GENERAL BUSINESS GUIDE, 2001 EDITION
Click here for NEW Spring 2001 Case in Point
Click here for Fall 2000 Case in Point
Critical Thinking Questions
- How do businesses and consumers benefit from e-commerce?
- Why would a municipal government participate in a C2G site such as GovWorks?
E-Business and E-Commerce On the Web
For the latest information about Internet usage and e-commerce growth, visit CyberAtlas (http://cyberatlas.internet.com). Browse the "Stats Toolbox" and "Traffic" links under "Big Picture."
- Using data under the "Traffic" link, which Web sites drew the most visitors in a recent month?
- Using data under the "Stats Toolbox" link, what growth patterns are experts predicting for e-commerce in the coming years?
E-Business Case in Point: Fox Store
Many Web sites sell motion picture videos and DVDs. So why would Twentieth Century Fox-known for its film classics, science fiction movies, and musicals-start an online Fox Store (http://www.foxstore.com)? "Our primary reason was to offer a wider distribution of our products," says Kathalene Barton, executive producer of consumer products sites for Fox. She also saw an opportunity for higher profits "because of the limited costs of selling a product online," Barton explains. "We don't have the overhead costs that a brick and mortar operation has."
To avoid conflicts with Wal-Mart and other retailers that sell Fox videos and DVDs, the company puts its corporate Web site address (http://www.foxhome.com), not its online store address, on all its products. However, once visitors get to the corporate site, they simply follow the Fox Store link to buy videos and DVDs. Although Fox originally thought its older, hard-to-find movies would be the hottest sellers, more sales volume has come from new releases of its recent blockbuster movies. Looking ahead, Barton says that one of Fox Store's biggest challenges will be to "break through the clutter" of the crowded online marketplace.
- In terms of the initiation and control of the exchange transactions, how would you classify the Fox Store?
- What does Barton mean when she talks about having to "break through the clutter"?
Source: "E-Commerce Success Story: The Fox Network Online Store," E-Commerce Times, n.d., http://www.ecommercetimes.com/success_stories/success-fox.shtml.
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E-Business and AccountingE-Business Case in Point: Iddex When Raymond Ee and Laura Moran planned the start-up of Iddex, their intellectual property management e-business, the co-founders worked out all the details of traditional business activities such as recruiting and marketing. In addition, they spent a great deal of time investigating which country would be the best base for their operations. The list of possible locations included Switzerland, the United States, Hong Kong, and Bermuda. The entrepreneurs were particularly concerned with each country's taxation policies, especially plans to tax Internet sales. They also looked at the privacy regulations, political climate, and telecommunications infrastructure in each area. After comparing each country's restrictions and opportunities, Ee and Moran decided to open Iddex in Switzerland. Given the global nature of e-commerce, more e-businesses are likely to follow a similar process when selecting their locations.
Source: Jennifer Jones, "Some E-Businesses Lured Overseas: Start-Ups Hope To Take Advantage of Breaks, Benefits Outside the United States," InfoWorld, February 28, 2000, p. 30. Current events news summaries: America Online was fined $3.5 million for spreading subscriber acquisition costs over 24 months rather than writing them off as current expenses. What did the Securities and Exchange Commission have to say? http://www.ecommercetimes.com/news/articles2000/000516-4.shtml The European Union may levy a value-added tax (VAT) on services purchased via the Internet and delivered to customers within Europe. What would this tax cover? http://cnnfn.com/2000/06/08/europe/eu_vat/ Support for Internet taxation is also building in the United States. What are the current arguments for and against? http://www.ecommercetimes.com/news/articles2000/000717-3.shtml Virtual accounting is only one of the topics e-business CFOs are thinking about. How are companies handling accounting in the Internet age? http://www.ecommercetimes.com/news/articles2000/000726-4.shtml E-Business and Business CommunicationE-Business Case in Point: Trip.com How can an e-business start-up with a small staff field hundreds of e-mail inquiries every day? Pat DeFazio, customer support supervisor, had to solve that problem after Trip.com (http://www.trip.com), a travel Web site, planned a wider advertising campaign to attract more customers. Months before the ad campaign began, DeFazio began researching automated e-mail response systems and found one that suited Trip.com's needs and budget. Because she was concerned about customer reaction, DeFazio decided to let the automated system answer only the most specific, clear-cut inquiries; she and her staff planned to read and answer any complex or unusual inquiries. Customers who send routine inquiries receive system-generated responses and are invited to e-mail another inquiry (with "Manual Review" as the subject) if they want a personal response from a staff member. The handful of Manual Review inquiries received every day go directly to the staff for immediate attention. Trip.com's automated e-mail response system is so efficient that DeFazio and one full-time staff member can manage as many as 25,000 monthly inquiries.
