E-Business Case Study Report: Zebedee Comics Ltd. inherent problems within the company that are increasing the company s costs and

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1 E-Business Case Study Report: Zebedee Comics Ltd Assumptions The analysis of the case study is based on determining whether or not Zebedee Comics Ltd (ZCL) should expand by introducing an online retail store. The analysis and recommendations made are based on several assumptions. The first is that there are not inherent problems within the company that are increasing the company s costs and reducing its profits. If these problems are present, increasing sales by any means will not lead to increasing profits. The second assumption is that ZCL has the financial resources to invest in development of the site. Any recommendation for the company to proceed relies on the company having the money available to invest in the expansion. Finally, it is assumed that the company has the capability to manage a significant expansion. This includes having availability of stock and the internal resources necessary to manage increased sales. SWOT Analysis Strengths The first major strength of ZCL is its experience in the specialty magazine and toy industry. This experience gives ZCL a strong understanding of the industry and the customer. This is a strength that ZCL could use to create a targeted website that will meet the needs of consumers. The knowledge that ZCL has of the industry and its ability to keep up with changes could be a key competitive advantage, where the website would provide consumers with valuable knowledge as well as being a means of purchasing products. Another strength of the ZCL online store is that the products are suited to online

2 retailing. They are niche products, which makes it easier to identify, target, and attract the right kinds of buyers. They are products that can be purchased with confidence without physically seeing them. They are also products that can be mailed cheaply. This allows ZCL to offer a free postage option, which eliminates one of the barriers that could prevent people from buying online. Another strength of ZCL is that it is a business that is always responding to current needs. This will allow the online retail store to be constantly adding new products and taking advantage of new trends. The awareness of current trends and ability to adapt will be a factor capable of keeping turnover high and keeping ZCL ahead of the competition. Weaknesses The first major weakness of ZCL is that it does not have any online retail experience. While ZCL has been successful as a retail store, an online store requires a different approach. The lack of experience online could make it difficult for ZCL to successfully start an online store. Another weakness is that ZCL s current activities do not all show an awareness of the need to profit. It is noted that ZCL is recognised as a community resource. While this could be an effective part of a strategy, it is not effective if it is reducing profits rather than increasing them. For ZCL to be effective online, it needs to focus on additional features that lead to increased revenue. Opportunities There is a significant opportunity for ZCL to expand both nationally and internationally. The online retail store would reach a large customer base within the

3 United Kingdom. It would also reach a large customer base internationally, including the Asian market, where there is a large potential for profit. ZCL has already achieved a good reputation within the market it currently serves. If ZCL can translate the effectiveness of its current retail stores into an online store, there is the real potential for effective national and international expansion. The online store allows ZCL to reach a much broader consumer base than is possible for retail stores. It also allows expansion for a relatively low cost and with relatively low risk. The online store also allows ZCL to test international markets with relatively low risk. The online store can be built primarily for a market in the United Kingdom, since this is the market that ZCL is most familiar with. Without changing the online store, it can then be advertised in international markets. Since this does not require the development of stores only for the international market, this requires a low input of resources. This will allow ZCL to test various international markets without high risk. Threats ZCL s proposed web presence faces three major threats. These threats are: national chain stores; online retail stores; and manufacturer s online stores. These three threats will now be analysed in turn. The first threat is from national chain stores such as WHSmith, Woolworths, and Waterstones. These stores are currently competition for some of the products that ZCL sells and the threat would be greater if these stores expand their product range. These stores are a significant threat because they have wide area coverage and reach a large proportion of potential buyers. In addition, their bulk-buying capability could make it difficult for ZCL to compete on price.

