Transcript Lecture 3 ( January 25, 2003) Personal Productivity Business Operations

Lecture 3
( January 25, 2003)
Personal Productivity
and
Business Operations
Case Analysis
Entrepreneurial industry: Amazon Co.
SMEs and Entrepreneurs
Small and Medium-sized Enterprises (SME)
-
family business
small scale
certain criteria for members of SME association
or government grants
not listed (just announced on 26 Dec 2002,
conditions for SME supports to be relaxed)
SMEs and Entrepreneurs
Entrepreneurs
- “oddballs”
- doing business for themselves
- a new way to do things or to market
a new product
- a person who risks his or her
livelihood to start a business from
scratch
Entrepreneurial industry
• The change – thriving and vibrant
• From not getting respect to being admired
and sought after
• From failure in corporate ladder to became
desired mind-set for corporate to succeed
• Relying more and more on
microcomputers due to decreasing costs
and availability of off-the-shelf application
systems
Some considerations
• High risks, high returns
• To be your own boss, try your best and prepare for the
worst
• A good idea or product is not enough, creating demand
or market to grow
• Capitalize on current trends, e.g. internet has exploded
as it makes data gathering so much faster when people
seem to have less time to spare
• Use technology to give an edge
• Grab incentives and grants from government in our local
context
Business Operations & Transactions
• A transaction is the exchange between
individuals, areas or companies
• All business revolves around transactions
• The basic element of a transaction is data
• Data elements are combined or collected
to produce information
• Technology’s first step has always been to
capture, store and manipulate the basic
data that surround a transaction
Retail sales
• Retail sales industry encompasses all sales to endproduct users, the consumers of the world
• Retail sales generate the most transactions
• It is expanding as new and innovative means of reaching
customers continue to be developed
• Internet as a new media for retail sales will capture a
bigger piece of the retail shopping market as consumers
are more pressed for time
• Transaction processing systems are the oldest type of
retails information systems. Customer Relationship
Management (CRM) and data warehousing technologies
are being used to obtain, gather and analyze customer
data/purchasing habits etc
POS and NETS
• POS (Point Of Sales)
• NETS (Network for Electronic Transfers (S) Pte Ltd)
• Capture transaction data at the location and time the
transaction occurs
• Accuracy of data is maintained
• Up-to-date information can be used almost immediately
• Amount of data and information used is enormous
• Data obtained easily and voluntarily (active or passive)
from consumers
Technological investments and
analysis
Using technology and tools to
– Improve work efficiency
– Increase productivity
– Gain competitive advantage
– Cut cost
– Project image
– Identify trends
– Support decision making
Some basic personal tools
• Microsoft Word, Excel, PowerPoint,
Access and FrontPage
• Web browsers and e-mail facilities
• Similar tools and other vendor products
like Star Office, Chinese software
• Licensed product and freeware
downloadable from the internet
Advanced technology is costly
•
•
•
•
•
•
Cautious investments on technology
Success and failure stories
Factors to analyze
Leader or follower
Conservative or risk taker
Corporate worker or entrepreneur
HIGH
application of technology
opportunity
cost
r
risk
i
s
k
LOW
TIME
HIGH
acceptance
financial risk
technology risk
LOW
TIME
Cost and benefits
• More cost, more benefits
may be, but not directly proportional and may be not
• Determine the functions/facilities required
• Distinguish the need to have from the nice to have
• Choose the options and add-ons available
• Relevancy and obsoleteness
• Return of investments
• Incentives such as tax concessions and grants
availability
• Prestige and image
Some local assistance scheme
•
•
•
•
•
•
•
Start-up assistance
Same year depreciation on technical assets
Economic grouping
Information and advice – SME FirstStop
Subsidy on cost of external consultancy services
LEFS -- local enterprise finance scheme
LETAS -- local enterprise technical assistance
scheme
• LIS – Loans insurance scheme
• MicroLoan Programme
Case Analysis: Amazon Co.
