E-Business in the Car Industry - Essay Example

?Comparison of offline and online retail environment for car industry............................................4 Analysis how value is created in e-business by applying Amitt and Zott value creation model ....6 Executive summary..........................................................................................................................6 Foreword.........................................................................................................................................8 Reason for research and main question...........................................................................................9 Objective of research......................................................................................................................9 Methodology...................................................................................................................................9 Literature review............................................................................................................................10 Strategy of the research..................................................................................................................10 The definition of e-business...........................................................................................................10 The meaning of e-business and e-commerce.................................................................................11 Interrelation of e-business and e-commerce..................................................................................12 Customer value and what it is........................................................................................................12 Customer value..............................................................................................................................12 E-business and costs......................................................................................................................12 Car market of Dutch......................................................................................................................12 Top 10 vehicle types as at March 2013.........................................................................................13 Top most five parking zones of Dutch...........................................................................................13 Amitt and Zott Car value creation Model analysis of the car product...........................................14 Efficiency.......................................................................................................................................15 Complementarities’........................................................................................................................16 Lock in...........................................................................................................................................17 Impact of e-business on customer value........................................................................................18 Conclusion.....................................................................................................................................19 Commentary...................................................................................................................................19 Reference.......................................................................................................................................20 Name Unit Name Lecturer Date E - Business in the car industry Comparison of offline and online Retail Environment of Car Industry The offline environment for retails of the car industry is that of manufacturer to customer .The chain from which the product, car, moves from the manufacturer to the customer is that of via the car dealer. The intermediary dealers buy a number of types from the manufacture and sell them from the store front. This presentation and placement of the good has largely proved successful. The product which is tangible is test driven, viewed and purchased from the intermediary. An advantage of the offline environment retailing is that of the face to face environment transaction. The buying of the car calls for high involvement between the consumer and the supplier and be shown that it calls for customer relationship. It is argued that this enhanced interaction empowers the customer. (Pitta, Franzak and Fowler, 2006).Sales people with knowledge could also improve trust and along with an already brand knowledge existence. A fervent argument favoring the retail environment is that customer for the product of high expense calls for time and attention from employees (Grewal, Baker, Levi and Voss, 2003) and it is said that the value can’t be matched or replicated in an online environment. One primary weakness of the offline retailing environment that every business may have to fight is that of custimisation.Previuiosily if a customer desired to have a certain feature the only option they had was to wait for many days for that certain specification to be made available. This is no longer the case anymore as the consumer can buy the custom made products without having to wait for specific specifications to be made available. Many benefits are offered by the online retailing environment both to the consumer and the manufacturer. Web markets widen the market choices availability to buyers, giving sellers access to incoming customs and reducing costs for transaction.