Assignment Topic: Case Study of Kalahari.net

Assignment Topic: Case Study of Kalahari.net

  By  Baral Abita                                                                                     

Contents

1.      Introduction. 1

Definition of E-commerce and e- business. 2

2. Business Issues. 3

2.1 Supply Chain and Value Chain. 3

2.2 Business Model 6

2.3. Factors leading to success. 8

3. Technical issue. 8

4. E-commerce focus strategies. 11

4.1. Affliction Model 11

4.2. Business Strategy: 12

4.3. Marketing Strategy. 13

5. Conclusion: 16

Bibliography. 17

1.      Introduction

This report studies some of the main issues related to business methods and technologies employed in e-commerce based on the case of Kalahari.net, currently one of the leading e-business ventures in South Africa. The website was developed in October 1998, at a period when extraordinary hype concerning the web let to the general idea that little time and money was necessary for establishing web-based businesses. Therefore Kalahari.net was first launched approximately one month after the decision was taken to get into business. However lack of preparation resulted in a failed first attempt because the organization could not cope with the technological and business challenges they faced. After this unsuccessful endeavour, the management group decided to re-launch the website in more a professional and thoughtful way. Since the re-launch of Kalahari.net, the business has grown sustainably and continuous increase in turnover has been reported.

Definition of E-commerce and e- business

E commerce and e-business are commonly viewed as being synonymous small differences must be clarified.

E-business is the integration through the internet of all the organization procedures from suppliers to customers (Boddy, 2008). 

“E-commerce is seamless application of information and communication technology from its point of origin to its endpoint along the entire value chain of business process conducted electronically and designed to enable the accomplishment of a business goal. These processes may be partial or complete and may encompass business to business as well as business to consumer and consumer to business transactions” (Wigand, 1997). According to (Rahman and Raisinghani, 2000) commerce is not only limited in buying and selling activities, but it also consists of the performance of pre-sale activities from raw materials production to end users, which adds in value in each stage.

Kalakota and Whinston (1997) define e-commerce in different perspective:

Communication prospective: E-commerce is designed to hold up communication requirements of a variety of tasks (delivery of products/ service, payments, etc) via a variety of electronic means.

Business process perspective: E- commerce is to automate the business transactions and workflows.

Service perspective: E- commerce is a medium to reduce the service expenses of the organization and offer superior service to the customers.

The online perspective: E- commerce is a medium to support buying/selling throughout the Internet and other telecommunication channels.

Rahman & Raisinghani (2000) argue the four perspectives given by Kalakota & Whinston are not separate to a great degree. For example: automating the business consequently improves communication and reduces the overhead cost associated with the provision of services. Similarly, buying/selling of products online improves the quality of services to customer/suppliers, allows better communication and results in more adaptive business processes.

                                                                                                 

2. Business Issues

2.1 Supply Chain and Value Chain

 

            2.1.1 The value chain

Value chain is a tool that divides the firm into the discrete activities which the firm performs in designing, producing, marketing and distributing product and services. It is a basic tool for diagnosing competitive advantage and finding a way to enhance it (Lee &Yang, 2000).

The value chain consists of primary and support activities. The primary activities help to identify qualitative input and also help to transform input into output.  

 

Fig. 1 Value Chain                                          (Porter, 1980)

The implementation of Information technology (IT)[1] has added further value to each department comprising the organization and has contributed to a more efficient management structure.

Marketing department:  Information technology makes easier for the business to identify the reaction of market. IT has made simple for organization, to obtain information about tendency in demands, competitor products and performance that should be examined for developing organization strategies to compete in marketplace. The introduction of IT in business operation made it easier for business to get information related to changing need and preference of customers as a result organization can launch goods and services as per the demand of customers which add the value for both the organization and customers. For example: through IT system, information about clients can be obtained and used to better segment and target customers according to their characteristics and needs and their level of satisfaction with service (Chaffey D, 2004).

