CHAPTER 4 CASE STUDIES
4.1 Convenience Store Industry
4.1.2 Company B
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4.1.2 Company B IT capability
Direct technology transfer from Japanese associated company
They prefer to exploit their technological lead and follower through direct foreign investment or licensing. This is because of the easy and efficient transfer of technology between the patent and the sister company’s foreign ownership. They also have constantly improved the technology to meet the dynamic changing business needs and the customers. At the interview, they said they regularly have meetings with the staff from the Japanese company. In these regular meetings, they discuss the topics covering new technology development, new services to launch, and management practice on store development. From introducing the management practice and technology, they are able to have more opportunities to adopt new technologies in a short time.
Complementary Resource
Top manager’s teaching by self example
Teaching by setting examples by senior managers makes the spirit of service deeply understood by the front line employees. In 2005, the CEO and the other eight senior managers spend two months visiting every store. During the visits, they discovered the problems and challenges which occur in the front-line service. In another example, the store managers are volunteered to distribute the pre-ordered meals to their customers. These actions initiated by the top manager, help form the deeply embedded culture and create the promise of service to the middle managers and the front-line employees.
Well-organized human resource training and development
The key to success for the service industry is to encourage employees to continuously learn and gain experiences. They have established the enterprise university to provide various courses and certificate training designed to correspond with each employee’s different professional capability, position, and background. In another example, because most of the employees are part-time, they have introduced the Store Staff Training (SST) to take training, and are taught by the store chief and the senior manager. Providing the completed and well-arranged training system designed for the every position is important as the human manager has noted. The co-evolved learning employees with the company are necessary for building the long term competence as the human manager noted.
Dedicated to customer service experience
As the CEO has expressed, the only way to differentiate themselves and have success with the intensive competition is to provide the greatest customer purchasing experience. For example, the store manager provides the special activities and campaigns such as the exchange: battery recycling in exchange for bread and milk and blood donation services. The constant focus on high quality service is awarded three times in election of the best service experience evaluated by customers in Taiwan’s convenience store industry since 2004
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IT-enabled Service Innovation Supply Chain Management System
The construction of a distribution center, which served as the platform to information sharing and transmission among the suppliers and distributor, was the central focus in the early development of Company B. In May 1989, Company B established Taiwan Logistics Co., Ltd., which is the only set with four temperate setting rooms, including normal, chilled, frozen, and constantly heated at the logistic center. Because the distribution centers and the fresh goods plant are located in the same location, it not only has reduced transporting costs, it further promised the product quality. The reason for the establishment of a logistics center in the early stage of company development is explained by the managers as follows:
“Logistics is the core competence in the convenience stores industry, and the strong logistics capability is just like making A multiple B into A plus B. That is, it can tremendously simplify the process of production logistic that offer delivery of the correct amount of goods to the right customers in the right time, right place and making cost within a reasonable range.”
With the establishment of a logistics center in the south Taiwan they expanded the scope of its stores and services to the southern region by successively introduction of electronic distribution systems including Point of Sales (POS), Electronic Order Book (EOB), Electronic Oder System(EOS). These integrated systems provided sales information storing and analysis, and streamlined the ordering process to achieve the cost reduction. In this period, they also started to cooperate with third-party vendors and service providers to launch convenience services such as:
government parking fees, costs of collection services, telecommunications, and UPS's express send and receive. With successively forming the strategic alliance they constructed a huge circle of logistics and sales force including department store industry, maintenance of computer service providers, B2B2C, C2C EC marketplace, B2C commerce sites.
Moreover, the headquarters utilized POS intelligence analysis to quantify the difference in spending habits of customers, rapid provision of goods set to play off of each situation, and make product marketing unit so that they could quickly and continuously adjust their marketing activity and planning according to the consumers’ tastes and behavior in purchasing.
Multi Media Kiosk (Famiport)
Company B introduced the MMK by direct technology transfer from the Japanese partner company in 2005. To develop this new type of service, the company spun off this virtual service business embedded on the kiosk to form a subsidiary responsible for the new business. The virtual service provided on MMK is operated by the virtual distribution center (VDC) which is the platform designed for virtual goods trading. Unlike the traditional concept of product distribution, namely that all the products are physical and tangible required for the physical distribution, the VDC is the concept which aims to make the products virtualized and be able to be purchased by information flow processing.
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For example, although the same kiosk has been introduced in two other companies, they had their own deployment for this service innovation. In contrast with the emphasis on the technology development, Company B has focused on introducing and improving new services by transforming existing goods and services from physical to virtual distribution. For example, it has replaced physical game cards with virtual information goods by integrating the information flow across the various game card publishing companies. This new application extremely reduces the costs and risks of stock management. Rather than to invest in the physical facilities and patent, they acquired the kiosk by technology transfer. The consideration of this deployment is keeping their service and marketing rather than by technology development as the core business. The introduction of VDC aims for the benefit from the VDC’s capability of “central control, disperse sales”, which can support other business processes and sales in the long term. This implies that the innovation is not just in customer’s services but also in their business process, which means that it is more extendable and can be applied in other related business lines. For example, they extended their service by cooperation with the distribution company TECO Group and Pelican, providing income signaling picking parts, and simplifying the delivery company’s drivers of customer service and delivery routing operations, reducing store labor costs and telephone charges. More importantly each transaction access to the POS systems of Company B’s stores which help Pelican's accounting system processing with transparency.
