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INDUSTRYEXAMPLES OFVIRTUALVALUECHAINS 531Table 2Retailer Value Chain AnalysisRetailer Value Chain Analysis
New online-only New online-only businesses must develop their entire value chain systems from scratch.
Established
online-onlyEstablished online-only businesses such as Amazon.com may have these components
developed. They may have advantages in supply chains, images as online-only firms,
targeting of audiences, shipping systems for distribution, data collection and knowledge
management, and managerial expertise in e-commerce.
Catalog businesses Existing catalog businesses have these components developed. They may have advantages
in supply chains, images as non-brick-and-mortar, targeting of audiences, shipping
systems for distribution, knowledge management, and managerial expertise in direct
marketing.
Retail chains Existing traditional national retail chain businesses may have these components
developed. National chains may have advantages in supply chains, image, targeted
audiences, prime locations for distribution, information capture and knowledge
management systems, and managerial expertise in retailing.
SME retailer Existing small to medium-sized retailers may have none of these components developed
for conducting business outside of the targeted market area.FromStrategic Electronic Marketing, Managing E-Business,2nd edition, by Kleindl.©c 2003. Reprinted with permission of South-Western, a
division of Thompson Learning: http://www.thompsonrights.com. Fax 800 730-2215.Analyze the customer’s value chains to determine how to
fit into their value chain and determine how to develop
long-term relationships.
Identify cost advantages against competitors.
Determine the likelihood of acceptance of the new model.INDUSTRY EXAMPLES OF VIRTUAL
VALUE CHAINS
Two examples of e-commerce value chains will be given.
The first is an evaluation of how Dell competes against a
traditionally brick-and-mortar manufacturing and retail-
ing industry. The second is an online-only e-marketplace
environment.PC Industry
An example of a traditionally brick-and-mortar manu-
facturing and retailing industry model changing to an
e-commerce-based model and value chain can be seen in
the PC sales industry. Figure 7 illustrates the functional
business model for the PC industry prior to 1998. This
model relied upon traditional manufacturing, shipping,
and retail sales methods.
This model followed a generic manufacturing and dis-
tribution model. Sales projections set inventory levels
while continuing lowering of inventory costs made stored
inventory expensive. Production was to fit retail orders,
leading to a lag between customer demand and the man-
ufacturing process. Excess inventory at the retail level
would also lose value while it was stored in the retailInventory levels
ordered based on
sales projections.Personal sales backed by
national and local advertising
adds to marginal costs.Payments are made through
cash, check, credit card or
invoice. B-to-B payments
based on invoicing resulting
in delayed cash flows.Product delivered through
shippers to retail outlet.
Orders based on retail
inventory requirements.Customer has immediate
possession of product, and
can possibly return
product and receive
support.Manufacturer produces
product to fit retail orders.
Prices are based on channel
structure considerations such
as quantity purchases.Figure 7: Pre-1998 personal computer sales functional business model. FromStrategic Electronic
Marketing, Managing E-Business,2nd edition, by Kleindl.©c 2003. Reprinted with permission of
South-Western, a division of Thompson Learning: http://www.thompsonrights.com. Fax 800 730-2215.