FURTHER READING

Article I. Web Enabling Strategy Supplement

A review of the Web-enabling strategy literature reveals two business models used by the e-business enterprises. One model highlighted by Mahadevan (2000) shows the different economic streams targeted by the pure-plays to succeed in the new Internet economy. Another model highlighted by Gulati and Garino (2000) shows how clicks-and-mortar firms have successfully integrated their online channels with their off-line, traditional ones.

Mahadevan's article, "Business Models for Internet-Based E-Commerce" (2000), focuses on classifying the business models as portals, market makers and product/service providers who rely on three economic streams for surviving in the new economy. They are value stream, revenue stream and logistical stream. To succeed, the dot-com companies must rely on some unique combination of each of the three streams. Although Mahadevan has done a good job in identifying the various revenue streams for the dot-com companies depending on their market structure, these economic streams may never materialize for companies. For example, free offerings do not always result in paid purchases by the customer. Both Pets.com and Petco gave away free advice to pet owners on care, wellness, behavior, etc., through their e-commerce websites. This counsel was not exclusive to these two companies, as similar information could be obtained from other non-commercial sites. Therefore this advice did not have the anticipated impact on potential customers. Nor does the amount of dollars spent on advertising compensate for all the expenses incurred trying to capture sales for the site. For example, eToys and Pets.com spent significant advertising dollars trying to steer customers to their websites. Some of these advertising contracts were upwards of $27 million.

Mahadevan (2000) also directly contradicts some of the core strategies that must be followed in order to succeed with any form of business as stated by Porter. Mahadevan states that giving the customer more and more choices with more suppliers available is in the best interest of the e-commerce firm. As we now know (with all dot-com failures), giving away too much bargaining power to the consumer has an adverse affect on the firm and the industry as a whole. Mahadevan also states that the pure-play has larger margins than the brick-and-mortar firms do. This may have been true last summer, but now the pure-play margins are thinner or negative as opposed to margins for large brick-based establishments.

Gulati and Garino (2000) are proponents of integrating the e-commerce channel and Web presence with the core brick-and-mortar establishment. In their article titled, "Get the Right Mix of Bricks & Clicks," they discuss the values and advantages of being a fully integrated firm or at least tending to lean toward that end of the integration scale. They go on to evaluate four major strategies that firms can take when it comes to running an extension of their business channel on the Internet. This scale ranges from in-house division (high integration), to joint venture, to strategic partnership, to the other side, which is spin-off (high separation). They state that the benefits of being fully or partially integrated are greater than the advantages of independence as a pure-play Internet business.

The integrated business does seem to have a greater advantage over its pure-play counterpart. The only difference is that instead of solely concentrating on the clicks-and-mortar approach, we want to investigate both sides of the coin. We believe that HA can still survive in today's economic conditions. However, its management must follow certain basic business strategies as outlined by Porter.

Porter's Model

The framework for our analysis is built upon the theories of Michael Porter's recent article, "Strategy and the Internet" (2001), in which he defines several business fundamentals that must be followed in order to be successful regardless of the type of firm. Porter outlines two major fundamentals that are influenced by the Internet to more of a degree than was once thought previously. They are industry structure and sustainable competitive advantage. Without at least acknowledging these essentials to be crucial to the profitable operation of the firm, a fight for survival will always exist.

The Internet has an inherent adverse or beneficial effect on each of the Porter fundamentals. An important aspect to note is that the Internet is based upon an open technological architecture. This architecture has the largest effect on these competitive elements. Since the technology platform is common, and little or no capital investment is required, anybody with minimal know-how can set up a website and start conducting e-commerce. Enterprising individuals that want to set up a side occupation can now have additional disposable income, thereby helping to fuel the economy. This also results in the barrier to entry being nearly non-existent in certain industries, not to mention that the number of competitors coming on board every month, or every day, is astronomical. This increases the rivalry that already exists between competitors, and even compounds it logarithmically.

The Internet has opened up the availability of the vast amount of information that can be acquired by potential buyers. This is great for buyers because they can perform in-depth research before buying the product. It seems that this would cut down the number of returns because the consumer would be more knowledgeable about the different features of a product. They can even get cost information that was not readily available to them before the emergence of the Internet. An example of this is, the actual invoice paid by a car dealer is now available at a buyer's mouse click. This puts bargaining power into the hands of the consumer and puts the dealer at a disadvantage. The consumer will get the deal of her choice or go elsewhere. The bad part of all of this is that the retailers (brick-and-mortar firms and pure-plays) now compete solely on the basis of price, and switching costs are lowered, meaning that consumers can readily change vendors without penalty.

Because of the Internet, suppliers gain an increase in the number of potential customers causing the number of middlemen to be reduced. The ease in which these potential customers are reached means more direct sales are possible from large suppliers. This is good for suppliers, but has mixed results for consumers. The consumer has only one outlet for a certain product, such as a well-known brand of computer that he really wants, and he has to pay the exact price stated. There are no middleman-type companies to play off each other for a reduced price (haggling). On the other hand, the middlemen inflate the actual price in order to profit form the sale, so the supplier may realistically have a lower price.

