IS Management- Solution
TASK 1: E-COMMERCE
The term e-commerce also known as electronic commerce is considered to be a new hub in doing business where provides a great deal of convenience not only to customers but also the company since it minimize cost (2001). With the aid of telecommunication, internet and information technology it really is a sure way of reaching target audience and an effective tool in conducting business. The domains of e-commerce encompasses all business-to-business (B-to-B) and business-to-customer (B-to-C) transactions that engages the buying and selling of goods and services through an innovative medium of communication. The existence of information technology has been one of the major factors for enhancing many business performances. As part of this technological advancement is the integration of internet, specifically e-commerce as part of business operations. E-commerce or e-business is a business process in which goods and services can be seen via the internet or other computer networks.
E-commerce follows the same basic principles as traditional commerce that is, buyers and sellers come together to exchange goods for money. But rather than conducting business in the traditional way in stores and other brick and mortar buildings or through mail order catalogues and telephone operators in e-commerce buyers and sellers transact business over networked computers. In addition E-commerce offers buyers convenience and satisfaction. They can visit the World Wide Web sites of multiple vendors and companies 24 hours a day and seven days a week to compare prices and make purchases, without having to leave their homes or offices ( 2001). In addition, it helps the customers to see the description of the products.
In some cases, consumers can immediately obtain a product or service, such as an electronic book, a music file, or computer software, by downloading it over the Internet. For companies which use this kind of technology, e-commerce offers a way to cut costs and expand their markets. They do not need to build, staff, or maintain a store or print and distribute mail order catalogues. Automated order tracking and billing systems cut additional labor costs, and if the product or service can be downloaded, e-commerce firms have no distribution costs. Because they sell over the global Internet, sellers have the potential to market their products or services globally and are not limited by the physical location of a store (2000). Internet technologies also permit sellers to track the interests and preferences of their customers with the customer’s permission and then use this information to build an ongoing relationship with the customer by customizing products and services to meet the customer’s needs. Primarily, the goal of this paper is to analyse the e-commerce business models, furthermore, the paper will also attempt to assess what e-commerce business models used by HSBC.
E-Commerce Business Models
The use of e-commerce actually originated from the development of various information and communication technologies (ICT). Generally, ICT is made up of innovations, gadgets and instruments that are based on technology; these enable users to improve their operations, products and services. Some concrete examples of these technologies include computer systems, internet and wireless communication. Before it was used to improve organizations business performance, e-commerce was able to provide several advantages to different fields.
One of which is the business sector. In all types of business, innovation and expertise are two of the important elements to be considered. In particular, information and communication technology (ICT) through e-commerce encourages companies to become competitive by means of expanding their markets, attracting and retaining customers through tailored services and products as well as restructuring their current business strategies. This in turn affects the business industry by transforming internal processes and external relationships (2001; 1998).
There are several business industries that have already realized the significant role e-commerce has in their operations. For instance, in the manufacturing sector, e-commerce has been utilized by several companies in order to improve their supply chain operations. Presently, various information systems are made available to business owners, from less-sophisticated to more advanced systems for this purpose. In particular, internet utilization facilitated the ease of interaction between e-commerce business models. These include business and business partners (B2B) and consumers (B2C). Through the internet, online deliveries, information searches as well as mass customization are all made available to the customers. Manufacturers, suppliers and distributors on the other hand, benefit from internet utilization through well-coordinated information sharing. Online auctions are even made possible with this breakthrough (2000).
B2b is one of the categories of e-commerce that has been characterized as profit-oriented whose aims is to obtain information and retain information that uses different type of motivation in which it has a shorter route of channel in terms of distribution. In b2b it seeks to realize transactions that necessitate performed financial and commercial activities via the internet. Among b2b’s typical applications are e-procurement and e-marketplace. A very good example of b2b marketing online is the website from Volvo Construction Equipment. The website once visited, is loaded with the convincing benefits and the catching words that surely can caught buyers attention.
Among its advantages is that it promotes automatic communications between companies that hastens the business dealings. The b2b business dealings is proves to be higher in volume and less cash-driven in such a way that it saves time and expenditure of resources since most of the time the delivery charges is already covered in the whole package if a company transacts in a b2b marketing (2000). Further, it allows cutting prices dramatically abrupt since an economic equilibrium point represents a compromise done deal by the buyer and seller. Similarly, on one hand, buyers have pricing options that is vast while on one hand, the sellers have a large marketplace for bidding to occur. It even minimizes opportunistic behaviors of some businesses that exploit such opportunity since the spreading of information is faster.
