Bullet 5: Response Factors

Bullet 5: Response Factors

1. This topic exports the factors influencing how and why businesses respond to the growth of e-commerce

2. Business Model

   • This is the way a business tries to make revenues and profits and the choices they make about methods
   • Print Magazine/Newspaper Readership
     • Falling as more consumer prefer to browse online (increasingly via social media)
     • Impact is lower print circulation and subscription revenues + a knock-on effect on advertising
     • Independent newspaper is no longer printing!
   • Data Storage Devices
     • Demand for memory sticks and other storage devices surged in the last 5-10 years as consumers and businesses created so much more data
     • Dropbox Cloud-Based Storage
       • Dropbox used the freemium model to quickly build leadership of cloud-based data storage and management. They demonstrated a first-mover advantage in E-commerce. They launched in 2008 and iCloud launched in 2011
     • Now most businesses (and increasingly consumers) want to store their data on the Cloud rather than a single device
   • How should a business respond to if their business model is challenged?
     • Do nothing (hope e-commerce goes away)
       • Try to maximise share of remaining demand for what remains of the market
       • Primark have not yet responded to E-commerce
         • Primark does not offer e-commerce, but this doesn’t have anything to do with the organisational culture, lack of innovation or poor leadership. But instead, it is that Primark’s business model (which is a fast-fashion retail and very low price points) makes e-commerce uneconomical.
       • Morrisons were late to respond
         • Morrisons were the last of the four major grocery retailers to offer e-commerce, and it took them 2 years to go live after announcing they wanted to.
         • In 2013, they said that their sales were continually suffering because they do not yet offer online deliveries and a small number of convenient stores.
     • Respond by taking a hybrid approach
       • Try to maximise revenues from the old model
       • Launch new alternatives based on e-commerce
       • Tesco - Click on Collect
     • Entirely reinvent the business
       • A more risky strategy, but with potentially transformational benefits
       • Independent Magazine

3. First-Mover Advantage

   • The advantage (if any) gained by the initial ("first-moving") significant occupant of a market segment or industry.
   • Spotify
     • Spotify builds 20m users before major competition arrives
     • Launched in 2008
       • Apple Music launched in 2015
   • eBay
     • Launched in 1995 - eBay was the first major online auction site
       • Easy launched in 2005 and Yardseller launched 2009
   • Dropbox
     • Dropbox used the “freemium” model to quickly build leadership of cloud-based data storage & management
       • iCloud launched in 2011 and Google Drive launched in 2012
   • Uber
     • American multinational online transportation network company

4. Organisational Culture

   • Zappos
     • Formed in 1999, Zappos is now part of Amazon. It was formed based on a vision that by 2020 30% of retail transactions in the US will be digital. The whole culture is designed to support an agile approach to being a leader in its chosen e-commerce market segments.
   • Uber
     • Uber’s phenomenal global growth to dominate the ride-sharing app market (and challenge licensed taxi firms) is based on substantial investment and a distinctive, aggressive organisational culture. It relentlessly seeks the best technological talent. A culture described as ruthless (like some of their investors) – but successful so far!

5. Leadership

   • Satya Nadella - CEO of Microsoft
     • Satya Nadella, the new CEO of Microsoft has led a change in strategic direction for the firm that was once reliant on its 98% share of the PC (desktop) market. Microsoft’s strategy is now “mobile first, cloud first” – signaling a strong commitment to e-commerce.
   • John Lewis - Omnichannel success due to strong team of directors
     • Leadership can also be demonstrated by a Board of Directors as a whole. Why has John Lewis been so successful in its transformation into omnichannel retailing? Because the senior management team is committed and aligned. Strong leadership leads to long-term commitment to invest which in turn is more likely to result in e-commerce success.

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