Source: Elizabeth Crane, "Trip.com," SmartBusiness Magazine, August 2000,http://zdnet.com/smartbusinessmag/stories/all/0,6605,2598240-2,00.html. Current events news summaries: XPlane knows that a picture is worth a thousand words–and much more. E-business start-ups are asking XPlane, itself a start-up, to create colorful, snappy illustrations to clarify their complex business plans. What are the benefits? http://cnnfn.com/2000/08/10/cashflow/q_graphics Text chat is catching on as an effective way to communicate with customers who are browsing company Web sites. How do text-chat systems help e-businesses better serve their customers? http://www.business2.com/content/magazine/marketing/2000/06/01/10974 E-mail campaigns are the latest marketing tool for reaching targeted audiences with messages geared to their interests and needs. How can e-mail marketers avoid being labeled as spammers? http://www.business2.com/content/magazine/marketing/2000/08/08/15434 Spam isn't just annoying, it's illegal in some states: Washington state forbids misleading subject lines and other common tricks used by spammers. What's the future of spam? http://www.ecommercetimes.com/news/articles2000/000509-4.shtml E-Business and Decision ScienceE-Business Case in Point: Hewlett-Packard Many of Hewlett-Packard's inkjet printers were available with different features and options. Customers liked the wide range of choices, but it complicated the company's efforts to effectively forecast demand and manage inventory. Then Hewlett-Packard developed a set of algorithms covering the interrelationships among inventory costs, pricing, demand uncertainty, supply uncertainty, and related factors. These algorithms, accessed via the company's intranet, help product designers mathematically examine different product variations and their impact on supply-chain requirements. Using the Web-based tools, Hewlett-Packard designers have developed new types of printers specifically designed to be enhanced with additional features and options further downstream in the value chain. This means the company can meet ever-changing customer needs without maintaining unnecessarily high inventory levels or producing too many unpopular models. "Reducing future uncertainty by investing in the design allows us to respond to market fluctuations quickly enough without excessive inventory cost," says the product manager for Deskjet printers.
Source: Tim Stevens, "Designs in Sync," Industry Week's The Value Chain, June 12, 2000, http://www.iwvaluechain.com/features/articles.asp?articleid=842 Current events news summaries: Larger companies used to insist that suppliers use electronic data interchange (EDI) to exchange information about orders and shipments. Internet technology is now helping businesses of all sizes manage supply-chain activities. What are the advantages? http://www.iwvaluechain.com/Columns/Columns.asp?ColumnId=641 Home delivery of ordered goods is a key logistical element for e-businesses. How is HomeGrocer.com using delivery as a competitive tool? http://www.time.com/time/digital/magazine/articles/0,4753,50333,00.html Rare book dealers that want to sell on the Internet can use the Alibris Web site as an online catalogue and, for an additional fee, have Alibris manage their inventory. What are the benefits and limitations? http://www.time.com/time/digital/magazine/articles/0,4753,47491,00.html E-Business and EconomicsE-Business Case in Point: PayPal In the movement toward a cashless society, PayPal (http://www.paypal.com) is one of the Internet front-runners. This payment services site allows consumers and businesses to pay for transactions without printed checks or plastic cards. Once users have logged onto PayPal and submitted their credit card or checking account numbers, they can send money to anyone by simply entering the recipient's e-mail address and the amount. Recipients can choose to have money deposited directly in their bank accounts or have a check mailed to their homes. Three million users have already signed up for PayPal's services. Some use the service to pay for goods purchased at online auctions, while others use the service to donate money to charity or to pay bills online. Although consumers can use PayPal for free, the site also offers low-cost business accounts for e-commerce merchants that want to accept credit card payments. In a new twist, PayPal is allowing users to send payments using mobile phones. Watch for more innovations as PayPal grapples with competition from Western Union's MoneyZap service and eBay's Billpoint service.
Source: Roland Jones, "E-Pay Firms Outpace Banks," The Street.com, May 23, 2000, http://abcnews.go.com/sections/business/thestreet/epay000523.html; Cheryl Rosen, "New Services Let Users Pay Bills Via Cell Phone," Information Week, June 19, 2000, http://www.informationweek.com/791/paypal.htm Current events news summaries: The B2B online auto-parts market planned by General Motors, Ford, and DaimlerChrysler is one of several B2B markets raising concerns at the Federal Trade Commission. What are the antitrust issues? http://www.business2.com/content/channels/ebusiness/2000/08/08/15404 American Express has set up a B2B online market exclusively to serve its business customers. Why is American Express bringing in a B2B technology expert to run this online market? http://www.thestandard.com/article/display/0,1151,17366,00.html By 2005, Jupiter Communications believes that the total value of U.S. B2B non-services transactions will run into the trillions of dollars. Where are B2Bs headed? http://www.redherring.com/industries/2000/0627/ind-shoptalk062700.html E-Business and FinanceE-Business Case in Point: eParties and eCompanies When eParties opened for business in December 1999, launched by the eCompanies incubator, it was designed as a complete online party store and planning center. Customers could simply sign on, plan their guest lists, and buy hats, plates, invitations, and everything else for birthday bashes and other parties. Just six months later, however, eParties fired all its employees and was bought by the online toy retailer eToys (http://www.etoys.com). What happened? As the online business environment becomes increasing competitive, weaker firms are being forced out of business or are having to arrange mergers to gain the strength to continue. Timing is also important. Online rivals such as iparty (http://www.iparty.com/) opened for business well ahead of eParties, so iparty was already established when the newcomer joined the bash. In addition, profitability plays a critical role. As eParties learned, the profit margins on party goods are relatively slender. In the end, although incubators such as eCompanies can provide valuable support in the form of funding, office space, and other assistance, e-businesses must attract loyal customers and build strong, steady sales to stay alive.