The evolution of the business to consumer marketplace has been regarded as fast and furious. Most business-to-consumer developments have centred on consumer products and services, the products and services most affected by price and convenience as purchase factors. The most successful brands have developed in a seemingly haphazard way. Many Internet start-ups moved into an industry with little concern for traditional brick-and-mortar stores and grabbed the spotlight. Others built niche positions by creating tools and value for consumers searching for deals on the Internet. The current state of the market is both booming and confusing. The organizations that waited to see whether the Internet was merely a passing fad have either been fired or retired from the business.
The rest of the world has awoken to new challenges for the speed and environments in which they must work. Determining how to meet these challenges has created reactions ranging from mild concern to outright terror. Clearly there is a difference between deciding what to buy and actually buying on the Internet. Studies continue to confirm that consumers are out there making decisions about what they want to buy using the Web as a sophisticated research tool, but many are often still buying via traditional stores. In many cases it is difficult for consumers to acquire a product locally; in other cases the distribution channel has not yet given up on the retail end of its pipeline. As a result, the cries of disintermediation in the marketplace have turned out to be false (2000). This situation is a function of which products consumers can find on the Internet and whether they sense they are getting a good deal. The basics of developing business-to-consumer e-commerce are fairly simple in terms of stages in the marketplace: build a community of visitors, give them relevant information about their area of interest, present products or services links to shopping areas which support such interest, allow the consumer to make some comparisons in terms of price and delivery to enable the sales process to evolve and take the order and provide satisfaction and fulfilment.
Hong Kong Shanghai Banking Corporation Holdings
HSBC Holdings, a British financial holding company with origins in Hong Kong and Shanghai, where offices were opened in 1865 under a special charter which allowed Hong Kong rather than London as a headquarter location. The bank remained an eastern force until the 1950s, when overexposure to the crown colony and its textile industry pointed to a need for geographical diversification. A worldwide scan was made with rather disappointing results. Australia and Canada was protectionist and so was the Continent, in addition to being over-regulated and well served by its own talent. Central West Africa was saturated by British banks and, after independence; the new countries gave priority to domestic banks. Only the USA was attractive because it offered dollar assets in a dollar-hungry world (2003).
But before anything could be done about it, events elsewhere called attention. HSBC was in intense competition all over Asia with Chase Manhattan which showed interest in a small bank in India and Malaysia. HSBC pre-empted by purchasing the bank in 1959. In the same year another defensive acquisition became necessary, when an investor group tried to buy the British Bank of the Middle East, strip its assets and sell the branches to HSBC, which did the bulk of its Middle East business through the bank. For example, Kuwaiti authorities kept half of their money there. With the purchase came a chain of retail branches in Cyprus. A few years later a banking crisis erupted in Hong Kong. HSBC was not seriously affected but Hang Seng Bank, the colony’s second largest, was about to flounder in a run. Chase offered help but Hang Seng preferred HSBC, because of its local roots, and sold it a majority stake in 1965. These three deals illuminate the difference between corporate strategy and the realities of the marketplace (1991).
Diversification had taken a beating although it was only in 2000 when acquisitions in Asia became topical again, in a small way. Two of them were part of the private banking drive, PCIB Savings Bank in the Manila area and Taiwan’s leading asset manager China Securities Investment Trust Corp. in 2001, to be followed by an 8 per cent stake in the Bank of Shanghai. HSBC had returned to its roots. Afterwards many more events unfolded including the turnover of Hong Kong to china this prompted HSBC to transfer headquarters to United Kingdom (2003).
In this, in order to stay competitive HSBC sees the Internet as one of several exciting media, to be incorporated as an integral part of its business. In this manner, HSBC has made its own website and use business-to-business as its e-commerce models. The bank has concluded that B2B change the fabric of the financial services sector. In addition, through B2B the bank has been able to reach millions of customers online. B2B also enables the company to enhance its services to existing customers. The use e-commerce B2B model helps the company to reorganize the business so as to provide higher-quality customer services more efficiently. Herein, HSBC are able to link its customers to the full range of international services and manage their processing wherever it chooses, which the bank sees as a considerable competitive advantage( 2002). HSBC has adopted a clicks and mortar strategy. This requires that customer Internet offerings must meet three criteria: customer needs and preferences come first; they must fit HSBC’s existing distribution channels; and they must be multinational in scope. HSBC aspires to be one of the first to provide customers with facilities through the Internet on a multi-geographical and multi-product, basis ( 2002).
The e-commerce business model used by HSBC provides different benefits to the company. These benefits include competitive advantage against competitors, achievement of the company’s goal, better service given to the customers, and increase profits for the company. Through the system the company can make an effective management system and an appropriate e-business technology can be used to transact with online customers. Through the e-commerce the company does well in its field thus the goal it has can be closer to being reached. The computer based system helped the company in giving better service to the clients. The system improved how service was given to the clients; it created measures that changed the meaning of serving the clients.
