defenders is cost efciency, which is more attainable due to a relatively stable product-market domain. According to Table 4, internal Internet operations and supplier Internet interactions are ways that will reduce costs. A stronger supplier relationship reduces search costs, enables longterm contracts at reduced prices, and produces a level of trust in design and production capabilities that allow Defenders to concentrate on its core competencies. The last dimension of Internet Performance that was analyzed was time reduction. All of the Business Internet Use dimensions were signicantly related to time reduction, but Internet-driven market channels was negatively related. These signicant relationships typify a Prospectors strategy and by enhancing distribution channels, supplier and customer interactions, as well as internal efciencies, they would be able to streamline and create a more responsive value chain, thus decreasing time to process, time to market, and time to respond or service products. The negative relationship to Internet-driven market channels may be explained by the nature of the cannibalization of other marketing channels, which are more readily developed. For Prospectors to venture into new ways of marketing their products with which they are unfamiliar, the time invested will naturally increase with development. For Analyzers and Defenders, similar strategies for cost reduction are needed for time reduction. Internetenhanced distribution and internal Internet operations were found to be signicant to time reduction for Analyzers. Internal Internet operations, supplier Internet interactions, and also customer Internet interactions were found to be signicant for Defenders. With the use of the Internet to communicate in a more effective manner, organizations are able to attain real-time information, which reduces the time to exchange information. 6. Practical implications for strategic Internet systems Our research indicated that organizations and organizational structures should not all take the same path in using the Internet. Each structure has distinct advantages and organizations should capitalize on prior

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successes, realizing that they must make tradeoffs in determining the use of the Internet their organization. 6.1. A Prospectors Internet use Prospectors establish close ties to their customers. Their Internet initiative should emphasize stronger customer relations, such as customized services, provision of real time information on products or services and easy feedback. An example of a Prospector that has taken customer relationship to a different level is Amazon.com, which started as an online seller of books and exploited its success by moving into other areas such as electronics, music, and apparel. They now have such items as musical instruments, sporting goods, and outdoor living. Their recent success can be attributed to their ability to enhance the customer experience. For example, a customer will nd a specialized webpage with recommendations based on past purchasing and viewing trends. 6.2. An Analyzers Internet use For Analyzers, Internet use may be more complex. An example of a successful Analyzer that has a unique and effective distribution system is Dell. They started by selling computers and have developed that business into a stable market with loyal customers. Dell has added other product lines, such as TVs, printers, PDAs, MP3 players, etc., and has penetrated new markets. They have not been rst to market, but have revolutionized the direct to consumer computer industry and continue to perfect their distribution system. 6.3. A Defenders Internet use In most cases, Defenders try to become more efcient and retain customers. Therefore, revenue expansion may not be as important as relationship enhancement, cost reduction, or time reduction. An example of a company that exemplies this is Visteon Appendix A. Survey items for nal constructs A.1. Business Internet Use
Item Survey items

Corporation, a supplier of automotive systems, modules, and components to global vehicle manufacturers, mainly Ford Motor Company which spun off Visteon in 2000. As part of their Internet strategy they have incorporated numerous supplier relationship initiatives. VSP allows suppliers to access general information, account information, and more accessibility to potential customers and markets. Thus Defenders can add value to their organization by developing an Internet strategy that integrates their suppliers into the processes and systems of their business practices. Also, internal Internet operations can be used by them to reduce costs and time to receive, place, and process orders. 7. Conclusion Our research identied and developed measures for Business Internet Use and Internet Performance. A survey was used to test hypotheses for signicant relationships between each dimension of Business Internet Use and Internet Performance, based on strategic proles. Results conrm that Internet strategies should differ based on an organizations strategic prole and the type of performance they wish to pursue. The study had limitations. First, the use of the Internet may be premature in measuring the benets of Internet Performance. Second, only one respondent was used per organization and since the target market was IT managers, the respondents may be biased. However, the measures were revalidated and seem to be a good framework for identifying the key aspects of Business Internet Use and Internet Performance. From a practical standpoint, companies may decide that an Internet strategy is not needed and continue to question the relevance of IT and the Internet in the business environment. However, they should implement an Internet strategy that correctly determines its strategic prole, understands the level and type of performance it needs to succeed, and then develop the system that adds value to the business and processes.