Source: "Eparties Turns Out the Lights," Red Herring, June 5, 2000, http://www.redherring.com/industries/2000/0605/ind-ecompniaes060500.html; Lori Enos, "Etoys Acquires Online Party Site," E-Commerce Times, June 12, 2000, http://www.ecommercetimes.com/news/articles2000/000612-5.shtml. Current events news summaries: As discussed in an earlier E-Business Case in Point, Niku's IPO got off to a good start, but the stock price has been lower in recent months. Check the company's investor relations page to find out about the company's latest earnings and stock price. What's next for Niku? http://investor.niku.com/ Chinese e-businesses are also facing financial challenges. Online start-ups that once looked so promising are now struggling, despite meteoric growth in Internet usage. What's happening? http://www.redherring.com/investor/2000/0814/inv-troubles081400.html Venture capitalists such as Benchmark Capital and Crosspoint Venture Partners are critical to the funding equations of many e-businesses. Who are the leading venture capitalists–and what are they backing? http://www.forbes.com/asap/00/0529/121.htm Charles Schwab, E*Trade, and TD Waterhouse are all getting ready to allow online investors to buy and sell stocks and bonds on any of the world's major stock exchanges. What are their plans? http://www.ecommercetimes.com/news/articles2000/000612-5.shtml E-Business and Legal StudiesE-Business Case in Point: Bidder's Edge vs. eBay Can one Web site create a link to any page on any other Web site–without permission? That's the basic question underlying the legal battle between Bidder's Edge (http://www.biddersedge.com) and eBay (http://www.ebay.com), the largest online auction site. Bidder's Edge uses sophisticated technology to sniff out and link to auction pages for various products being sold on other auction Web sites. This allows buyers to compare numerous offers before bidding. Bidder's Edge had been linking directly to individual auction pages on the eBay site instead of to the firm's home page. Ebay complained that Bidder's Edge might be showing customers outdated, inaccurate, and incomplete data because pages are constantly updated as auctions progress. After negotiation attempts failed, eBay won an injunction preventing Bidder's Edge from continuing to search its pages, citing computer trespassing. Bidder's Edge countersued, arguing for the free flow of information across the Internet and for consumer access. Bidder's Edge has successfully negotiated to search and list pages from four other online auction sites, but the legal wrangling with eBay remains a major focus for the coming months.
Source: "Ebay Wins Round in Court," CNNfn, April 18, 2000, http://cnnfn.com/2000/04/18/technology/ebay/; Daniel Roth, "Meet Ebay's Worset Nightmare," Fortune, June 26, 2000, 199-204. Current events news summaries: When Toysmart.com went out of business, it wanted to sell its proprietary database of customer information, but attorneys general for 39 states and regulators from the Federal Trade Commission objected. How was this dispute over privacy settled? http://www.ecommercetimes.com/news/articles2000/000728-2.shtml The Internet is changing the way lawyers operate and advise their business clients. What do all these changes mean? http://www.fastcompany.com/online/35/fastfunction.html Now individuals can sign legally-binding documents with a click of the mouse, thanks to the new electronic-signatures law. How will e-signatures affect e-commerce? http://www.zdnet.com/zdnn/stories/news/0,4586,2597132,00.html The Federal Trade Commission requires retailers to notify customers when shipments are late. Toysrus.com (http://www.toysrus.com) and six other etailers recently paid penalties to settle charges related to notification problems from last Christmas. What happened? http://www.cnnfn.com/2000/07/27/news/settle/ E-Business and Management/Human ResourcesE-Business Case in Point: Vignette High-tech recruiting methods are only one way Vignette, a developer of Web content management software, attracts skilled employees. The company, based in Austin, Texas, is growing extremely rapidly as demand increases. In line with its aggressive expansion plans, it wants to increase the size of its workforce from 1,200 to 2,500 employees in less than a year. To catch the attention of Web surfing job-seekers, Vignette uses Internet job sites and posts prominent links to job opportunities on its company Web site (http://www.vignette.com). Still, employee referrals account for three-quarters of all new hires. Vignette offers rewards such as cash, electronic gadgets, and trips to employees who refer successful job candidates. Once employees sign on, they generally stay, thanks to a generous benefits package plus stock options, chair massages, yoga classes, and a concierge service to handle personal tasks.
