The Internet Encyclopedia (Volume 3)

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Kleindi WL040/Bidgoli-Vol III-Ch-43 August 13, 2003 17:28 Char Count= 0

INDUSTRYEXAMPLES OFVIRTUALVALUECHAINS 533

Procurement

(Orders are linked to purchasing and inventory and are tracked through enterprise systems)

Human Resource Management

(Technologically savvy employees)

Firm Infrastructure

(Technology and innovation oriented management)

Technology Development

(Supported by a technology infrastructure across the Internet, through extranets and intranets)

Value

Creation

Built-to-order

meets

customer,s

needs.

Dynamic

pricing allows

customer

lowest price

given market

conditions.

Inbound

Logistics

Extranet linked

allows for JIT.

Suppliers

located within

15 minutes

travel time.

Lowers

inventory costs.

Outbound

Logistics

Distribution

outsourced.

Contract low

shipping rates to

reduce fixed

costs in assets.

Outsource to

drop ship

components.

Marketing

& Sales

Web based

interface can be

customizable

for the

customer.

Individuals can

order online.

Payments made

online.

Lowers

promotion and

ordering costs.

Service

Database

supported

customer

relationship

management.

Customers

receive

customized

interface for

sales and

support.

Primary

Activities

Support

Activities

Margin

Through

Stronger

Customer

Relationships

Figure 9: Dell’s e-commerce value chain.

Ford have designed their own internal Web pages that

link to Dell’s computer system to allow online purchas-

ing. This customization has saved corporate customers

millions of dollars. Dell has moved its business model

overseas to allow rapid delivery of computers in foreign

markets. By 1997, 31% of Dell sales came from outside

the United States.

Dell’s value chain (shown in Figure 9) is designed both

to be efficient (resulting in cost savings) and to gain an

advantage through strong customer relationships. A key

to Dell’s success lies in logistical efficiencies that allow

lower costs, the production of high-value customized PCs,

and strong customer support.

Dell’s major competitors, such as Compaq and IBM,

built value chains that relied on manufacturing of com-

ponents and using resellers to sell their products. Switch-

ing to the Internet for e-commerce has the potential of

alienating reseller support because of channel conflicts.

Each of these firms was forced to match Dell’s online busi-

ness model.

Seller

Posts

information.

Buyers

eBays, Auction Portal Post bids.

Coordinates Communication.

Payments

Transacted offline. Facilitated

through escrow systems. Revenue

based on successful sale between

buyer and seller.

Shipping

Addressing facilitated through

information systems. Products

shipped by independent shippers.

Database

Collects information on buyers,

sellers, and transactions.

Figure 10: eBay’s business model.