Human resource and finance: IT reduces cost by increasing efficiency at all the stages of the supply chain. In addition, services can be delivered at reduced cost because IT allows fewer resources to be required compared to what is achieved with traditional value chain methods. The use of IT has diminished requirements for large number of personnel as efficiency is gained with the computerization of business operations. Besides, improvement in the organisation internal and external communication is commonly experience, which enhances the performance of both HRM and finance departments (Chaffey D, 2004).

Operating: IT can be used to innovate and generate new ways in which goods or service can be developed. IT has decreased the manufacturing time and cost by increasing systemic flow of information as a way to incorporate different value chains (Chaffey D, 2004).

2.1.2 The supply chain

“Supply chain is a set of three or more units (organization or individuals) directly involved in the upstream and downstream runs of goods, services, finance and/or information from a resource to a consumer”. (Mentzer, 2001, P. 4)

 

Fig 1. Traditional Supply chain                        Fig 2 Supply chain of E business (Kalahari.net)

IT has changed the traditional supply chain of the company, as shown in Fig.1.  The use of IT allows value to be added through the entire supply chain, for example logistic processes and the physical delivery of goods to the consumer are improved thanks to the use of communication and information systems. IT have reduced the order cycle time and cost; consequently fast fulfilment of the processes within the supply chain helps improve customer satisfaction (Lian Ee, 2001).  Through integration IT supply chains have help in JIT (Just in Time) inventory, JIT parts ordering, personalized marketing, real-time intra and inter corporate communication, paper transaction and customer satisfaction. Dell, music companies are the example of JIT inventory.

The logistics supply chain of E commerce has also significantly influenced the competitive forces of companies. The bargaining power of customers has increased at the expense of suppliers. The threats of new entrances, competitors and substitute products have increased; because of e-commerce global marketplace has become a single market. For example: Kalahari.net which is based in South Africa must compete on its marker against Amazon.com and other retailers. Therefore, the threat that present new entrants and substitutes to Kalahari.net business is exacerbated by the nature of its web based activities.

2.2 Business Model

“E-business model is a description of the roles and relationships among a firm’s consumers, customers, allies and suppliers that identifies the major flows of product, information and money, and the major benefits to participants” (weill and Vitale, 2001, p 34).

The major e-business models are business-to-business (B2B) and business-to-consumer (B2C). B2C refers to business-to-consumer form of technology-enabled business. The B2C model focuses on individual buyers (Pride et al, 2009), that is why understanding how consumers behave online is critical to the firm’s success. Successful B2C firms often make a special effort to building long-term relationships with their customers.

 

                                                                 (Gross et al, 2005)

Fig. 3 E- business B2C model

The main types of B2C e-business model are portal, content providers, transaction brokers, community providers, service providers, market creator and e-trailer. E-business model of market creator is followed by Kalahari.net. Market creator builds a digital environment where buyers and sellers can meet; display products search for products, and establish a price for the products.    

Firms that use the internet mainly to conduct business with other businesses generally are referred to as B2B and focus mainly on facilitating sale transactions between businesses. E-distributor, e-marketplace, e-procurement are different types of B2B models.

 

            Fig. 4 B2B model of E-business                                 (Gross et al, 2005)

While B2B and B2C models are the most popular e-business models, there are other models that perform specialized e-business activities to generate revenues (Pride et al, 2009). Timmers 1999 identifies 11 different types of e-Business models which are e-shop, e-procurement, e-malls, e-auctions, virtual communities, collaboration platform, third-party marketplace, value-chain integrator, value-chain service providers, information brokerage, trust and other services providers. 

In case of Kalahari.net, both B2B and B2C e-business models are suitable. Being an e-business venture, Kalahari.net has to maintain a good relationship with its customers and increase customer loyalty, if revenues are to be increased. At the same time, Kalahari.net needs support from other businesses to operate business. The communication methods commonly employed in B2B are followed so that the business transactions of Kalahari.net can further drive revenue by means of advertising available on its own sites. For example: large e-business corporations such as Google, Facebook, YouTube, etc generate sustainable revenue from this B2B model (Chaffey D, 2004).