Source: Kayte Vanscoy, "The Hiring Crisis," Smart Business, July 2000, 85-97. Current events news summaries: Many e-business start-ups lack the expertise to arrange the benefits they need to attract talented employees. That's one reason behind the growth of HR outsourcing. What do HR outsourcers do? http://www.thestandard.com/article/display/0,1151,14551,00.html As long as the company's stock price is going up, stock options can help e-businesses attract and retain employees. But what happens to employee attitudes when the stock price plummets? http://www.smartmoney.com/misc/index.cfm?story=thousandaire Now any company that wants to set up a customized corporate portal can do so using the new Corporate Yahoo! service. What kind of features might companies want to offer on their private portals? http://www.ecommercetimes.com/news/articles2000/000629-1.shtml E-Business and Marketing/AdvertisingE-Business Case in Point: Kmart Kmart has become a "bricks and clicks" retailer, building on its brand to spawn a Web site named after its well-known blue-light store specials (http://www.bluelight.com). This site is a joint venture between Kmart, based in Michigan, and Softbank Venture Capital, based in Japan. Martha Stewart, whose brand graces linens and other items sold at Kmart, also has a small stake and touts BlueLight.com on her Web site. One way BlueLight.com is making a splash online is by offering free Internet service to attract visitors, reinforce the brand, and keep visitors coming back to check e-mail and shop. Kmart's regular schedule of store advertising brings visitors to the BlueLight.com site in search of promoted products–and keeps the site's promotion expenses within reason, compared with the much higher promotion expenses racked up by Web-only retailers who must build their brands and their audiences from scratch.
Source: Joann Muller, "A Blue-Light Specialist," Business Week, June 19, 2000, 212E8. Current events news summaries: Reel.com (http://www.reelcom), which used discount pricing to build its online reputation, is being closed by its parent company, Hollywood Entertainment. What happened? http://www.ecommercetimes.com/news/articles2000/000612-2.shtml Webvan (http://www.webvan.com) is expanding beyond supermarket products to sell popular books, CDs, and consumer electronics such as CD players. Is this a good idea? http://www.ecommercetimes.com/news/viewpoint2000/view-000609-1.shtml Evite (http://www.evite.com) will do almost anything to get its brand better known. What will its marketers think up next? http://www.thestandard.com/article/display/0,1151,17192,00.html E-Business and MISE-Business Case in Point: Jamcracker One of the hottest trends in MIS is the growth in software supplied by application service providers (ASPs). Now Jamcracker (http://www.jamcracker.com) is taking the ASP concept a step further. As an ASP aggregator, Jamcracker has assembled a huge menu of software offerings from various ASPs, offering one-stop shopping for businesses that want to use a number of applications from different sources. The menu includes software for human resources management, expense accounting, e-mail management, and meeting management. Once business customers log on and enter their passwords, they can access any of the chosen applications, input data, and export data as needed. Jamcracker's Web portal ensures compatibility and allows customers to quickly and easily transfer information between different applications. Businesses pay one monthly fee for access to multiple applications, and they know the software will be available when needed because Jamcracker offers a 99% up-time guarantee. Customers like Jamcracker: "I'm working with limited funds here, so this is perfect; we have no capital expenditures and no payroll expenses for IT [information technology] staff, but we still have the applications we need," says the co-founder of ChannelAutomation, which uses seven applications from the Jamcracker menu.
Source: Sarah L. Roberts-Witt, "Jam On It," Business 2.0, August 22, 2000, 80-83. Current events news summaries: Companies planning to work with an application service provider should think about security, availability, and functionality before finalizing the arrangement. How do these issues relate to ASPs? http://www.nylj.com/tech/050800t4.html More e-businesses are hiring online security firms to check for security problems that might allow hackers to attack their sites or steal sensitive data. What do online security experts do? http://www.zdnet.com/smartbusinessmag/stories/all/0,6605,2577905,00.html Many companies use software to monitor their employees' e-mail content and Web-browsing habits. Why is this a hot issue? http://www.zdnet.com/smartbusinessmag/stories/all/0,6605,2562823-4,00.html E-Business and StrategyE-Business Case in Point: Commerce Bancorp Totally free checking seems like a throwback to the 1950s, but it's one of the differentiating features of Commerce Bancorp's customer-service strategy. While other banks are closing unprofitable branches and hiking fees, Commerce has been opening new branches, attracting new customers, and raking in revenues at a rapid pace. More like a savvy retailer than a conservative banker, Commerce goes out of its way to give customers the products and services they want–online as well as offline. Knowing that customers get upset about excessive banking fees, Commerce offers new customers a full year of free checking; after that, they need to keep $100 on deposit to avoid fees. The New Jersey-based bank has also redefined "banker's hours," keeping its branches open more than 12 hours on weekdays and at least a few hours on both weekend days. Although many banks offer Internet banking to wean customers away from branch visits, which are more costly, Commerce lets customers choose how and when they want to bank. In fact, Commerce customers who bank online (http://commerceonline.com/) still go to their local branches an average of five times monthly. This customer-service strategy is paying off: Commerce's earnings are nearly twice the industry average, and its customer usage of online banking is nearly three times the average industry rate.