The last competitive element is the threat of substitute products. The speed and organization of the Internet, with its database storage capabilities and set standards, has the ability to make industries more efficient and expand the industry. This expansion leads to more competitors and newer, better technologies that increase the threat of substitutions. As Internet technologies change rapidly and get cheaper, it gets easier and cost effective for customers to switch to a better product or service. If suppliers are not quick in their development, implementation and time to market, they will soon be filing for bankruptcy.

Operational effectiveness is described as offering the same product or service that your competitors do, except doing it better. This can refer to the speed at which something is done, the amount of customization that can be accomplished, the overall efficiency of operations or even the manner at which something is sold. Operational effectiveness is what many referred to as "Internet Speed"—how quickly can a company come up to speed to meet or exceed the operations of its competitors? As it turns out in the Internet world, duplicating a firm's operations is so easy to do that operational effectiveness becomes a non-issue. This is no strategic advantage because a firm's competitor can replicate its product and operation in a very short time. And with technology changing on a daily basis, the competitor could end up exceeding the baseline set by the original firm. The process becomes a vicious cycle.

The real advantage for sustainable competitive advantage comes from strategic positioning. The key to success is to provide something that a consumer or business needs and then be an exclusive provider for it. To accomplish this, the firm must offer something of high or inimitable value to the buyer, with no other competitor that can match this value. Sellers compete on providing unique services or offerings to buyers rather than competing on price, which can lead to failings in business. Please take a look at the challenges and problems faced by HA, and how the Porter model can be utilized by HA.

Article II. Customer Experience at HA: Pre- and Post-Website Phases

Walkthrough of a trekking trip that a young outdoor and adventure-loving couple, Hans and Petra (H&P) from Hamburg, Germany, takes with Himalayan Adventures (HA)

Action	Pre-Website	Post-Website	HOW WAS THIS DONE?
Finding and selecting the tour, reserving the place in the tour and making travel arrangements	H&P ask friends and family, read travel magazines to find HA. Communication between H&P and HA is primarily done through regular mail or phone. After numerous exchanges of information (including convincing a couple of like-minded friends to go on the tour in order to achieve economies of scale on the cost of the package), H&P decide on the package. Additionally they also have to do research on best airfares. Once booked there is another exchange of mail to finalize the itinerary of the trip.	H&P go to search engines and find HA website. Tour packages promotions are available on the HA website. H&P register their name and travel plans; find another three members to join their trekking tour. Within hours, they have replies from like-minded travelers who will be going on the same tour. HA website allows them to make all their travel arrangements and confirms everything electronically. Secure access is provided for H&P to select and pay for a variety of travel options for Air, Hotel, and Trekking packages.	E-Marketing Secure Access Electronic Payment Options
Tourist Visa acquisition	This process requires, first receiving the application in mail and then showing up in person at the nearest embassy or consulate (Berlin or Bonn) for an interview with the visa officer so as to establish legitimacy of the travel plans (estimated time: 2 weeks).	On HA website there is a link to all the relevant visa information and policy along with a online visa application form with relevant information on the tour provider i.e. HA. By filling out the information H&P would not have to travel in person for the visa approval. Instead everything can be done online. The whole process would take less than three working days.	Issues: Online Forms Database Integration Back-End Application Integration
Actual trip: staying in contact with loved ones	Once in Pakistan, H&P buy calling cards (for a 7 minute call to Germany, it costs $3–4 a minute on a calling card) which allows them to periodically call their family and friends at home.	The day they land in Pakistan, H&P send e-mails to their families and friends and can talk to their loved ones using the HA website. Once H&P arrive in Gilgit mountains two days later, H&P send another e-mail or talk to their relatives. Once they are on the trek, H&P rent a laptop and a digital camera from HA. Every day of the trek, they call home, download and send their digital images and stay in constant contact with their family, in addition to having 24×7 accesses to Instant Messaging, chat and e-mail.	Issues: Customer Service Community Boards, Chats, IMS, Etc. M- Commerce Collaboration
Aftermath	H&P are very happy with their tour. In writing they send their photographs to HA and thank HA for hosting the trip. HA management is extremely happy to receive the letter of thanks and appraisal. It is stored in the personal archives of the manger, perhaps never to be looked at again in the near future.	H&P thoroughly enjoyed their trip. They go back to Hamburg with all of these memories of a wonderful and safe trek. They upload their trip experiences with images/photographs on the HA website applauding them for their memorable experience. H&P's story appears in the next issue of the monthly online outdoor adventure newsletter that HA offers to its members. Potential clients have a chance to read H&P's story and view the breathtaking photographs.	Issues: Post Purchase Experiences Repeat Business