For now, e-commerce has earned its reputation as an effective means of new marketing strategies, convenience to the consumers and an alternative for business to minimize cost in business transactions.
TASK 2: Amazon.com
- How would you define Amazon.com’s business model throughout the 1995–2006 period examined and how has this changed and evolved?
Amazon has the first mover advantage in online bookselling industry. In the onset of 2004, it is named to be number one in on-line service, has six website servers, 32 million customers in 150 countries, 900,000 associate programmes linking up or having contents of Amazon. Amazon.com is an on line retailer of books and was established as a micro enterprise in the United States during 1994. It is among the most south-after online product/service provider. The company has applied the disruptive technology because of the fact that it has rapid expansion in the aspects of its operations such as business turnover and a spectacular rise in share value since public floatation in 1997 (2003).
Moreover, Amazon.com is essentially an information broker and sells through the use of on line process. It is a disruptive technology since it holds a small, though increasing and inventory and that outsourced most of the aspects of its operations. The company can best manage a disruptive innovation as well as technology by means of an active communication channel between the alliances and partnerships with their respected publishers as well as other on-line retailers and technology providers as a strategic notion. Even though there are a couple of online bookstores that emerged before Amazon.com, it holds the distinction among the first major pioneers in American as well as worldwide online retailing. Today, the ambition of Amazon.com is to amicably become a premier online retailer through leveraging on its brand and model in business. For the past years (1995-2006), the company has been able to use a business model that outgrows the company’s competitors.
The business model used by Amazon for the past years adheres to the technological advancement, particularly in the internet. The company used e-commerce business models as a major strategy for their business operations. Through this, consumers are more inclined to trust Amazon.com than other companies. The business model implemented within Amazon provides the company an edge compared to those competitors in the online business.
As part of the business model used by the company through out the years, is their involvement on the so-called the four-activity type in marketing operations. Proven and tested, it excels and competent enough in such activity-types. The ultimate proof on this claim is the fact that it considered to be one of the best e-retailers in the world. (2001) believes that it is more difficult to classify as online retailer because of utilising generic marketing strategy type.
Amazon.com do have low prices and with lots of discounts being offered to their consumers. The management has been very innovative in coming up with various strategies that reinforces their strong and obvious market standing. According to Merrilees (2001) the constant creation of innovation continues. This includes site development on specific aspects, extension of coverage into other retail categories, and a trial to venture on a unique yet related line of service/product offer such as CDs.
Accordingly, they have also been innovative in nurturing alliances with other online booksellers (Merrilees 2001). Their perfect usage of branding served as one of their distinguishing features. Branding is considered to be very important because it helps in the attraction and retention of potential consumers. Since they are one of the world’s best-known e-brands, it is expected that their market coverage will continue to flourish.
Meanwhile, another strength that the company possesses is that their stocks reach to approximately 10,000 items of various sizes. With its users numbering to millions, transacting everyday, pooling their items for sale, it offers a wide array of choices. This will ensure the consumers that if they have problems with the products that they have ordered the company will surely replace it with newer and better ones. Also, it will assure the consumers that the products they ordered will reach the destination in time depending on the geographic situation.
Amazon.com is also adept in their channel management. It is very important to maintain a good channel management because customization and personalization of their site are among their trademarks. Though the “Hello [Name]” welcome is popular to almost all online retailing services, they are one of the first companies who have that familiar greeting when the customer revisits. Additionally, the site contains a personalized customer profiles that are generated to offer assistance in book selection. The superior channel management strategies of Amazon.com are completely supported by appropriate capabilities by the people involved in the overall management.
They also have a “prompt delivery within the USA”. This vital mechanism is mandatory since “the entire site was designed on a basic five-step process that was meant to make the consumer shopping experience convenient and helpful” (Merriless 2001). To further reinforce the increasing demand for speedy delivery within the USA, they have built additional warehouses and built up excellent alliances with suppliers.
Through a B2C e-business, which deals with business to customer connection unlike B2B (to be discussed later), the company will be able to serve customers efficiently and simultaneously. There is a term called “disintermediation”, which means that the selling skipped the usual channels, and the product or service was retailed directly to the customer instead of going through a middleman. By browsing a specially designed e-business site, a customer will find inquiring about products, ordering, and payment transactions are so much easier, faster, and more convenient since they could do it without even leaving their offices/homes.
The sustainable competitive advantage of Amazon.com is primarily related to superior relationship in marketing and through the effective use of its e-commerce business model. The Amazon.com experience highlights the dynamic nature of competitive strategy. That is why it seeks to provide and adapt to new marketing environments, as well as developing their own growth trajectory. Pioneer firms in particular are likely to enter markets with an innovative strategy, but this can evolve into some other generic strategy as conditions change.