Factor coefcient 0.79 0.79 0.61

Internet-driven market channels (MARK), a = 0.941 MARK1 The importance your organization currently places on the use of Internet to reach new customers directly MARK2 The importance your organization currently places on the use of Internet to reach new markets directly MARK3 The importance your organization currently places on the use of Internet to reach new geographical locations directly

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465

Appendix A. (Continued )
Item MARK4 MARK5 MARK6 MARK7 MARK8 MARK9 Survey items The importance your organization currently places on the use of Internet through intermediaries The importance your organization currently places on the use of Internet through intermediaries The importance your organization currently places on the use of Internet locations through intermediaries The importance your organization currently places on the use of Internet information to potential customers The importance your organization currently places on the use of Internet pricing to potential customers The importance your organization currently places on the use of Internet personalized marketing based on demographics of potential customers to reach new customers to reach new markets to reach new geographical to provide to provide to provide Factor coefcient 0.72 0.80 0.76
a

0.57

Internet-enhanced distribution (DIS), a = 0.945 DIS1 The importance your organization currently places on improve integration of intermediaries DIS2 The importance your organization currently places on improve integration of distributors DIS3 The importance your organization currently places on improve integration of retailers DIS4 The importance your organization currently places on improve existing distribution channels DIS5 The importance your organization currently places on improve tracking of the distribution of your product Internal Internet operations (IIP), a = 0.944 IIP1 The importance your organization IIP2 The importance your organization IIP3 The importance your organization IIP4 The importance your organization IIP5 The importance your organization IIP6 The importance your organization IIP7 The importance your organization IIP8 The importance your organization currently currently currently currently currently currently currently currently places places places places places places places places on on on on on on on on

the use of Internet to the use of Internet to the use of Internet to the use of Internet to the use of Internet to

0.66 0.80 0.76 0.76 0.67

the the the the the the the the

use use use use use use use use

of of of of of of of of

Internet Internet Internet Internet Internet Internet Internet Internet

to to to to to to to to

reduce reduce reduce reduce reduce reduce reduce reduce

time to process orders cost to process orders administrative costs time to fulll orders time to place orders cost in placing orders cost of materials cost of doing business

0.79 0.81 0.80 0.80 0.78 0.79 0.74 0.76 0.81 0.85 0.81 0.77
a

Customer Internet interactions (CUST), a = 0.973 CUST1 The importance your organization currently places on the use of Internet with customers to improve feedback CUST2 The importance your organization currently places on the use of Internet with customers to improve relationships CUST3 The importance your organization currently places on the use of Internet with customers to respond quicker to their needs CUST4 The importance your organization currently places on the use of Internet with customers to understand their wants and needs CUST5 The importance your organization currently places on the use of Internet with customers to offer complementary products within your industry CUST6 The importance your organization currently places on the use of Internet with customers to be the primary point of contact for your industry CUST7 The importance your organization currently places on the use of Internet with customers to provide expert information CUST8 The importance your organization currently places on the use of Internet with customers to provide dynamic pricing based on their current demand CUST9 The importance your organization currently places on the use of Internet with customers to allow them to track status of orders Supplier Internet interactions (SUPP), a = 0.953 SUPP1 The importance your organization currently places on the use of Internet with suppliers to share information SUPP2 The importance your organization currently places on the use of Internet with suppliers to integrate planning systems

0.61 0.64
a

0.80 0.84

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C.H. Apigian et al. / Information & Management 43 (2006) 455468

Appendix A. (Continued )
Item SUPP3 SUPP4 SUPP5 SUPP6
a

Survey items The importance your organization currently places with suppliers to share production plans The importance your organization currently places with suppliers to integrate designs/design plans The importance your organization currently places with suppliers to improve communication The importance your organization currently places with suppliers to track status of orders on the use of Internet on the use of Internet on the use of Internet on the use of Internet

Factor coefcient 0.81 0.81 0.69 0.54

Item was deleted during factor analysis. Cronbachs alphas (a) are given for each construct.

