The E-Corporation: Amazon, Dell, E-Bay - Case Study Example

E-Business Amazon.com: Amazon.com is an e-commerce site which utilizes their business and revenue model well. "Amazon is perhaps the most widely known example of e-commerce retailing, not disintermediating retail stores from the supply chain but replacing them." (Bayers, 1999.) According to (Kador, 2005) "Amazon is a perfect example of how the web has added another value-added retail channel." Amazon represents a new breed of retailers; changing the way business is conducted online with their business to consumer model (B2C.) It is a virtual reseller, one of the main new intermediaries (Sarkar et al, 1996.) They are an electronic-commerce only intermediary; business and customer relationship management (CRM) is conducted purely via their website; a virtual marketplace with no direct contact between buyers and sellers. Amazon have created a virtualized value system through their accelerated ordering, delivery and payment of goods and services, while reducing operating and inventory costs associated with traditional bricks and mortar stores. They have access to global markets, economies of scale and the ability to personalize. As a virtual merchant, their products are suited to the Internet, their business models remain a source of differentiation. Amazon is a seller-controlled site whose commercial mechanism is fixed price sales. Timmers (1998) classifies Amazons business model as a virtual community, which "helps build customer loyalty and trust through an interplay of virtual and physical realities." (Hagel and Armstrong, 1997.) Amazon strengthens their association as a virtual store with "shopping trolley technology" (Cooke, 1997.) Shopping carts and checkouts act as reminders of physical environments. (Weick, 1995.) Amazons effectiveness as a virtual community is evident with their customer co-presence. "Amazon has made customer relations the centerpiece of its strategy." (Hagel and Armstrong, 1997.) Collaborative filtering helps them achieve personalization and mass customization. Customer extension is offered via their site and e-mails. This has enabled “mutual close relationships” (Berscheid, 1985) significantly increasing customer loyalty, a major source of competitive advantage. Amazons business model is now considerably more flexible as it has diversified from books and CDs to a range of products more typical of a department store. (Chaffey, 2004.) Amazon has warehouses to support their technical innovations. They are dependent on the publisher-to-wholesaler supply chain. Their distribution centers are placed near distribution warehouses to allow quick turn around on deliveries. (Bayers, 1999.) Amazons brand has enabled them to pursue differentiation strategy identified by Porter, 1985. They have an excellent reputation due to their efficient one-click purchasing system, prompt after-sales service and tight security measures. Amazon are using innovative business models such as e-mail alerts, which deliver value in ways that have not been economically viable in “traditional” physical settings. (Hamel & Sampler, 1998; Kotha, 1998.) Their distinctiveness is evident in their online value proposition "Earths biggest selection." Their brand, accompanied by reputation and trust is difficult for competitors to imitate, making it a source of sustained competitive advantage. Barnes and Noble previously traditional intermediaries, now conduct business using both traditional and online methods. Due to its large share of traditional consumers and physical store outlets, Barnes and Noble are able to appropriate benefits of EC innovation in a manner that Amazon cannot match. Crucial to Amazons competitive advantage has been their ability to build affiliate/associate networks. "Amazon has in excess of 500,000 affiliates, which have links to the Amazon site." (Chaffey, 2004.) They have entered exclusive bookseller relationships with five of the top six sites on the web: AOL, Yahoo, Netscape, GeoCities and Excite. (Rindova and Kotha, 1999.) Amazon pays commission on sales referred from these sites. In return brand awareness, traffic and sales for Amazon increase enormously. Dell.com: Dell was an early and enthusiastic convert to the Internet, creating its first web site in 1994 and moving many of its business activities to the Internet ahead of its competitors. (Kraemer & Dedrick, 2001) The company witnessed that its direct model gave it a lead in selling online. Unlike indirect vendors such as Apple, IBM, HP and Compaq, Dell did not have to worry about channel conflict with resellers and distributors when it began selling online. Also its build-to-order manufacturing processes were already in place, making it easy to offer customers the opportunity to configure products online just as they already did on the telephone. According to (Kador, 2005) "Dell is a perfect example of how the web has added another value-added retail channel." Dell represents a new breed of retailers; changing the way business is conducted online with their business to consumer model (B2C.) It is a virtual reseller, one of the main new intermediaries (Sarkar et al, 1996.) They are an electronic-commerce only intermediary; business and customer relationship management (CRM) is conducted purely via their website. Dell have created a virtualised value system through their accelerated ordering, delivery and payment of goods and services, while reducing operating and inventory costs. They have access to global markets, economies of scale and the ability to personalise. As a virtual merchant, their products are suited to the Internet, their business models remain a source of differentiation. By 2000, Dell was doing $50 million a day in web-enabled sales, but this figure was not the whole story. Dell also used the Internet to link itself more tightly to its large customers by developing extranets called Premier Pages (now renamed Premier Dell.com). Dell had developed over 50,000 Premier Pages for thousands of business customers by mid-2000. These are used for configuration, ordering, services, and support, all customized to the customer’s systems and needs. Smaller companies and consumers could buy PCs, peripherals, software and other items online from Dell.com, and receive technical support and other services at the Dell web site. Equally important was Dell’s effort to use the Internet to coordinate its entire value network, including suppliers, logistics providers, and distributors of third-party products, system integrators and service providers. All of this was driven by the tight information linkages between Dell and its customers. Dell’s successful use of the Internet drew the attention of the media and other companies, including its customers. The