(Kaplan and Sawhney, 2000) The effect of the B2C marketing directly is that the manufacturing costs are lowered and expensive intermediaries can made way with, this can be explained as disintermediation. (Turban, 2006) Purchasing car, nonetheless, and the whole process has proved to consume al ot of time and at times a witty battle between the car dealer and the consumer.Suggsestions are that the consumer who expreses high disutility of bargaining and lack of adequate time are more likely to purchase from the online market. The start of the online intermediary (Viswanathan, Kuruzovich and Agarwah, 2007) has brought about a significant advantage for such consumers. Therefore it is seen more clearly that the environment online has intermediary agents such as Microsoft CarPoint rather than making them obsolete. Presently the consumer can buy directly from the producer known as Business to Consumer (B2C).Researching various car websites from car manufacturer such as Toyota and fiat (www.fiat.co.uk, www.toyota.co.uk) the dealership in cars seem s to remain as the recommended means of buying . The online advantage is that the customer can have comparison on all products available and use the intermediaries in conjunction to compare various manufactures and brands. This is known as the click and mortar buying. (Turban, 2006).The consumer can use the online environment to select and research the product they desire to purchase and the dealership in cars to assess and view the tangible product. There exists a superior sense of security in buying from the dealership as many customers may still be wary of protection when buying goods from the online market more so when the cost are exaggerated. The slick and mortar operations method have the enhancing confidence in real store backing ups the advantage of their operations on the internet. Value creation has been described as the difference between the cost for providing the product and the amount the customer is willing to offer for the product. Value can be added to the product via outside or support (Potters, 1985) activities such as awareness of brands, speedy delivery and after sales service among others. Resource Based View (RBV) literature argue that technology information resources cab be employed today in an online environment to make a firm improve efficiency irrespective of if mimicked by rivals or may yield performance effects unique to affirm relative to its rivals (Melville, Kraemmur and Gorbaxani, 2004) A major factor to in RBV and value creation enhancing better than a company’s rivals is that of a competitive heterogeneity. This means the enduring and the systematic performance variations amid relatively close rivals.(Hooper, Modsen and Walker, 2003) Resources are the intangible and tangible assets of a firm that can be used in the process of creation of value . Analysis how value is created in e-business by applying Amitt and Zott Value Creation Model Executive summary At the onset of previous recess in economy, the selling of cars dwindled at a high degree. If you look at the leading car types sold within that span of recess in Netherlands we discover that most of the top most familiar types of car sold witness a drop in sales in March 2013 as compared to those sold in March 2012. As a result that period of recess has a great impact for the sellers of cars and also to the manufacturers. Due to the falling car sales statistic, the car manufacturers have come up with two of the porter’s strategies namely cost management and separation in a bid to curb the issue business of car sale. The focus of this paper is separation and one process of differentiating is the introduction of the e-exchange in the industry of the product, car. Thus the question that comes up is: will the introduction of e-business aid towards customer value? Which is the reason we have the primary question of the paper as: Does introducing e-business in the car manufacturing help contribute to the customer value? Thus the primary question in our study is: I have investigated and tried to explain the answer to the question through the help of some great authors and researcher who have tried answering the same question before Off all other things I have examined at the impacts for the flow of the product from the firms to the customers with the aid of peter Meindl and Sunil powerful ideas on the topic. Through the assistance of their receptiveness frontier competence, we have examined at the penalty of being more receptive through e business. We discovered that being more receptive has advantages, but too the expenses in the mode of extra amenities, account etc. Due to the perspective of the flow of the product from the firm to the customer, we have considered other factors that affect to viable worth creating of an e-business. More so Buttner and Goritz examination the impacts of credibility of online sellers on the intent to purchase of clients and Amit and Zott?s study on other factor that influence the potential creating of value of e businesses were found to be of help. Amit and Zott indicated that 4 factors should be improved in order to increase the potential creation of value in an e business, namely: complementarities, competence, lock in and uniqueness. Coming up with an experimental verification that introducing e business in the car industry helps improve the consumer worth we carried out an analysis of the study of Martin Schreier on the increments of value of large mechanization. His study gave great supporting confirmation that introducing the chances to develop your own car depending on your wish through e business does raise the worthiness of the consumer in the mode of an increased willingness to pay. At the closure of the investigation i will offer an idea for the car industry which can be employed to improve efficiency and responsiveness at a similar moment with the assistance of established concepts like Damen Shipyards, mymuesli.com etc. Foreword Reason for research and main question A high number of the car developers aren’t in a position to foot all of their expenses, because of decreasing car sales to consumers. That implies that it’s fetching much imperative for these producers to maintain active consumers and increases their share of market. Raising the customer worthiness is one method of maintaining and winning the share of the market. Growing ones worthiness of the consumer can be done by using e – exchange. To find out how e trade can be introduced to increase the worthiness of the customer in the car industry, the primary question of my thesis is: Will the implementation of the e – business in the industry of the cars help in the improvement of the customer value? Scientific importance of the subject and its social relevance The investigation am carrying out is1 of dire social application for the administration and the developers of cars. Developers of cars can use this study to find if e business in the form of e commerce will result to an