A.2. Internet Performance

Item Survey items Factor coefcients

Relationship enhancement (REL), a = 0.820 REL1 The Internet has helped REL2 The Internet has helped REL3 The Internet has helped REL4 The Internet has helped

our our our our

organization organization organization organization organization organization organization organization organization

improve improve improve improve

relationship relationship relationship relationship

with with with with

suppliers employees government agencies community

0.55 0.81
a

0.76 0.59 0.80 0.64 0.69 0.83

a

Revenue expansion (EXP), a = 0.928 EXP1 The Internet has helped our EXP2 The Internet has helped our EXP3 The Internet has helped our EXP4 The Internet has helped our EXP5 The Internet has helped our

increase revenues reach more potential customers sell a larger variety of products reduce the time to respond to customers improve relationship with customers the the the the the the time time time time time time to to to to to to produce products/services receive new orders input new orders place orders receive payments from customers send payments to suppliers

Time reduction (TRED), a = 0.948 TRED1 The Internet has helped our organization reduce TRED2 The Internet has helped our organization reduce TRED3 The Internet has helped our organization reduce TRED4 The Internet has helped our organization reduce TRED5 The Internet has helped our organization reduce TRED6 The Internet has helped our organization reduce Cost reduction (CRED), a = 0.943 CRED1 The Internet has help our organization CRED2 The Internet has help our organization CRED3 The Internet has help our organization CRED4 The Internet has help our organization CRED5 The Internet has help our organization
a

0.71 0.69 0.67 0.83 0.75

a a

reduce reduce reduce reduce reduce

transactions costs with our customers transaction costs with our suppliers operation costs the cost to market products/services the cost to communicate with suppliers

0.72 0.65 0.81

Item was deleted during factor analysis. Cronbachs alphas (a) are given for each construct.

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C.H. Apigian et al. / Information & Management 43 (2006) 455468 Systems. Her current research interests are in information systems strategy, ethical issues in information systems, and behavioral issues in managerial accounting and control systems. T.S. Ragu-Nathan is Professor of Information Systems and Operations Management in the College of Business Administration at the University of Toledo. He holds a Ph.D. in Management Information Systems from the University of Pittsburgh. Has published in several journals including Information Systems Research, Decision Sciences, OMEGA: International Journal of Management Science, Journal of MIS, Journal of Information Systems, and Journal of Strategic Information Systems. His current research interests are in information systems strategy, quality issues in information systems, and use of information technology in manufacturing and supply chain management.

[55] G.M. Zank, K.L. Kraemer, The Internet: motivation, deterrents, and impacts on the supply chain relationships, S.A.M. Advanced Management Journal 68(2), 2003, pp. 3340. [56] K. Zhu, K.L. Kraemer, E-commerce metrics for net-enhanced organizations: assessing the value of e-commerce to rm performance in the manufacturing sector, Information Systems Research 13(3), 2002, pp. 275295. [57] Y. Zhuang, A.L. Lederer, An instrument for measuring the business benets of e-commerce retailing, International Journal of Electronic Commerce 7(3), 2003, pp. 6599. Charles H. Apigian is Assistant Professor of Information Systems and Quantitative Methods at Middle Tennessee State University. He received a Ph.D. in Manufacturing Management and Engineering at The University of Toledo. He has published in OMEGA: International Journal of Management Science, Journal of Computer Information Systems, Journal of Electronic Commerce Research, International Journal of Innovative Management, and Journal of Statistics Education. Prior to pursuing an academic career, he held the position of Vice President for an automotive supplier, with experience in quality systems, information technology, and corporate strategy. Bhanu Ragu-Nathan is Professor of Accounting in the College of Business Administration at the University of Toledo. She holds a Ph.D. from the University of Pittsburgh. She has published in Information Systems Research, Decision Sciences, OMEGA: International Journal of Management Science, Journal of MIS, Research in Accounting Regulation, Accounting Horizons, and Journal of Strategic Information