company saw an opportunity to capitalize on its growing reputation as an e-commerce innovator and redefine itself as a knowledgeable provider of e-commerce infrastructure to its customers. Dell’s public relations machine, with Michael Dell as point man, drove home the message that Dell knows the Internet and could help its customers achieve similar success online. Dell began to market itself as the company that "knows how ‘E’ works" and can provide the infrastructure that companies need to make it work for them. Dell has executed its “E-Works” strategy through a new Information Infrastructure sales force and through partnerships with service and software providers, rather than by transforming itself into a services company. Dell brings its corporate customers to the table and offers itself as a model for success on the Internet, but lets its partners do the actual labour-intensive consulting business. Thus Dell taps a high growth market and improves its margins without needing to hire an army of consultants. Dell also tried to expand its e-commerce business in 2000 by setting up an online exchange in partnership with Ariba and others, but pulled the plug on the exchange in 2001. Dell does make money from services, but most of its revenues still come from selling hardware as part of the e-business solution. This hardware includes high margin items such as large servers and storage devices needed to support e- commerce, as well as commodity desktops and laptops. Dell has expanded and revamped its product line to meet the demands of the e-commerce market. It built Dell.com on Dell servers running Windows NT, and was quick to adopt Windows 2000 internally and in its server line to take advantage of the capabilities of the upgraded operating system. It also has designated Linux as one of its three core operating platforms (along with Windows and Novell), taking advantage of the capabilities and popularity of Linux with ISPs and e-commerce application providers. Dell has increased its R&D investments to enhance the capabilities of its server line, while still sticking to the Intel hardware platform. Another piece of Dell’s e-commerce strategy has been Dell Ventures, which has invested $700 million in about 50 Internet companies (as of July 2000), in areas including broadband and wireless communications, business-to-business and business-to-consumer e-commerce, ASPs, server and storage infrastructure, Internet content, and e-consulting.6 These investments give Dell access to new technologies without expanding its own R&D activities, and may pay off financially if the companies go public. Dell strengthens their association as a virtual store with "shopping trolley technology" (Cooke, 1997.) Shopping carts and checkouts act as reminders of physical environments. (Weick, 1995.) Dell’s effectiveness as a virtual community is evident with their customer co-presence. "Dell has made customer relations the centrepiece of its strategy." (Hagel and Armstrong, 1997.) Collaborative filtering helps them achieve personalisation and mass customisation. Customer extension is offered via their site and e-mails. This has enabled “mutual close relationships” (Berscheid, 1985) significantly increasing customer loyalty, a major source of competitive advantage. E-Bay.com The third company for evaluation is E-Bay.com which uses a combinational business model of portal, storefront and auction to attract customers. This business model enables the customers to track the rise and fall in prices of the products and services and offers various other technologies to make up the marketing and sell of the products. The variance in the price of the products makes it suitable to compete with the discount stores over the world and suitable options for purchasing of the product or service. The various advantages are as follows: 1. Built-to-order personal computers sold directly to customers. 2. Direct sales via mail, phone orders, and the Internet. 3. Built-to-order personal computers eliminate markups of resellers. 4. Built-to-order personal computers greatly reduce the costs and risks associated with carrying large stocks of parts, components, and finished goods. 5. E-Bay has regional and manufacturing plants globally. 6. E-Bay is a well-known brand name. 7. E-Bay direct-to-consumer strategy has given the company a substantial cost and profit margin over its rivals. 8. E-Bay has a good relationship with the company’s large corporate and government customers and continues to focus on these sales and service relationships. 9. E-Bay built-to-order manufacturing process results in rapid inventory turnover and reduced inventory levels. 10. E-Bay has a wide range of customers including large corporations, government agencies, healthcare, educational institutes, small business, and individuals. 11. E-Bay divides its sales and marketing force among the various customer groups in order to meet each group’s specific needs. 12. E-Bay advertises its products on the Internet, TV, and by mailing a broad range of marketing publications. 13. It enforces B2B, B2C and C2C business models for the sale of their products. 14. Its revenue models make sure that all the various business models are enforced to its very best for fetching the right customer for the product. References Armstrong, A. & Hagel, J. (1996) The Real Value of On-line Communities, Harvard Business Review, pp.134-141. Bayers, C. (1999) The Inner Bezos. Wired. Retrieved 17 April 2008 from http://www.wired.com/wired/archive/7.03/bezos.html, Berscheid, E (1985) Interpersonal attraction. In Lindzey, G. and Aronson, E., Handbook of Social Psychology: pp.413-484. Cooke, M. (1997) Java e-commerce: technologies for distributed enterprise computing, Retrieved 17 April 2008 from http://www.dcs.shef.ac.uk/~martin/teaching/ecommerce/intro_1.ppt, E-bay.com. See http://www.ebay.com Hamel, G. & Sampler, J. (1998) The E-Corporation, Fortune, pp.80-93. Hoffman, D. & Novak, T. (1997) A new marketing paradigm for electronic commerce, The Information Society, pp.43-54. Kador, J. (2005) Internet Jobs. Retrieved 17 April 2008 from http://www.jkador.com/netjobs/two.htm Kraemer Kenneth & Dedrick Jason, 2001.Dell Computer: Using E-commerce To Support the Virtual Company. Rindova, V. & Kotha, S. (1999) Building Reputation on the Internet: Lessons from Amazon.com and its competitors. Retrieved 17 April 2008 from http://us.badm.washington.edu/kotha/personal/pdf%20files/amr_final.PDF. Sarkar, M., Butler, B. & Steinfield, C. (1996) Intermediaries & Cybermediaries. Timmers, P. (1998) Business Models for Electronic Markets. Retrieved 17 April 2008 from http://www.imse.hku.hk/imse2016/Readings/Essential/BusinessModel-Geoffrion/Timmers/98_21_n.html Weick, K. (1995) Sensemaking in Organisations. Read More