extensive rise in the value of the customer. This can assist car firms to find out how they can differentiate themselves with the aid of e-exchange and capture market share. Through gaining share of the market they can avoid insolvency of their firms. Beyond the car producers this study will also of significance for the administration. The administration can employ this study to aid the car industry as a whole to prevent insolvency which implies a great number of jobs can be salvaged. To it can help avert whole areas that rely on auto producing industries from closure and trailing population, because of people looking for employment in every other place. The application scientifically is that this study can assist in bridging theory with actuality. Through the study of the firms which already uses e trade for the marketing of their products, one can find out what remuneration and pros that e-exchange offers and whether it would be better to use e trade in sale of car. Purpose and objective of the study My study is the expressive research. The aim is to find out what the gains and benefits of e commerce are, and in what way the gains can lead to a great valuation of the customer who buys cats. Up on investigating the problems which may arise with a model that is more proficient and tempting for customers such that they will be persuaded to use the e -trade in buying a car. Compelling the customers means excess profit and a greater share of the market. A greater share market means great turnover for the firm and a much flexible enterprise which is better placed to overcome losses and other surges in the demand for the customer. Methodology and the process of research In my study i will pay attention on the sales of cars in the markets of Netherlands. Employing theories by Mr. Chopra and Meindl I will look at both the pros and the cons of e business foreword. More so the theory of receptiveness versus competence will initiate a very noteworthy role in amplification when e trade is safer for the consumer worthy and when not. Besides the theory of Mr. Chopra and Meindl I will also employ significant ideas and thesis by Dave Chaffey, Mooi, E, and Sarste, Maholtra, N, and Michael Porter. Michael Porter’s Chain worthiness scrutiny and generic framework will also have a vital role in this part. Literature review Much has been brought forth about e commerce before with Kalakota and Whinston distinguishing between views of e commerce, namely: An online point of view, business process outlook, service perception and Communications view. By business perspective they refer to the appliance of expertise aiming at the mechanization of dealings of trade and the flow of business.” The service point of view implies: “empowering cost cutting at that particular moment escalating the quality and speed of service delivery.” With the online standpoint they imply: “selling and buying merchandise and information online”. Strategy of the research and the expectation The study sets off with the definition of what e trade and e business are and how these two interconnect. Afterwards we will look at the pros and cons of e business and the manner in which it contributes to the exchange of goods by raising the customer value for the consumer. My expectation is that the use of e business will have a great involvement to the swell of the customer value. With the information that e commerce offers the consumer the chance to compose a car depending on his wishes, he will be prepared to offer a superior fee for a car and he will be faithful to the make that gives him this likelihood. On the contrary i expect that offering this excess service also means higher costs of production and will also imply that it will be hard to realize the scale of economies in the development of cars. That implies that the introduction of e-exchange in the flow of products will also imply incurring extra expenses. Up on selecting to use e – business in the car sales and offering ones consumers the chance to create their own car, one has to be more receptive. To be much receptive means excess duties for ones company. It also implies that the firm has to comply with the leads in the short moments; it also means added amenities near the customers, high bargaining power of suppliers etc. Thus introduction of e – trade as a means to sell cars is a decision in which you have to decide a balance between the remuneration and implementation costs The is e business The meaning of e business and e commerce E business is defined as every exchange of information digitally aimed at supporting business programs that are carried out via internet expertise, including dealings between and within firms. e business cannot exist without having e trade thus according to Dave Chaffey, e commerce refers both to the monetary and informational electronically performed transactions between firms and any third party it transacts with. The interrelate between e business and e commerce Concerning the interrelation between e trade and e business we can distinguish the two views. The initial perspective looks at commerce as a correspondent to e trade and the latter perspective looks at e commerce as a compartment of e business. I will employ the second perspective in this study. The meaning of customer value Customer value Customer value is referred to as the customer’s insight of the real value of the merchandise or service. Most companies settle on their price on the base of the fabrication costs of a definite product, upon which the put an addition cost in a bid to attain the desired profit. The problem with this is that the firms will raise the prices a bit higher than the worthiness of the consumer The best means of charging a higher price is by growing worthiness of the consumer E- Business benefits and costs. Dutch car market Looking at the leading ten makes of passenger vehicles that are used in the Netherlands we found a pointed drop of sales compared to last year. The most top ten makes that are sold in a ascending order include Audi, Hyundai, Citroen, Fiat, Renault, Opel, Peugeot, Volkswagen, Ford and Toyota in that order. As seen, most of the Dutch consumers of cars prefer Europe made cars other than other makes from other regions of the world since among the top 10, 