CHAPTER 4 CASE STUDIES
4.1 Convenience Store Industry
4.1.3 Company C
國
立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
30
4.1.3 Company C IT capability Internal R&D
As a locally founded enterprise, Company C has strived to keep up the pace and accumulate their competitiveness by way of continuous invention and innovation. Without the prior and rich experiences from outer resources, they highly rely on R&D activities to build up their own technology-based innovation, including the service embedded in the kiosks. With strong R&D capability, they are likely to foresee the opportunities in innovative IT-based service provision and to gain the first mover advantages by reducing the time to market technological innovation. The capability to build up the service ecosystem quickly is of central importance in the service industry.
In this regard, R&D helps them to connect various stakeholders such as vendors, suppliers, and third parties, by building up their information systems and technological facilities. In sum, R&D is regarded as the critical capability for Company C to respond to the needs of the existing business, at the same time to contribute to the identification and exploitation of technological opportunities in new business. The philosophy of technological development noted by the VP of Company C is as follows:
“Although there is less chance to introduce technology via foreign technical transfer, yet the development of their own fruits of touring intellectual property rights can be fully owned within that organization which has increased the capacity of the staff and the organization on technological developments and applications, and can reduce the transaction costs resulting from contracts with application providers as well.”
Patent deployment
Company C also exploits patent deployment to protect the intelligent asset in the technological innovation. Moreover, this resource helps them build up the entry of barriers to competitors and to avert latecomers to imitate them. In the case of MMK, they successfully impede competitors’ action and development on the similar Kiosk-based services. Generally, there are three categories of their patents:
kiosk-enabled services, facilities, and energy-saving technology. From Table 4.1, we can see that Company C has undertaken the patent-protection policy more than other competitors. Under the protection of the patent, the follow-up technological applications and innovations can have more unrestricted access to constant development and can establish entry barriers to some extent.
Table 4.1 Comparison of Numbers of Patents among Four companies
Company A B C D
Kiosk-related services, 14 9 16 0
Facilities 27 9 47 14
Energy-saving 1 1 6 0
Total 42 19 69 14
Source: http://twpat.tipo.gov.tw/tipotwoc/tipotwekm IPO, Ministry of Economic Affairs R.O.C. Access in 2010
‧
國立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
31
Complementary Resource Top manager’s support for innovation
As the assistant vice president of Company C talks about the manager’s support toward the technological innovation:
“For example, the Kiosk had been developed since a long time ago, because our technology Assistant Vice President and the Chairman of the board has addressed the issue of information systems enabled operations and has placed considerable emphasis on the intelligent property deployment.”
The top manager’s willingness to conceive the technological innovation aligned with the cooperage’s strategy becomes the critical factor to the success of every initiative. As they said, we found that the successful initiatives lies not only in the appropriately implemented technology, but also in the long-term support and emphasis from the managers who drive the company to continuously discover the opportunity for innovation. This resource has been found to be necessary for success in the innovation and the initiatives. With the full support and strategic emphasis from top managers, they can conceive a more strategic roadmap with their IT and business.
Core-value Insistence
In the 1990s, they faced the challenges brought on by the growing numbers of competitors’
stores. Soon, they started to consider applying a diversification strategy to broaden their product and services into other markets to obtain sales growth. They chose the wine and cleaning supplies because they were the potential products for their targeted and regular customers-housewives-.These new products did boost the product sales growth to a certain degree, yet they brought problems and challenges to the company. They started to wonder whether these newly-introduced products may contradict against their long insistent value: high quality and healthy food products. The primary concern is whether the perceived image of wine has a negative effect with their proposed value of their food product: healthy. They were also confronted with cultural conflicts with their wine suppliers and the vendors, because the cultures differ largely from the food product business.
Considering the above concerns, in the 2000s, they decided to cut off this business line and to restart, putting more focus on their core business: food manufacturing. Although the consequence was the reduced sales growth by 3 billion and one-third of employees were laid off, the company thought the reduced investment was needed for sustained competitive advantages in the long run.
“The core value of the company is the quality focus of the product and services. We did not invent an irrelevant business just for growth. We undertake acquisition and merge only as the core value of a targeted business is consistent with ours to our customers”
While in the process of business growth and scope expansion, there is a chance that too many associated businesses and sub-brands will bring confusion to the original essential value of the company. Company C chooses to preserve their core value even when they have to endure the
‧
國立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
32
financial loss and operation risk. Consequently, with long term perseverance in their core value they tend to differentiate themselves by the self-developed invention on the technological innovation such as the energy-saving facilities, bakery machines and also the services embedded on technological asset such as MMK.
Be the differentiated and fist one
Company C always strives to differentiate them to discover the niche while still standing on their co-value and core-business of their owned company: the quality focus and the food products manufacturing. For example, rather than increasing their numbers of stores, they stop to think how to create more value to customers from existing stores. First, they closed the ill-operated stores and then came up with the idea to provide fresh bread in the stores, providing the same food as the barkley does. These specialized stores with facilities to produce bread are a brand-new business which requires time in bread production and the additional specialized staff to compensate for the limitation of the area in stores. They also have developed some complex-specialized store to provide services and products corresponding to the needs for nearby areas, such as the coffee provision nearby downtown, and breakfast nearby the schools. After stores were redesigned, the daily revenue was more than that of the normal store by about 40 percent.“To do the business differently is the only opportunity for our company”, as the chairman has said. These examples illustrate that the focus on differentiation is an essential tactic for them to build up their brand image and also the critical means to extend the existing business into more industries.