4 The second threat is from online retail stores. This includes major retail sites such as Amazon and Ebay. As with the national chain stores, these sites have a high buying power that could make it difficult for ZCL to compete. These sites also have strong site recognition, a high level of technology, and significant financial resources to put into site development. These factors could also make it difficult for ZCL to compete. This is especially important when the low switching costs of the Internet are considered. Unlike retails stores, there is very little cost associated with accessing competitors. Perreault & McCarthy (2000) note that consumers can reach a wide assortment of retailers with a few clicks of the mouse. If ZCL cannot compete on price, it becomes a significant threat that major retailers offering lower prices are just a click away. The final potential threat comes from manufacturer s online stores. The possibility that ZCL has recognised is that its current suppliers will establish online retail stores of their own. However, while this is a potential threat, it is not a significant one. Manufacturer sites offering one type of product are rare and manufacturers that have tried this approach typically find that retailing online is more difficult than expected. Retailing online becomes a process that takes too many resources compared to the traditional process of using a retailer as the bridge to the customer. For this reason, this is not considered likely enough to be a major threat. ebusiness Model The ebusiness model that is recommended is based on taking the best advantage of ZCL s strengths, while limiting the potential impact of its weaknesses and reducing the threats. The ebusiness model is based on creating an interactive site that offers resources and involves consumers as well as selling products. The intention of this is to create an

5 online retail presence that builds strong relationships with customers. The site will feature products for sale, though will not be limited to this. The site will be designed to mimic the atmosphere of the retail store. It is noted that the ZCL retail store has an excellent reputation and is known as a community resource. This reputation will continue to be built and expanded on with the online store. The site will offer information on products and allow customers to interact and ask questions. Staff in retail stores will be utilised and be part of the online store presence. Staff will continue to write a piece on their favourite new stock and will also take part in message board discussions and answer questions. This feature will also be expanded by allowing users of the site to submit pieces on their favourite items. Product critique and honesty will also be incorporated by allowing site users to rate and critique products. The site can also host online contests and continue to sponsor role-playing tournaments in local areas. This will be part of the interactivity of the site, with users registering their local area as the next location for a role-playing tournament. Overall, the site is designed to emphasise a community approach, where site users interact and feel like part of the site. This will build strong relationships with customers, maintain customer loyalty, and lead to high sales and profit. The site that builds strong relationships with customers serves several critical purposes. Firstly, it draws on ZCL s strengths as a means of attracting a customer base and maintaining customer loyalty. The key strength for ZCL is its experience and industry knowledge. Using this knowledge effectively will give ZCL a strong link to the customer and the website will be a way to attract and retain customers. Secondly, the strong customer loyalty created will help protect ZCL from threats, especially those of

6 the major online retailers. It has been said that the key to achieving organisational goals is determining the needs and wants of target markets and delivering the desired satisfactions more effectively and efficiently than competitors (Kotler, Chandler, Gibbs, & McColl, 1989, p. 15). As a specialist retailer with strong customer awareness, ZCL has the ability to understand the market and provide for consumer needs more effectively than larger competitors. While large competitors both online and offline such as WHSmith, Ebay, and Amazon have an advantage in financial resources and technology, they also have a broad focus that is not targeted to specific consumer groups. To compete with these major competitors, ZCL has to take advantage of its position as a niche retailer. This can be done by using the knowledge that ZCL has of its consumers and by adapting the site to meet the specific needs of the target market. Finally, this approach protects ZCL from its weaknesses. It recognises that ZCL will not be able to compete on a technological level since it does not have online retail experience or significant resources to put into site development. However, it does have experience with creating a retail store that involves customers and results in a good reputation. The key for the website is to translate the community feel of the retail store into the online store. The community factors that do not equal profit in the online store will actually be important in creating profit in the online store since they create the kind of user loyalty that is rare online. Benefits and Pitfalls of ebusiness Kotler (2000) notes that an online retail store is significantly different to a retail store. Consumers are not just looking for products to buy, but are also looking for information, special offers, and interactive content. Companies that create online stores