Source: Jathon Sapsford, "New Jersey's Commerce Bancorp Stretches Hours, Cuts Service Fees," Wall Street Journal, May 17, 2000, p. A1+. Current events news summaries: Companies that expand their business portfolios through acquisition of existing firms sometimes get more complications than they bargained for. What happened when Virginia-based giant America Online acquired Nullsoft, a tiny Arizona-based software firm? http://www.business2.com/content/magazine/vision/2000/07/25/14830 Amazon is teaming up with Toysrus.com to set up a separate toy and video game e-tail site. For Amazon, the new site is a way to offer a much wider selection and reach many more customers. How is each partner gaining from this strategic alliance? http://cnnfn.com/2000/08/10/technology/amazon/ Barnesandnoble.com continues to lag behind Amazon.com in online bookselling. Its expenses have been unexpectedly high, and sales have not grown as expected. Can the parent company boost sales through synergy between the e-business and the legacy book store business? http://www.forbes.com/tool/html/00/aug/0804/feat.htm In conducting their SWOT analyses, many e-businesses would call "first-mover advantage" a major strength. Amazon.com, for example, was the first online bookstore, which gave it a huge head-start. But does being first always translate into online success? |
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E-Business and AccountingE-Business Case in Point: Amazon.com Aggressive accounting techniques are again in the e-commerce spotlight. The U.S. Securities & Exchange Commission (SEC) is now investigating how Amazon.com calculates revenues. The e-tailer reports as revenues the stock it receives from e-businesses whose sites are promoted on the Amazon.com siteóa practice that's legal but may be regarded by the SEC as too aggressive. Amazon.com is also reporting fulfillment costs (such as maintaining warehouses) as selling, general, and administrative (SGA) expenses, rather than as items under cost of goods sold. This makes its gross margin appear better. As a result, Amazon.com's gross margin in 2000 is about 24%, although it would be only 14% if fulfillment costs were included under cost of goods sold. Meanwhile, the Financial Accounting Standards Board is going to allow companies to include fulfillment costs either under SGA or somewhere else on the income statement. If these costs are shown elsewhere, however, they must be detailed in a footnote. Amazon.com has already said it doesn't plan to change its accounting practices, and other e-businesses have also indicated that they will continue using the SGA category for fulfillment costs. Unlike the FASB, the SEC would like to see more consistency: "To have two companies account for the same thing differently cannot be the same thing for investors," states an SEC professional accounting fellow.
Current events news summaries:
The goal of the Streamlined Sales Tax Project is to "simplify and modernize sales and use tax administration." How will this effect taxation of online sales? A survey of Web shoppers shows that online spending would decrease if such purchases were subject to sales tax. What are the positions of industry groups and government officials? Accounting irregularities led Lernout & Hauspie Speech Products, a high-tech company based in Belgium, to file for Chapter 11 bankruptcy protection so it could sort things out. What happened? E-Business and Business CommunicationE-Business Case in Point: Plagiarism.org The Internet is such a fast and convenient tool for researching term papers that colleges and universities are concerned about a rising tide of copy-and-paste plagiarism among students. In addition, a number of e-businesses have sprung up to sell prewritten term papers to students over the Internet. Now the 59 academic institutions in the Consortium of Liberal Arts Colleges have signed up to detect plagiarism using the database of Plagiarism.org http://www.plagiarism.org, founded by John Barrie. Here's how the site works. After an instructor submits a paper electronically, Plagiarism.org's system digitizes the contents and compares it with the one billion papers and documents in its database. The system highlights any passages that match information in its database, indicates the probable sources, and e-mails the paper back to the instructor. Although Plagiarism.org is helpful, it's not entirely foolproof. An assistant professor of history at Wesleyan University, for example, was able to confirm her suspicions by submitting two students' papers for checking; both were returned with color-coded matches showing definite plagiarism. Still, some instructors complain that Plagiarism.org might not catch passages lifted from more recent Web documents not yet in the site's database, and others say that the system can catch direct quotes but not paraphrased material used without attribution. Nonetheless, Plagiarism.org can be a valuable screening device for instructors who want to find out whether particular papers are original or plagiarized.
Source: Alissa Quart, "How To Cheat the Cheaters," Time Digital, November 15, 2000, 70-71. Source for December, 2000 update: Elizabeth Hurt, "Chat Spats," Business 2.0, August 25, 2000, Current events news summaries: A group of Internet ad agencies and promotion firms has formed the Responsible Electronic Communication Alliance to self-regulate the industry's use of spam. What are they proposing?