- Has it entered the harvest stage that CEO Jeff Bezos promised would eventuate?
With the business model used by the company and with the innovative strategies implemented within Amazon.com by the CEO and the rest of the management of the industry, it can be said that Amazon.com now has been able to enter its harvest stage. Some of the factors that allow the company to meet the goal of its CEO Jeff Bezos include the ability of the company to reduce business cycle time. Before marketing or selling the product, the first consideration is producing the goods. It can’t be denied that personnel responsible for locating the right product and the right supplier that’s best suited for the requirements of the company, takes a long time to accomplish this task.
Amazon has high ability to generate internal funds as showed by its cash equivalent of $133M in 2001 to $822M in 2002 most possibly from cost cutting activities that includes downsizing and inefficient distribution/ warehouse closures. However, it also has also invested to partnerships in Dell and other auction houses that could result to gains for the company although its borrowing capacity through public offering seems sub-optimal primarily because of the uncertainty of technological advancements that makes shareholders key financer of Amazon’s innovation and acquisition endeavours. In relation to financial resources, patents and stock of technology not only gives the firm 20% share of web development from total revenues (additional internal fund generation) but also competitive advantage of one-click technology from Apple to back-up its browsing and searching convenience promise to customers.
The best thing about innovation culture in the firm is that the founder CEO Jeff Bezos maintains and flames it. Thus, the process of keeping the learning- curve even at rough times and stock price falls created a reputation of customer-focused innovation to increase convenience protected in its 8-year existence, rooted in its 1995 infancy and stored in the heart of the CEO since his 14th birthday. The innovation culture is enhanced by recruiting top executives who have thorough experience and knowledge in areas of supply chain management, logistics and international relations to support geographic expansion of markets in Canada, Japan and France wherein 2003 figures showed 37% share on revenues of countries outside North America.
- Is Amazon.com a natural acquisition target for Wal-Mart?
With the potentials of Amazon.com, it can be assumed that the company can be considered as a natural acquisition target for Wal-Mart. Through its management strategy and e-business strategy, Wal-Mart may gain many advantage in acquiring Amazon.com. As mentioned, e-business supports easy procurement queries based on search criteria. When an e-catalogue system is employed by the company, this would mean a probable volume of orders, but can it all be handled all at once which may be needed by Wal-Mart. Accordingly, Amazon Company may become Wal-Mart’s e-business supplier and Wal-Mart in return would gain access to the e-tailer’s expertise in handling an internet operation from online ordering to home delivery.
E-business supports easy handling of large number of orders through automated customer info/orders retrieval into online database and being the largest retailing industry, this strong point is needed by Wal-Mart. Furthermore, E-business supports a lot of EDI functions that transform the business processes into paperless operation, which speeds up business process without sacrificing accuracy, reliability and efficiency.
E-Business is large and speedy using Internet as the main infrastructure( 2002) and the Wal-Mart is aware of the advantages of this. In lieu to publishing, Amazon.com potential as an effective medium to connect Wal-Mart from its target market through online networks provided by Amazon. With this, the customers of Wal-Mart will be ensures of the Reliability, flexibility and convenience offered by online vendors like Amazon. Convenience rather than low prices is the most critical need of consumers in the new world of e-marketing and the more that the e-marketing strategies reflect this, the more successful they are likely to be (2001).
- Is the Amazon.com business model, the right model looking ahead 5 or more years?
Amazon.com is currently one of the best in its industry. The company can maintain such status by improving the website it has and through the e-commerce business model that it uses and implemented within the industry. With the business model used by the company, Amazon has been able to gain competitive advantages among its rivals. Among the competitive advantages enjoyed by Amazon.com includes economies of scale and scope in manufacturing and research and development arising from its numerous facilities situated in the United States and other countries worldwide.
It shows that the e-commerce business models implemented by Amazon has helped the company to become the most largest and strong competitor in the online market. In addition, the business model used by the company has helped Amazon to gain customer trust and loyalty by making sure that they always provide the demands of their target market. Through the business model, Amazon is able to customise their products and services to the needs of their customers so as to meet the organizational goal of satisfying them. The e-business model used by the company also helps Amazon to meet the objective of the organization as well as their mission and vision.
Amazon.com perfected the application of the dual generic marketing strategy – the combination of branding and channel management through the business model that it utilised. These strategies helped them to be in an extremely strong position worldwide in connection to the line of the industry they belong. It was also shown that they support their market position with high performing, relevant capabilities, such as communication and technology.
Hence, it can be concluded that Amazon.com’s strategy or choice of e-business model is the right model for the company in order to stay in the competition in the online market and to be recognised as the leading online business in the world. This model can be regarded as the foundation of the success of Amazon.com in the business world.