7 as mimics of offline retail stores tend to fail. Greenberg (2001) describes the experience of Macy s online as one example. Macy s created a website offering the same products it sold in retail stores. It then launched an campaign, sending potential customers details of products available. The approach did not create consumer interest because it focused too strongly on the products for sale and did not offer any clear benefits to the consumer. For ZCL s online store, the same approach will need to be avoided. While the products for sale are a key to success, other features will need to be used to attract consumers to the site. The example above shows that the content that a site offers becomes more important than what the site is selling since it is the content that attracts customers. This creates a demand for companies to create websites that will offer interesting content to consumers. This is a positive point for ZCL, since it has the industry knowledge and resources available to provide this content. ZCL simply has to introduce the same types of interactive features it has in its retail stores into its online store. Another potential pitfall of ebusiness is related to consumer concerns about security. Kotler (2000, p. 44) notes that consumers are reluctant to finalise online transactions with companies they never heard of, do not know well, or have not done business with in the past. This creates a barrier to sales that needs to be overcome. This can be achieved by establishing a relationship with customer that precedes making sales. The proposed strategy for ZCL s online store is based on creating this relationship and so will overcome this barrier. This pitfall then becomes a benefit because consumers that have a good experience tend to become loyal to that site (Kotler, 2000). This will allow ZCL to increase return sales as initial customers become long-term customers.

8 Analysis and Recommendations It is recommended that ZCL introduce the online store, while also maintaining the city-based retail stores that are currently profitable. Since the city stores are not showing any reduction in profits, it is recommended that they remain open. This will allow ZCL to maintain a steady income as it expands. The current customers of these stores can also be introduced to the website. This will be a low-cost means of advertising the website initially, with word-of-mouth working to build site traffic. It is also important that these retail stores remain open to source staff for the website and to keep ZCL connected with the customer. Staff of these stores will be a key part of the website by adding articles and reviews and by interacting with customers. Personal contact with customers will also ensure that ZCL keeps up-to-date with changes in the marketplace. The online store will be introduced to allow the company to expand. The lack of success of the stores in small towns suggests that regional expansion via retails stores is not a suitable option. The profit figures of the store also suggest that it does not have the available resources to implement a risky plan of international expansion. The expansion via an online store is a suitable way to reach national and international markets with low risk and a reasonably low resource input. It will be a way for ZCL to draw on its strengths and successfully expand, which is essential to its continued success. It is recommended that the online store be an interactive site that involves consumers. Kotler, Armstrong, Brown, & Adam (1998, p. 11) have noted that marketing is shifting from trying to maximise the profit on each individual transaction to maximising mutually beneficial relationships with consumers. An interactive website will create these beneficial relationships. This will allow ZCL to expand its customer

9 base and maintain it. Customer loyalty will be established, which will provide ZCL with the strong customer base and strong future sales that are essential to its continued success.

10 References Greenberg, P.A. (2001) Brick-and-Click does not mean overnight success. E-Commerce Times, July 2001, pp Kotler, P. (2000) Marketing Management. London, Prentice Hall. Kotler, P., Armstrong, G., Brown, L., & Adam, S. (1998) Marketing. London, Prentice Hall. Kotler, P., Chandler, P., Gibbs, R., & McColl, R. (1989) Marketing. London, Prentice Hall. Perreault, W.D., & McCarthy, E.J. (2000) Essentials of Marketing: A Global-Managerial Approach. London, McGraw-Hill.

11 Bibliography Belch, G.E., & Belch, M.A. (1999) Advertising and Promotion. London, McGraw-Hill. Cateora, P.R. (1983) International Marketing. Homewood, IL, Irwin. Greenberg, P.A. (2001) Brick-and-Click does not mean overnight success. E-Commerce Times, July 2001, pp Kotler, P. (2000) Marketing Management. London, Prentice Hall. Kotler, P., Armstrong, G., Brown, L., & Adam, S. (1998) Marketing. London, Prentice Hall. Kotler, P., Chandler, P., Gibbs, R., & McColl, R. (1989) Marketing. London, Prentice Hall. Neal, C., Quester, P., & Hawkins, D. (1999) Consumer Behavior: Implications for Marketing Strategy. London, McGraw-Hill. Perreault, W.D., & McCarthy, E.J. (2000) Essentials of Marketing: A Global-Managerial Approach. London, McGraw-Hill.