VDC as a virtual trading platform reduces the threshold of production distribution, and has made supply and demand and more smoothly. On the basis of this advantage, it has largely transformed the conventional “ABC commodity management rules” applied in physical channel stores. In brief, VDC has made it possible that the products with low sales could still exist in stores in terms of virtualized commodities even with limited spaces in stores. The products such as the game point card and the entertainment tickets have caused cost in inventory management and risk of stealing incurred. But with the VDC, they turn this transaction by the virtual process without any physical inventories in store. One of the successful cases is that in which in the sales of Skype, the stored value card sales in five product items with different prices exceeded 10 million NT dollars, while that which sold Skype’s own network channel did not reduce, indicating VDC has created another sales channel for Skype.
In this case, Company B strove to create more innovative services and store product management by innovation in a process attributed to the introduction of VDC joint ventured with another company. Instead of self-developed technology in the early stage, their focus was on discovering the potential usages both in customers’ services and business applications, provided by new technological roots in the aspect of taking technology as the long term investment.
E-Commerce
In 2000, Company B started to take action against the long-time monopolized market on distribution channel in the part of the internet sales value network. Company B takes the initiators to suggest forming a strategic alliance that has aimed at resource integration and risk-sharing among
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two other companies (Company C and Company D). They later formed a joint venture and named the company “CVS Co”, responsible for cooperation on e-commerce, sales channels, and logistic centers through implementing the shared IT infrastructure including complete cash flow, information flow and stable operating information system rendering the function of information central control and integration. In this way, they could offer both a virtual plus physical channel service called “The last mile in e-Commerce,” that is, the online-market purchased-product pick-up service in more than 2700 stores.
This alliance has stood for the important momentum in this industry, because the goal of the alliance has been to construct a fair trading environment in the business on the internet or in the general merchandise without the exclusive contracts service which cares about the interest of suppliers rather than about the customer’s benefit.
Furthermore, the special management practice is that the CVS Company is operated by rotation from the three companies in the alliance. By doing this jointly owned company, they are more inclined to collaborate and coordinate the resource as a union. This philosophy of business can also be shown by the interview with the managers who talk about the cooperated culture of Company B:
“When we cooperate with companies, the exclusive authorized contracts are not always our options.
In any case, we started from thinking about what can maximize the benefits for customers. The cooperation with suppliers, if taken in a non-exclusive manner, also allows more suppliers to pursue the best interests (i.e. cost, sales channel) at the same time, in turn, the customer may have more opportunities to benefit from the suppliers for broad and inexpensive service provision. While such a strategy appears to suffer in the short term, if considering the best interests of customers and suppliers and maintaining long-term relations with suppliers, this approach is the best solution to achieve a win-win situation for both partners and customers.”
By a strategic alliance, they have obtained the benefit not only of the tangible resources such as the channel expansion, sales increase, shared risk, and cost reduction, but most important the intangible resources such as the brand, suppliers’ linkages and the competitive position against Company A.
E-Wallet (Happy Go)
Rather than with the self-owned and developed e-wallet payment tool, Company B has tended to corporate other’s alliance to offer the convenient payment for customers. At first, they joined the Happy Go Strategic Alliance established by FarEastern Enterprise Group in 2007. The function of this e-wallet is the bonus collection, which can be the exchange for goods or cash discounts.
Customers gain the bonus points based on the amount of consumption when they consume in the vendors within the Happy Go Alliance. With up to 6000 associated retail stores across different industries such as those of department stores, bookstores, gas stations, and traveling agencies, Company B had a great opportunity to increase the to stop rate and to obtain the card holders’
consumption too. According to the data, the average amount of consumption from Happy Go card
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holders is 25,000 NT dollars per person per year. Besides that, the rate of using the card at least once in three months was as high as 80%, and usage of bonus exchanges was up to 50% of card holders.
These data showed this card was a frequently used card and had much potential in increasing the consumption. Company B also pointed out that because the points could be redeemed at any time, the average amount of consumption has been 160NT dollars which has been more than the general customers by 3 times.
In the later cooperation with Easy Card Company has provided the service that allowed customers to use the easy card as the payment tool in store consumption. Knowing that the E-wallet can enhance the customers’ loyalty and retention and customers contribution per consumption, they try to contemplate adopting the consumption payment tool in stores. Instead of issuing the self-owned E-wallet payment card, they have provided the sensor devices to accept the easy card, which brings no need to change the customer’s consumption habit
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4.1.3 Company C