The Spamhaus Project, an anti-spam organization in the United Kingdom, reported finding evidence that AT&T and PSINet allowed commercial e-mailers to distribute unsolicited messages using their networks. How did AT&T and PSINet respond to this report? The Internet is becoming more international: Organizations can now register for .com, .net, and .org domain names in Chinese, Korean, and Japanese languages. Around the world, how many new domain names are registered daily? E-Business and Decision ScienceE-Business Case in Point: Petopia Order fulfillment is a critical element in e-commerce, yet major sites such as Toysrus.com and Macy's.com had major difficulties during last year's year-end holiday shopping rush. Both sites allowed customers to continue ordering products that were not in stock. This got customers steamed and resulted in a hefty fine from the U.S. Federal Trade Commission. Smaller e-businesses have had trouble, as well. Managers of the pet supply site Petopia (http://www.petopia.com) were initially elated when 160,000 customers flooded the site with ordersóquadruple the level it had expected. However, the orders overwhelmed Petopia's distribution center, leading to delays in delivery and in answering customer inquiries about shipments. Petopia immediately apologized: "We were upfront with our customers about botching things," said a company official. As the company caught up on fulfillment, it sent every customer a free music CD for their pets. The apology and the gift helped repair relations with customers, leading 70% of Petopia's customers to place additional orders. Petopia didn't take any chances with the 2000 holiday shopping season, however. It invested $10 million to install updated customer-service software capable of handling twice as many customer orders and communications as in 1999.
Source: Jeannette Brown, "Service, Please," Business Week, October 23, 2000, EB48-EB50. Current events news summaries: The Department of Defense is modernizing its procurement system by hiring Accenture (formerly Andersen Consulting) to develop a computerized system for buying and tracking the warehousing and delivery of 4 million non-weapon items such as office equipment and uniforms. What are the benefits?
Timely fulfillment of orders is a key issue for e-tailers this holiday shopping season. How are online stores preparing for this critical selling season? Decision-science technology jargon changes quickly. Here's a primer to some of the latest terminology. What is a vertical marketplace? E-Business and EconomicsE-Business Case in Point: FoodUSA.com Competition among B2B online food and meat markets is fierce, as FoodUSA.com (http://www.foodusa.com) has learned. The site opened for business just one day after six meat industry giants, including Smithfield Foods and Tyson Foods, announced their own B2B meat and poultry exchange. Other B2B food and meat exchanges include Foodexchange.com (http://www.foodexchange.com), and Sellmeat.com (http://www.sellmeat.com). Despite the competition, Rod Heller, FoodUSA's chairman, continues to push ahead, adding new features and special services to attract buyers and sellers. For example, Peer Foods, a Chicago-based meat-processing company, decided to participate as a seller because FoodUSA.com handles transportation arrangements and credit approvals; it also offers seminars to educate industry players about e-commerce. FoodUSA.com makes money by charging sellers a fee of one-half percent on sales made through the site. So far, FoodUSA's strategy is paying off: In just six months, the site led customers to sales of more than $30 million worth of food and meat products.
Sources: Paul Elias, "B2B Exchanges Arm For Food Fight," Redherring.com, June 23, 2000, http://www.redherring.com/industries/2000/0623/ind-foodusa062300.html; FoodUSA.com Web site (http://www.foodusa.com); Paula Lyon Andruss, "Choose Or Lose," Marketing News, October 23, 2000, 1, 11. Source for December, 2000 update: James K. Glassman and Kevin A. Hassett, "Ganging Up," Standard.com, December 4, 2000, http://www.thestandard.com/article/display/0,1151,20421,00.html. Current events news summaries:
B2B e-commerce is ringing up more than $335 billion in sales during 2000. How large will this part of the new economy become in the coming years? Statistics are commonly used to create and support all manner of economic theories. What statistics making headlines are being debunked by the Vital STATS site this week? More electronic cash alternatives are becoming available. How are CitiGroup and America Online teaming up to enter this business? E-Business and FinanceE-Business Case in Point: Icebox.com Once VC investors fund an e-business, they closely monitor its progress and prospects. Sometimes they put pressure on a company to make changes that will affect financial performance, as Icebox.com has learned. Icebox.com, which develops Web-based creative animated shows, came online in June 2000. Within a few months, both Showtime Networks and Fox Broadcasting had licensed Icebox.com shows as the basis of live-action television comedies. Despite continued interest in its shows, however, Icebox.com recently laid half of its 100 employees in a bid to achieve profitability more quickly. "We're being forced by our investors to take a very rational look at the business and do the things that were the right thing to doóand we've known were the right things to doófor five months, but didn't want to," said CEO Steve Stanford. "We need to be able to do shows a lot less expensively than we've done in the past." Now the company is outsourcing much of its production operations, and it will ask some of the laid-off employees to work as freelancers on selected projects. Stanford says Icebox.com is aiming to be profitable by the end of 2001, which should be good news to the eCompanies incubator and other investors.
Source: Gary Gentile, "Web Entertainment Site Cuts Staff," Washington Post, November 28, 2000, http://www.washingtonpost.com/wp-srv/aponline/2001128/aponline203621_000,htm. Current events news summaries: CarsDirect.com filed for IPO in the spring of 2000, but as of mid-November, it had not followed through on the plan to go public. Where does the company stand relative to its competitors, and why is it suing KPMG over customer-tracking technology?