7 come from Europe. Toyota is the most required car in Holland and it’s the the leading but it is from Japan. Upon comparing the sales between March 2012 and March 2013 we discover that their was a vitsl fall in the sale of all the makes as seen in the table below Figure 3. Top most make betweeen march 2012 and march 2013   Brand march 2012 march 2013 Difference 1 Toyota 3.653 3.809 -4,1% 2 Ford Europa 3.434 4.440 -15,7% 3 Volkswagen 2.988 3.441 12,4% 4 Peugot 2.531 4.259 -41,7% 5 Opel 2.331 3.634 -34,7% 6 Renault 2.220 3.881 -46,1% 7 Fiat 1.831 2.728 -27,1% 8 Citroen 1.834 2.110 -11,9% 9 Hyundai 1.744 1.862 -7,1% 10 Audai 1.664 1.226 17,1% Source: web From the above example we have only considered the leading sales of some specific makes within a given time span. In case a firm desires to gain knowledge on the make that have the most sales in a long stretch of time then it is advised to investigate its parking zones. Looking at the parking zones of Holland this is what we discovered as shown in figure below. The top 5 in ascending order of the park zones 1 Ford focus 120.278 2 Fors europa 143.333 3 Opel corsa 200.000 4 Opel astra 256.009 5 Volkswagen 333.348 Source: Market monitor webs After investigation we find that that the small compact cars are mostly the cars that the dutch citizens posses most. The companies should have in mind the above information when designing their website. Any company with the above information should customize more the small compact cars and at the same time avoid having large customization of the large cars Amitt and Zott value creation model analysis to this product, car. Amit and Zott have come up with a 4 source model of value creation in e business. From their data analysis they have discovered 4 sources of value creation in e business transactions, known as: complementarities lock – in, efficiency and novelty. When they talked about value they referred to the total value developed in e-exchange trades whether it is the customer, the company or any other participant’s involved who helps initiate the value of the customer. This is a different definition of value, other than customer value. But nevertheless, their study can be very important to find out with which other factors a company has to consider when implementing e business as a sales method. In the next part of the chapter I will explain what Amit and Zott mean by efficiency, complementarities, lock in and novelty after which we will look at how we can use their model in setting up an e business sales model for cars. As mentioned in the first part of this chapter, Amit and Zott identified 4 sources of interrelated creation of value in e business. In this section I will explain what exactly is meant by each of the 4 sources and how they can be employed to succeed in creating customer value via implementation of the e-exchange in the auto industry. Efficiency For the description of efficiency Amit and Zott use the transaction costs theory belonging to Williamson. This theory argues that transaction efficiency raises when costs per transaction falls. In their sources of creation of value model they have a wide definition of costs. They identify search costs, symmetric information, selection range, simplicity, scale economies and speed. With search costs Amit and Zott refers to the the money and time the consumer has to spend to find the product they desire. By decreasing information asymmetries between sellers and buyers efficiency can be increased. The simplicity and speed by which information can be transmitted through internet can assist in improving efficiency. Improving the flow of information can also reduce customer bargaining and search costs and opportunistic behaviour. So Amit and Zott’s model suggest that decreasing information assymetry through speed and simplicity of internet, lowers search costs, bargaining costs (Luking Reiley and Spulber, 2001) and opportunistic behaviour ( Williamson, 1975). Through reducing these 3 costs and giving a greater choice at lower costs, consumers can make faster and more informed decisions. In this way purchasing via internet is more appealing for customers. So when you choose to let customers design their cars on their own, you should also improve efficiency by lowering search costs, bargaining costs and the possibilities for opportunistic behaviour. One means of reducing all these costs is by decreasing information asymmetries. To lower information asymmetries the industry has to improve the information of the product on its site. By designing a simple understandable and clear site, you can reduce information asymmetries and make it more appealing for the customers to assemble and buy their car through online. Complementarities By complementarities, Amit and Zott says that having a bundle of goals together gives more value than the total value of having the goods separately. In the case of car sales, this means that offering a self- designed car online offers the customer with low value than giving a self designed car online with other options like car radios, hand free sets, tuning parts etc. If the industry decides to use e business in the sales of cars, it has to consider offering the customers some of this surplus in a bid to make buying online more attractive. Lock – in Besides complementarities and efficiency, lock-in also plays a significant role in the creating of value viability of an e-exchange. By lock in Amit and Zott refer to the ability to which an e business can encourage customers to engage in repetitive transactions. Their analysis indicates that a company has a number of ways to improve lock in through customer retention enhancement. First, a firm can set up loyalty programs, like the airmail system of Albert Heijn, second, a firm can come up with a dominant proprietary standards for e business processes, products and standards and third a firm can develop trustworthy relationships with customers by giving safety in transaction and reliability guaranteed by independent and highly trusted 3rd parties. For car sales through the internet this means that the car manufacturer can raise the value creation potential of his site through giving users for instance a 10% rebate when they custom design and order their car through the internet. It