CHAPTER 4 CASE STUDIES
4.1 Convenience Store Industry
4.1.1 Company A
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4.1.1 Company A IT capability
IT infrastructure
Company A has the strong and robust IT infrastructure developed continuously to afford the distribution capability among suppliers, and the information transparency. The IT infrastructures include the Point of Sales System (POS) performing the data integration among all the stores and suppliers. The mature IT infrastructure underpins a firm’s competitive position by enabling initiatives such as cycle-time improvement, cross functional process coordination, and cross firms collaboration. The unified and integrated infrastructures shared among various stakeholders in the value network benefit the scalability and transparency, enabling the real-time coordination and collaboration within the value network. For example, the integration of the system with the existing platform creates the ability to afford the one-day delivery services. This service has greatly enabled the stores, suppliers and distributors to be more closely connected and well-informed, which has enabled quick logistics scheduling. The constantly developed and improved infrastructure requires the effort dedicated to a solution, which became the promise for the group enterprise to extend and the key capability to attain long-term advantages. The flexibility largely increases the capability of extending their existing infrastructure and system application to respond to future business needs.
Spin-off information department
After spinning off the information center into the independent firms, the center served as the specialized information technology provider for all the associated enterprises within the group. The redesign of the relationship between the organization and the IT department benefits in two perspectives. First, the integration of the IT resources, including employees and technology, turn IT group into a more focused and specialized organization to facilitate the efficient teamwork. Second, the spun-off organization share skill knowledge worker and specialized workers, also the structure of the spin-off company became the revenue creating department rather than the cost development. This action integrates the existing internal IT resources including the workers, knowledge, and that which empowered the operation and the authority toward the different IT investment.
IT business experience
IT business experience is one of the proposed IT capabilities which refer to the ability to align IT strategy and business strategy. It is recognized that the innovation not only involves the technical problem-solving process but also requires the capability to synthesize the value of the firm’s resource with the IT resource. The IT sector has put huge emphasis on the training of both planning and conceiving the IT with business thinking. This capability is crucial for the IT sector, because it contributes to the accumulation of not only the knowledge about the technology but about the comprehensive ability to think strategically for the business. Whereas physical assets and tangible resources can be replicated by competitors, the long term advantage often depends upon the expertise of the people in the organization
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Complementary Resource Large customer-based
Company A has accumulated the large customer base due to their widely coverage throughout the country as an early entrant into the industry. The economics of scales attributing to a large customer base creates sales growth and increases the bargaining power. While they obtain the financial capital such as cash flow, revenue, and profit from a huge customer base, they also leverage this resource to lock in their suppliers in the way of contracting the exclusive for service or products.
Synthesis of value from group enterprise
The resources of sharing within the group enterprise contribute to compounded benefits in two aspects. One is the resource reinforcement which represents the fact that value of resource will increase as the specified resource can be applied in different scenarios. Take the e-wallet as an example, where the more associated vendors and brands accept the card issued by Company A, and the customer can obtain more convenience. The other aspect is about the resource complementarities that create the synthesized value than can be obtained by their existing resource. For example, the strong distribution capability compensates for the inability of online books to sell websites for the products’ logistics. The resources contributed by the economics of scope are the broad extension of their service and products.
Innovation foresight by top managers
Innovation foresight by top managers not only facilitates the innovation activities in the organization, but it also assures the attainment of long term advantages. According to the assistant manager of the General Managerial office in Company A, the CEO and the Chairman clearly understand the opportunity by sensing and identifying the key potential trend of future competition.
This really provides the starting point of the process of formulation of a technological innovation. As assistant mangers mentioned the source of research on the business opportunities, he said as follows.
“Regarding the assessment of investment, we regularly collect information from all the sources including executives visiting abroad, and a unit stands inside to search the latest related information, and some other journals, reports, or exchange information from private organization, etc”.
Marketing capability
The strong marketing capability increases the customer’s retention and stickiness toward their brand. The intensively launched marketing campaigns provide the customer with a variety of products and exclusive services. These rapidly renewed marketing activities create a fresh image to the customer, thereby increasing the possibility of continued customer retention. The effect of marketing activities not only reduces the cost of customer sales, moreover they create the superior purchasing experience with surprises. This strong marketing capability, which stems from the marketing department, gives large boosts to their sales growth and accelerates the introduction of new technological innovation, which helps in understanding the acceptance or thought of the newly introduced IT-enabled service.
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IT-enabled Service Innovation Supply Chain Management System
Company A has developed the collaborated supply chain management systems which provide the strong capability on integrate and coordinate the information throughout their value network.
Especially with information transparently, suppliers and vendor stores can facilitate the non out of stock replenishment capacity. The continuous introduce the facilities and upgrade the information processing systems such as POS, EOS, POS II. POS has four major advantages, first of all, for selling products and sluggish characteristics analysis of consumer goods for understanding the business district; second, to help adjust the shelf arrangement and the effective use of store space;
Third, analysis of inventory data as orders and sales forecast information; finally, to reduce the error rate of accounts, time and manpower. In order to accurately grasp the consumer demand, Company A import second-generation POS service information system, and structure of the company powerful competitive intelligence, real-time invoicing per hour as the unit of information, the weather four times a day intelligence to multimedia display and real-time delivery of goods to centralized information. Therefore, the POS service information system receives 5 million documents daily regarding information consumption, the marketing department then can use these analyzed data to determine the introduction of marketing activities and adjust the set of product in stores. Through the capability of a strong and robust IT infrastructure to create a coordinating and collaborative process;
they can play the central role in this service-value network thereby create well connected linkages and foster the tight relationship with their partners.
