A01 chaf6542 06 se fm indd

Digital marketing 

function

Traditional 

marketing 

agency

New media 

agency

ISP or 

traditional 

IT supplier

Management 

consultant

1 Strategy

2 Design

3   Content and service 

development

4  Online promotion

5  Offline promotion

6 Infrastructure

Table 10.3

Options for outsourcing different digital business activities

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Part 3  Implementation

many venture capitalists and proponents of ecommerce, the cause of that reduction in 

  scalability , human intervention, may help a firm to differentiate its offering to customers, 

thus providing a source of competitive advantage.    

 He  concludes: 

  For firms that are very high on the scalability continuum, the need for physical service does 

not present a ‘scalability’ problem. At these firms, information is the core service offering. 

Physical service is relatively insignificant, both from customers’ perspectives (use of physi‑

cal service is infrequent, if at all) and from the firm’s perspective (it represents a very small 

portion of total costs). Thus, these firms do not rely on physical service (and the employ‑

ees it requires) to differentiate their offering; their differentiation tends to come from the 

quality of their content and the ease with which users can access it. 

 In contrast, firms that sell  non‑  information services such as travel, or goods such as 

books, toys, or antiques require significantly more complex physical service operations. 

The degree to which they need more physical service is inversely proportional to the 

degree to which they are ‘scalable’.  

 Case study 10.1 explores the extent to which outsourcing of core business processes is 

possible.   

  Revising  organisational  structures 

 When a company first embarks on digital business, perhaps through creating a new web‑

site to promote its products, it will normally operate within the existing company structure, 

perhaps using outsourcing to make good a resource deficit. However, as the contribution 

of the website to the company increases, the work involved increases and more staff from 

different parts of the organisation are involved in digital business, it may be necessary to 

adopt new organisational structures and working practices. This issue has been considered 

by Parsons  et al  . (1996) from a  sell‑  side e‑commerce perspective. They recognise four stages 

in the growth of what they refer to as ‘the digital marketing organisation’: 

   

● 

   Ad hoc activity . At this stage there is no formal organisation related to e‑commerce and 

the skills are dispersed around the organisation. It is likely that there is poor integration 

between online and offl  ine marketing communications. Th e website may not refl ect the 

offl  ine brand, and the website services may not be featured in the offl  ine marketing com‑

munications. Maintenance of the website will be informal and errors may occur as infor‑

mation becomes out of date.  

  

● 

   Focussing the eff ort . At this stage, eff orts are made to introduce a controlling mechanism 

for Internet marketing. Parsons et al. (1996) suggest that this is oft en achieved through 

a senior executive setting up a steering group which may include interested parties from 

marketing and IT and legal experts. At this stage the eff orts to control the site will be 

experimental with diff erent approaches being tried to build, promote and manage the site. 

Th is approach is useful for specifi c digital business initiatives which involve stakeholders 

across an organisation, for example, CRM or Social media.  

  

● 

   Formalisation . At this stage the authors suggest that Internet marketing will have reached 

a critical mass and there will be a defi ned group or separate business unit within the com‑

pany which manages all digital marketing.  

  

● 

   Institutionalising capability . Th is stage also involves a formal grouping within the 

organisation, with formal links created between digital marketing and a company’s core 

activities.   

  Revising  organisational  structures 

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