Venture capital financing continues to flow to e-businesses based in Southern California. Who's getting VC capital, and for what? IPOs have raised more money in 2000 than in 1999, but first-day closing prices are no longer setting records. What are the trends in IPOs? E-Business and Legal StudiesE-Business Case in Point: Napster Napster (http://www.napster.com) is a company based on file-sharing software created by Shawn Fanning, a student at Boston's Northeastern University. Napster's software (currently free) allows users to locate and download music files from other users' computers. This "peer to peer" model connects users with each other rather than giving users access to a central database like the music files available on MP3.com (http://www.mp3.com). Napster says that the free site is legal because users are making private, non-commercial "fair use" of the shared files. But the Recording Industry Association of America (RIAA) and more than a dozen music publishers disagree. They've sued Napster for copyright infringement, saying that the company is encouraging the free exchange of copyrighted music without payment to the copyright holders. Although a U.S. District Court ordered Napster to shut down, a U.S. appellate court allowed Napster to remain operational while the case moved through the courts. Then, in November 2000, the German music and media giant Bertelsmann cut a deal with Napster to start a fee-based music subscription service. Bertelsmann is lending Napster $50 million to develop the new system, which will receive monthly fees from subscribers and make music files available in exchange, paying royalties to copyright holders for the music that is downloaded. This deal raises hopes that the intellectual property issues surrounding Napster can be settled privately rather than through a court-ordered resolution.
Sources: Jonathan Ringel, "Federal Circuitry," American Lawyer Media, October 2, 2000, http://www.law.com; "Digital Firms Urge Changes in Copyright Law," Reuters, November 29, 2000, http://www.reuters.com; Brad Stone, "The Odd Couple," Newsweek, November 13, 2000, pp. 56-57. Sources for December, 2000 update: Lori Enos and Elizabeth Blakey, "Toysmart Will Not Sell Customer Names... For Now," E-Commerce Times, July 28, 2000, http://www.ecommercetimes.com/news/articles2000/000728-2.shtml; Keith Regan and Clare Saliba, "Privacy Watchdogs Blast Amazon," E-Commerce Times, September 14, 2000, http://www.ecommercetimes.com/news/articles2000/000914-3.shtml; "Amazon May Share Data," CNNfn.com, September 1, 2000, http://cnnfn.com/2000/09/01/technology/wires/amazon_wg/; Current events news summaries: MP3.com has lost a series of legal battles with music publishers over copyright violations. The company recently agreed on the amount of damages it will pay to settle the last of the court decisions. How much will MP3.com have to pay Universal? Music publishers and film companies protect their digitized works using access codes. Now the U.S. Library of Congress says that only two types of electronic works are exempt from the laws forbidding the cracking of these access codes. Which two are exempt? The European Union recently passed a law allowing consumers to file suit in their home countries and use local laws for redress against online shopping abuses. What does this mean for international e-commerce? E-Business and Management/Human ResourcesE-Business Case in Point: Circles With so many companies vying to recruit, retain, and motivate high-tech job candidates, benefits have become a key part of the compensation packageócreating a huge opportunity for e-business entrepreneurs. Circles is a Boston-based company that provides virtual concierge services to the employees of corporate clients. From finding a special gift to buying entertainment tickets to making travel reservation, the concierge service will do almost anything to get whatever the employees request. The cost is a flat yearly fee of $200 per employee plus an hourly rate to cover services over a preset level. However, companies see this as a good way to reduce employee stress and help staff members better balance home and work obligations. Once a corporation signs on, employees can log onto the Circles Web site (http://www.circles.com) to submit requests. Then Circles automatically routes the requests to the appropriate suppliers, who complete the transaction. As an alternative, employees can call Circles, but the concierge service prefers to do as much as possible electronically. In time, Circles hopes to learn so much about employees' preferences and lifestyle that its experts can actually offer suggestions rather than simply wait to act on requests.
Source: Erick Schonfeld, "The (Electronic) Personal Touch," Fortune, March 20, 2000, 214. Current events news summaries: Outsourcing can be a good way to have experts handle specialized activities such as personnel benefits. What should companies consider before deciding to outsource human resource functions or other operations? Demand for top management talent is so strong in areas with a high concentration of e-businesses that more firms are turning to interim CEOs while they continue recruiting. What are the benefits? How do businesses recruit for e-business positions outside the United States? Here's a primer on what to do. What common missteps should U.S.-based e-businesses avoid? More e-businesses are asking employeesómanagers, in particularóto sign employment contracts when they're hired. What does this mean for the new employee and the company? Working in a start-up or a fast-growing e-business can be draining. How do e-businesses help their employees maintain a healthy balance between their work and personal lives? E-Business amd Marketing/AdvertisingE-Business Case in Point: Lee Jeans During most of 2000, Lee jeans played on the excitement of presidential politics by running an online "Buddy Lee for President" campaign, built around the brand's mascot. The campaign also included Web sites boosting Buddy Lee's rival, a racecar driver named Curry. The point was to make the Web sites look anything but corporate, so consumers in the target audience (17- to 24-years-old) would not see the sites as advertising. "At that age, they don't trust advertising," says Lee's manager of interactive communications. "They like to think they've discovered something for themselves." The campaign worked, increasing sales of Lee jeans at Sears by 125%. Now that the election is over, the main Buddy Lee site (http://www.buddylee.com) is continuing to use the characters of Buddy and Curry to keep the fake rivalry alive in games, sweepstakes, and other promotionsówithout losing site of the site's purpose. In addition to a store locator page, the site contains a page of featured dungarees for men and women.