2.3. Factors leading to success

According to Turban et al. (2005, pp 15 -19) to become successful and to gain competitive advantage organizations must take into account of technological, economical and social forces. Critical success factors for the business include an innovative culture, focusing on core competences of organization, customer relationship management, efficient e-supply chain management, and mass customization should be in consideration along with the external conditions (Kuballa, 2007). In case of Kalahari.net, the factors which lead success are effective change management, change in human resource management, proper management of resources, maintaining good relationship with its stakeholder.

Kalahari.net has changed following factors: The web-site itself was substantially overhauled; Kalahari.net strengthens the relationship with suppliers to ensure that truthful product data was supplied; Kalahari.net hired new general marketing manager to direct marketing experience for implementing new strategies including diversifying the product base to attract and retain customers.

3. Technical issue

The technical issues are related to security, connectivity, process support i.e. software and hardware to evaluate websites.

The criteria for evaluating the websites are:

How long does it take to open the webpage?

How clutter is the websites?

Keyword Prominence:  how early in a page a keyword appears;

Keyword Frequency: number of time the keywords appears;

Site popularity: A few search engines consider how popular site is,

Personal login, Chat rooms, Guestbook, Message boards, Referring sites, search engines, Feedback forms, review, privacy, website layout, name of company, etc (VMilutinović, Frédéric Patricelli, 2002).

Further, these criteria are used to evaluate Kalahari.net and some solutions for improving those issues are described below: 

Security: Security is the major technical issue related to e-commerce. Despite the technical development in internet security such as cryptography, digital autographs and licenses, and verification, 55 % of customers remained concerned about internet security as reported in a survey carried out in June, 2010 (Boulder & Colo, 2010). Although it has been reported that apparent web security has a positive effect on the purpose to purchase online (50), security continues to be of the key obstacle to online shopping (Kiely, (1997); Since Kalahari.net is the first e-business venture in South Africa it is difficult for customers to pay online by credit card. To overcome such obstacle Kalahari.net implemented alternative payment methods such as telephone transaction and cheques. In general, websites should include robust security tools and adopt privacy practices in order to improve customers trust (Rangathan & Ganapathy, 2001).

Design and speed: Design and layout of website plays a significant role in drawing attention, satisfying and maintaining the interest of a customer at a site. Delay in finding or in downloading a web page turn customers to other websites that provide faster download and shorter display time. For example: customers of Kalahari.net may turn to Amazon.com because of low connection speed often experienced in Africa. Simplicity of navigation of the websites, time taken for navigation and page download and use of multimedia improve its visual appeal. User friendliness and time saving are reasons that are often cited by consumers as an important motivation for shopping online (computing Canada, 1998). Kalahari.net has similar issue of design and speed. Kalahari.net should design its websites in such a way that make customers to spend fewer time in searching information which they are viewing for (Rangathan & Ganapathy).

Informative: The effectiveness of websites is summarized with major resource of information and instruction; absolute information on goods and service; permit for fast access and instruction, all the way through tools such as search engines. And websites should offer decision making aids to provide support in data; websites should add frequently asked questions (FAQ) for making it more efficient (Rangathan & Ganapathy). Therefore, it is important for Kalahari.net to offer electronic means of interactivity to consumers and to make websites more informative. In addition, B2C (Kalahari.net) websites should be easy to navigate, consume less time in searching and have an aesthetic appeal.