www.amazon.com
the online internet bookstore
a Seattle based Fortune 500 company
July 1995 start-up
founded by Jeff Bezos, systems developer,
Bankers Trust, New York
average visitors
2,200 daily (December 1995)
average visitors
50,000 daily (December 1996)
average visitors
80,000 daily (December 1997)
in November 1998 alone, there were 8,000,000 visits which work
out to around 267,000 daily
market leader
inventory of 2.5 million books
competitive prices
superior customer service
stock value USD 300 m
USD 15 b in market capitalization
defensible market position
Stock performance
IPO in May 1997 @ USD 18 per share
Share price rose to USD 31 before
closing @ 23.5, a 30% premium
Share price once rocketed to USD 220
per share (April 1999) and the low and
high for the past two years was around
5 to 25 USD respectively
Best performing stocks
STOCK
Amazon.com
Yahoo
MindSpring
EarthLink
@Home
CMG
Onscale
Broad Vision
Mecklermedia
ANNUALIZED RETURN
+496%
+214%
+152%
+143%
+135%
+108%
+ 93%
+ 57%
+ 52%
Net Profit/Loss to Sales
700
600
500
400
300
sales
net profit/loss
200
100
0
-100
-200
1995
1996
1997
1998
Net Profit/Loss to Sales
sales
net loss
1998
610m
124m
1999
1310m
720m
2000
2760m
1410m
2001
3120m
567m
1Q2002
2Q2002
3Q2002
847m
806m
851m
23m
94m
35m
Losses despite increasing sales
• Losses were expected for the first five
years, accumulated losses already
reached 3 b USD
• Low margins on sales due to competitive
pricing and superior customer service
• Technology investments and overheads
such as aggressive advertising
• Commitment to gain market share at the
expense of profitability
Challenges ahead
• It’s all about the long term
• Must establish itself as the dominant
player before the internet becomes
crowded with competitors
• Although online retailers do not have the
burden of maintaining physical stores, this
is precisely current and new competitors
can launch new sites easily and take away
a share
Information broker
products
co
customers
consumers looking for books
books
publishers looking for consumers
More than books
• Publishers and traditional book retailers cannot easily
obtain demographic and behavioral data about
customers, limiting opportunities for direct marketing and
personalized services.
• Online retailers are taking the advantage of increase
functionality, accessibility and overall usage of the
Internet.
• Amazon.com added CDs in 1999. Videotapes,
audiotapes, digital video discs and computer games
were than added later. Next were electronics and
software.
• Go to the website www.amazon.com to see the wide
varieties of merchandise and its design.
Components of successful online
sells
–
–
–
–
–
specialty services
customer privacy
timely customer response
follow-up (e-mail)
more than sell books, offers information
about books such as customer reviews and
author interviews
– customer reviews, input information on customers’
tastes
– discounts in various forms
Competition from online & traditional
bookstores
Internet Bookshop
www.bookshop.co.uk 1.4 m titles
Bookstacks
www.books.com
4 m titles
(taken over by Barnes & Noble )
Barriers to internet entry are minimal.
Current and new competitors can launch new sites at a
relatively low cost.
The big names in the retail industry,
Barnes & Noble
Borders Books
have devoted substantial brick-and-mortar
resources to online commerce. (www.bn.com or
www.barnesandnoble.com and www.borders.com)
Note that www.borders.com has been taken over by amazon.com
Into the future
• More than books
• Acquisitions:
online bookseller Bookpages (UK)
online bookseller Telebook (Germany)
Internet Movie Database (UK)
US web-based companies Junglee & PlanetAll
• Improve distribution & delivery
• From a go-to site to a go-through site
• Aspirations:
– Wal-Mart of the internet
– to become an e-commerce
Resources & Reading Materials
Chapters 2, 3 and 4 of textbooks.
www.spring.gov.sg
www.sdf.gov.sg
www.amazon.com