IT-enabled Service Innovation Supply Chain Management System
There are two parts in the supply chain management systems of Company C, including the front part: Electronic ordering system (EOS), Point of Sales (POS I), and POS II. The other part is the back-end operation including the systems connecting the suppliers and logistics centers.
In 1988 the Board began with the first store in 1989i which set the "system storage" as responsible for all store items in the operations center, followed by the establishment of electronic ordering system (EOS) to establish a set of standards cargo management guidelines as the beginning of our electronic information technology. Later they introduced the POSII, which provided a more advanced function such as the customer profile analysis. In this part, most of the cooperation with third-party developers such as development of POSII was to increase intelligence gathering and analysis capabilities through intelligence gathering customer information. For example, the selection of the place for the bread-first shop selection and the development of a strategy for the specialty shops all depends on intelligence capabilities and therefore on the formation of marketing capability critical information infrastructure.
After realizing that the distribution capability is of importance to a superior operation at providing customer goods in time, Company C decided to spend huge sums of money setting up the Wugu Logistic Center as they opened the 100th store.
‧
國立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
33
Multi Media Kiosk (Life ET)
Among the four companies, Company C was the first to adopt the kiosk to provide numerous information-based services and to enter into the virtual goods market within the convenience stores industry. It took three years to develop and to bring it to the market from 2001 to 2004. Relying on strong capabilities and skilled IT employees, they developed the kiosk without seeking resources from other organizations, which is critical for their subsequent deployment on patent appliance. It obtained first-mover advantages by rapidly building up the information service value ecosystem after implementing the kiosk system. Initially, Company C integrated the information payment systems of several governmental departments with banking companies to provide payment services such as payments of fees and fines, frequent user reward services, and several banking transactions. These services created a strong cash flow and profit growth from the transaction fees. Accordingly, their most revenue-creating source was the “Cash Card payment service” which had helped them break even between their investment and revenue within three years.
In order to sustain these advantages, Company C has taken several patent protection procedures to keep competitors or potential imitators from copying them. Knowing that the kiosk itself is imitable and thus without entry barriers, they choose to protect the related services embedded in the kiosk.
Though intellectual property protection for new services is not a common practice in Taiwan, this action did protect them and to a certain degree impeded service development through kiosks by competitors.
As Company A introduced the ibon facilities and provided some services such as banking payment reward systems, company C started to take the patent protection procedure as their strategy.
Company C claimed that the applications of Ibon, such as the payment services and the reward point systems, have infringed their patent of “Point of Sales”. Company asserted that the services Company A has provided so far are operated in the same fashion as the specification of the patent described. Regarding these services, Company A explained that it is not illegal, because there have been rich applications in such kinds of kiosks and services in Japan and have been utilized in other industries such as in retailing, banking, restaurant for a long time. Company A further argued that the method of transaction on the kiosk to deliver service value to the customer is too prevailing to identify the belongings. Although the verdict of the lawsuit took three years to come to the result and was company C’ lost, Company C still gain the advantage and deter the Company A’s progress in MMK service development during these years.
E-Commcerce
In 2000, they joined the strategic alliance initiated by Company B to serve as the sales channel of physical and virtual goods. Later, they started to launch the on-line shopping mall by cooperation with one of the companies in telecommunication (Company E). In this cooperation, Company B also plays the role in distribution and sales channel and Company E plays the role on implementing the shopping mall platform.
‧
國立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
34
E-Wallet
At first, they are asked to become partners for the bonus card “Happy Go Card” issued by Far Eastern group. They have been assessing whether this card can bring to us the number of customers that they actually have done with the new platform-rich Lyle points card. Far Eastern Group's Happy Go bonus point card is also set to discuss cooperation with us, but they are considering whether the cost of the machine is too expensive or necessary to generate customer retention. The considerations about the adoption of the e-wallet card in the stores are expressed by the CEO of Company C as follows:
“We recognize that a large number of customers can bring considerable cash flow available for operation without any interest. But the critical question is whether customers will really adopt this new means of payment.”
However, the result turns out quite successfully to their expectation, with an amount of 4 million customers adopting the plan. Thus later they changed their attitude toward the e-wallet application.
They cooperated with the banking industry to settle the Mondex electronic cash, besides the Hsinchu Commercial Bank, Commercial Bank of the North release, but for more than a dozen banks totally only about 80 million have not yet reached the prevailing usage. With the first payment platform into an e-wallet, consumer electronic tools in the shop if payment, customer unit price is 30% higher than average. In addition to marketing practices on the commodity rates to attract consumers to use e-wallet payment, the "credit card" feature also stimulates the improvement of customer revenue contribution per consumption. With the function provided through a combination of the e-wallet card, they can understand consumer spending habits after they analyzed the customers’ profiles gathered during the transaction.
‧
國立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
35
4.1.4 Company D