Multi Media Kiosk (ibon)
The MMK has been under development for about the past 5 years, starting in 2000. The plan came from top executives in reference to MMK (Multi Media Kiosk) which provides the new kind of distribution of different services different from those products in the stores. However, at that time, they thought it was not mature enough to launch such an initiative, given the limited resources and uncertainty in the markets. Therefore, they did not put the development of ibon in the first priority. In this case, they chose not to be the first mover, which is their preferred strategy. Instead, they thought the introduction of this kind of new platform involved the consideration of the market environment and the costs on the hardware and software. Thus, they would rather launch innovation at the appropriate time with strong system function and robust platform and then keep up with the competitors later. Compatible with the appearance of small stores, using the interface more with the existing multifunction printers links and reserves the expanded scalability to meet future demand for more and more business opportunities. Implementation costs were over one billion, including the back-end part, network transmission, software, etc.
Soon after the launch of ibon, Company C filed the infringement against Company A for copying their services on the kiosk. Due to the lawsuit, they could not aggressively develop related services and features, especially the bonus set of points which is claimed to be one of the patents of Company C. Nevertheless, they thought the better way is not to add more functions to the kiosk, but
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to enhance the utilization rate on the kiosk. The Assistant Manager Lee explained as follows:
“We developed too many multifarious functions which have caused customers to be confused and have wondered what the services they can utilize. Therefore, we thought it would be better to offer simply a function such as the ticket booking that conveys a very clear image for customers to know that the our MMK is what customers can buy a ticket from. Perhaps it will be more effective than the numerous functions on increasing usages.”
Later in 2008 they started to offer the ticket booking services, including traffic tickets and concert tickets. In particular, they have offered these services by exclusive contracts with ticket suppliers in an attempt to tie up customers. Taking the advantages of the large customer base, they always try to contract services in limited supply or exclusiveness.
E-Commerce
Company A has launched a catalog online site named “Uni catalog” to enter the e-commerce market. The Uni catalog commerce site has been in operation for pre-order goods and mail order products, mainly concentrating on the self-developed products of clothing, jewelry and personal goods. In order to increase the sales, they have introduced a variety of products and the rich experience on the customer relationship management and supply chain management from the strategic alliance with Nissen, which has been the popular catalog market company in Japan for 30 years. However, since then, the infrastructure such as the payment mechanism on the e-commerce site did not yet mature, resulting in customers’ concern on the security issue in the purchasing experience.
They started to invest in more online market providers such as that of books.com, Rakuten, for making great use of the resource they had had such as the distribution capability, integrated sales systems. The most successful case is the merger of books.com, which is the online bookseller. After they obtained the books, they integrated the systems with books.com, together with their existing distribution system. This integration of the information and products affords the capability of providing the one-day delivery service, which has fostered their sales more than ever. The advantages stem from the organization to create the complementary which compensate the asset for the distribution and the customer buying experience. This resource complimentarity generated tremendous benefits, and has made books.com to become the largest online sellers in 2006. Later on with more alliance and cooperation with publishers and marketing campaigns have contributed to the sales surpassing the originally first bookseller with physical store and thus became the first bookseller all over Taiwan’s market.
Combined with group resources, they integrated the virtual channels and physical channel in order to generate greater synergy by the IT systems. Specifically, the systems for supporting virtual channels include: mail order to stores, online shopping, local specialties of delivery services, and physical resources that include: Catalog, logistics, stores, cell phone, ATM, etc. These well developed IT systems aid them on the coordination throughout the entire transaction process.
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E-Wallet (icash)
Operational by the end of 2004, they observed that the use of their electronic tools(i-cash) to paying customers and their customers will be priced higher than the average for more than 5 NT dollars. Even with a vast customer base, Company A still attempted to use i-cash to enhance the adhesion degree of customers and increase market share. According to the data, the customers who use i-cash to pay the bill have more on each transaction by 5 dollars.
However, they faced two challenges stemming from the external conditions. Firstly, the government's statute of limitations for the electronic wallet limited the scope of application and constrained it to only micro payments (no more than 450NT per transaction). The second one is that there was already another similar electronic wallet: the easy card, which had vast numbers of users in northern Taiwan. The easy card is issued by the Easy Card Company and was used as payment tool in Taipei’s public transportation facilities (i.e. Metro Rail Transportation and bus). Regarding the e-wallet payment tool, both sides have their advantages and disadvantages. While the advantage of i-cash is the numerous products and the shops provided throughout Taiwan, Easy Card is only limited to the northern region and can only be paid as a traffic tool. But the Easy Card Company was earlier adopted by its customers and is quicker in pay based on the RFID payment mechanism.
However, there is no necessity for competition but for cooperation. The idea of a mutual alliance aroused from the CEO of the Easy Card Company, who sought to extend their existing business line into more areas to be the source of revenue generation. In this cooperation with e-wallet, each side gained their benefits. Company A obtained a large amount of customers and the Easy Card Company extended their market throughout Taiwan. Company A will continuously increase the numbers of alliances, and will provide more associated vendors to customers who can apply the icash
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4.1.2 Company B