can also give extra’s that aren’t available if you order your car at the dealer and it can also use the 3rd parties as BOVAG safety guarantee for the trustworthiness of its site. Novelty The implementation of e business as a means to customize and purchase your car has to be a new first to the market business model. If the concept is relatively an incoming one, the car manufacturer can yield great benefits and value from the selection of the e business strategy. Summarizing, if the car manufacturer can improve the 4 sources of creation of value in e business, he can raise the value creation potential of e business and this can result to an increasing value of the customer in the mode of a higher readiness to cater for the expense. By this the industry can increase its profit and turnover. Impact of e business on customer value. It has no meaning to implement e business in the car industry, if it doesn’t bring customer value. For every company it is therefore important to know if the possibility of mass customization by implementing e business brings extra customer value. A lot of research has already been done concerning this subject. Franke and Piller (2004) have already discovered that giving the customers the chance to design their own watches raises their willingness to pay. In their article published in the Journal of Product innovation management, volume 21, page 401 – 415, they discovered that the customer is willing to pay an optimum of more than 100% if he gets the chance to design his own watch. Martin Schreier has also done some research on this subject. He deduced the rise in value of self- developed goods as opposed to a standard product with the aid of the consumer’s readiness to pay. The variation arising as a result of WTP of the user for a large modified manufactured goods and the benchmark produce offers a mounting value of a self developed goods (?WTP) Schreiers research offers empirical evidence that one benefit of implementing e business, mass customization, also raises the worthiness of the customer in the mode of the readiness give payment for self developed goods relative to the customer value for standard products. Schreier continues to explain the type of advantages that influence the willingness to pay. The excess eagerness to give payment for a self developed product is ascribed to 4 benefits, namely: functional benefit, perceived uniqueness, process benefit of self design: self design may be perceived as a self rewarding process and last but not least pride of authorship. What we can deduce from the study of Martin Schreier is that when we offer the consumer the opportunity to design their own car through internet by implementation of e business, their customer value in the mode of willingness to pay extras. This is explained by the advantages the customers enjoy because of mass customization through e – business. Schreier differentiate 4 benefits, namely: perceived uniqueness, process benefit of self design, functional benefits and the pride of authorship. When we employ these benefits to the self design of cars we find that selecting the interior, colours and accessories of a car gives the customer 4 benefits according to Schreier’s concept. Conclusion Amit and Zott showed that efficiency, complementarities, lock – in and novelty play a significant role in the stimulation of the creating value potential of an e business. Through improving trust, efficiency complementarities between products provided online, novelty and lock in one can also improve the customer value or other value (supplier value etc.) created by the e – business. Commentary In this section I used literature research to answer my primary question. We looked at the aspects of e – business from different perspectives. Of course I had to use a lot of previous works from other authors, but the quality of their analysis of data was sufficient for the objective of my research. Due to inadequate time for a large scale survey, these sources were of very great importance for my research. Looking at the results of our research, we can define a concept for online sales of cars that benefits consumers, dealers and manufacturers. Implementation of e business without involvement of dealers would result to channel conflicts between manufacturers and dealers about the sharing of profit. That’s why I propose a hybrid model in which the consumer can assemble his car according to his desires. For future research I propose that future authors who handle the similar subject, research the possibility I mentioned by setting up an fictive site and registration on how much people use this alternative and if they spend on average more on a online purchased car than on a standard car. In my research I also employed a study of the value increment of mass customization for relatively low and medium priced goods. That’s why it would be great if somebody would research the value increment for luxury, high trust and high priced goods like cars, yachts etc. When we would get some insights in this subject we could have more certainty about the customer value created by using e business in the car industry. Reference list Books: 1.Blackwell Roger D., Miniard Paul W., Engel James F., 2006, Consumer behaviour 10th edition. 2. Chaffey Dave, Woods Steve, 2005, Business information management: improving performance using information systems. 3. Mullins John W., Walker Orville C., Boyd Harper W. 2008, marketing management: a strategic decision – making approach. 4. Blythe, J, 2008, Consumer Behaviour London:sage. 5. Noel, H, 2009 .Basic Marketing .Newyork:AVA Publishing. 6. Mooi, E,.AND Sarsedt, 2011 .A concise guide to market research,New York:springs. 7. Malhotra, N,.Marketing research .New Delhi:pearson Education, 8. Dow, W. And Taylor,B. 2010, Project management communications bible USA.John Wesley and Sons. Journal articles: 10. Amit Raphael, Zott Christoph, 2001, Value creation in e – business, Strategic Management Journal. 11. Buttner Oliver, Goritz Anja S., 2008, Perceived trustworthiness of online shops, Journal of Consumer behaviour. 12. Molesworth Mike, Suortti Jukka-Petteri, 2001, Buying cars online: The adoption of the Web for high involvement, high – cost purchases, Journal of Consumer behaviour, volume 2. Read More