Sources for December, 2000 update: Erin Kelly, "This Is One Virus You Want To Spread," Fortune, November 27, 2000, pp. 297-300; Sofia Javed, "Ethnic E-Tailer Builds Expertise in Untapped Market," Marketing News, October 9, 2000, p. 24; David Welch, "Car Dealers Say: Follow That Mouse," Business Week, April 10, 2000, pp. 106-110. Current events news summaries: Companies using the Internet to build their brands also have to find ways of protecting their brands online, from cybersquatting and misuse, among other problems. What protection do companies have against unauthorized brand-damaging actions on the Web? Priceline.com's policies have left some consumers unhappyóso unhappy that complaints have prompted the Connecticut Attorney General to start an investigation. The company has also had financial problems and lost key executives. What are the issues? WebVan recently acquired rival Home Grocer, but continued to post losses although it has steadily gained customers. What is the outlook for this e-business? E-Business and MISE-Business Case in Point: Navy-Marine Corps Intranet The U.S. military is moving its internal communication systems into the Internet age through outsourcing. The Department of Defense recently awarded a $6.9 billion contract to Electronic Data Systems, Raytheon, and WorldCom for the building and operation of a gigantic intranet to link 360,000 members of the U.S. Navy and Marine Corps around the world. The new Navy-Marine Corps Intranet will replace separate Navy and Marine computer networks costing more than $1.5 billion yearly to maintain. Some of the savings from the switch to outsourcing will be put toward encryption and other features to improve the security of the military systems. A number of subcontractorsóincluding small businessesóare working on the project, which is the largest outsourcing contract the U.S. government has ever signed, covering a wide range of equipment and networks for state-of-the-art voice, video, and data communications within the Navy and Marine organizations. In the past, this kind of project was handled by specialized civilian workers on military payrolls. Now, says the Deputy Secretary of Defense, the outsourcing contract "gets the government out of the business of owning and operating information technology systems, and instead transfers that function to a fee-for-service contract with private industry."
Sources for December, 2000 updates: Matthew A. DeBellis, "ASP: Anyone Still Paying?" Redherring.com, November 20, 2000, http://cnnfn.com/2000/11/20/redherring/herring_asp/; Alan Hall, "ASPing For Trouble," Business Week, December 4, 2000, F21-F22. Current events news summaries: Although the ASP model is not catching on as quickly as expected, how is Jamcracker doing? The Internet Corporation for Assigned Names and Numbers recently approved a new group of top-level domain names, including .museum, .info, and .coop. Which domain names didn't get approvedóand why?
A vulnerability assessment can help a company determine how open its IT systems are to penetration by unauthorized outsiders. What does an vulnerability assessment cover? E-Business and StrategyE-Business Case in Point: Whirlpool and Brandwise Consumers use the Internet to compare and buy books and computers, so why not kitchen appliances? That was the idea behind Brandwise, started by appliance manufacturer Whirlpool. Whirlpool maintains a corporate Web site (http://www.whirlpool.com/), but it established Brandwise as a separate e-business, in partnership with Hearst publishing and Boston Consulting Group, to allow consumers the convenience of using the Internet to compare appliance products and prices and then buy. Whirlpool expected to earn 5% of the revenues from online shoppers ordering appliances through Brandwise-affiliated retailers. In addition, Whirlpool planned to collect data on users' behavior and sell that to retailers, as well. However, Whirlpool quickly learned about the economics of building an online brand: It spent several million dollars on online ads and billboards but failed to generate significant awareness and traffic for the Brandwise site. In addition, potential retail participants who sold multiple brands were concerned about Brandwise's ties to Whirlpool, even though the manufacturer was maintaining its distance to ensure objectivity in product reviews. Retailers also balked at paying Brandwise a percentage of sales generated from site users. Although Sears and Montgomery Ward were among the 20 retailers who signed on, Kmart and Home Depot, among other high-volume appliance retailers, did not. In the end, Brandwise couldn't drum up sufficient retail participation or sales. By the time Brandwise was shut down, Whirlpool had spent an estimated $10 million on the project.
Source: Amy Kover, "Why Brandwise Was Brand Foolish," Fortune, November 13, 2000, 201-208. Current events news summaries: Egghead is achieving higher profit margins than Buy.com and other online competitors. However, will customers accept the higher prices that translate into higher margins? Garden.com, an innovative e-tailer that had differentiated itself on the basis of service, shut down amid continuing losses. What happened? A recent Hoover's press release says the company is attracting more subscribers for its business information site, and increasing its Web-based revenue as part of its overall reliance on Internet-related products and services. How is this strategy translating into financial performance? The separation strategy originally followed by Barnes and Noble seems to be less popular these days than the integration strategy followed by Egghead. What's behind this trend? |
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