Content: Websites are essentially store house of information, which is provided in such a way that helps the visitors and thus affect their perception of its effectiveness. The content of websites plays a significance function in persuading the buying decision of customers. It permits the customers to place and choose the goods which best satisfies their needs. Before buying goods customer view for instruction and information on it: brands, diversity, cost, quality and value. But different customers may have different needs of information. Kalahari.net should offer instruction and information through hyperlinks; therefore customer can drill-down to in-depth and detailed about goods information as needed. For example: Amazon.com offers hyperlinks to book and product testimonials (Rangathan & Ganapathy).

The case study of Kalahari.net showed that in their first lunch, the website did not fulfil any of those criteria. As mention in the case study, Kalahari.net has technological issues such as websites was describe as being ‘horrendous’ with long download times, and poor information on site, crucial internal data loading process took weeks and resulted in unreliable product data; no fulfilment process in place. There were inadequate internal controls. However, the re-launch of Kalahari.net in thoughtful and professional ways fulfil all the criteria of technical issue which lead the business to strength and success.

4. E-commerce focus strategies

4.1. Affliction Model

E-business affliction programs are electronic versions of traditional sales recommendation programs exercised by many different types of business. Other websites are influences to persuade potential customers to a merchant’s websites in affliction, where it is hoped customers will buy merchants products and services (Napier. H, et al. 2006) Kalahari.net is afflicted from Naspers via Africa other websites and mweb.co.za, fin.24.com and news24.com. According to (Höpken et al. 2009) the affliction model has many positive and negative effects to business which is explained in table.

Positive effects of afflicted to Kalahari.net                           ·         Potential for revenue generation.        ·         No need to develop and/or deliver any Products or service; ·         No need to create or hold inventory; ·         Possible to start with very little capital; ·         Potential for incremental revenue generation; ·         Increase exposure; ·         Potentials expansion to new market; ·         Increase website ranking in search engines due to number of external  links to site; ·         Leveraging search engine market (SEM) expertise of multiple affiliates at no direct cost.

Negative effects of afflicted to Kalahari.net ·         Difficulties in creating adequate             traffic particularly in competitive              product categories; ·         Commissions should be paid by Kalahari.net  after initial sign up; ·         Brand control by Naspers; ·         Cost of setting up program             (.i.e. affiliate network costs.) ·         High commissions or overrides; ·         Fraud e.g. False advertising, unlawful             use of trade names, logos or             brands, pay per click fraud etc;

Table 1: Positive and negative effects of affiliated to Kalahari.net

4.2. Business Strategy:

                                                                                              

Kalahari.net first has to identify its current missions, goals, objectives, and strategies. After identification of current mission, goal, objectives and strategies, Kalahari.net can use environmental scanning tools such as PEST, Porter 5 forces analysis and SWOT analysis. The environment scanning tools help to understand internal forces such as strength and weakness and external forces such as opportunity and threats so that management of Kalahari.net can improve their business position in the future (Chun Wei Choo, 2005).

After identifying strength, weakness, opportunity and threats Kalahari.net can determine the business strategy among the following types:

Cost leadership strategy: In cost leadership strategy, the company aims to compete on price rate rather than any other advance features or high level of customer service (Boddy, 2008).

Differentiation strategy: In differentiate strategy organisations follow the strategy which consist of offering a product or service that is perceived as unique or distinctive (Boddy, 2008).

Focus strategy: In focusing strategy company focuses its attention on two to three target markets and give closer attention on them (Boddy, 2008).

Looking at B2C and B2B models of kalahari.net, differentiation and cost leadership strategies would fit. Kim et al. (2004), indicate that e-commerce can follow the traditional differentiation and cost leadership strategies, as the Internet enables organizations to reach both large and tightly defined consumers. Furthermore, they proposed an approach called integrated strategy that combines features of cost leadership and differentiation strategies. Kalahari.net can adopt the integrated strategy to attract more customers and at the same time further focusing their attention on some niche markets and segments its market into different groups, target different customers and position its product.

 

4.3. Marketing Strategy

4.3.1 Segmenting, Targeting and positioning

The formula - segmentation, targeting, positioning (STP) - is the core of strategic marketing." (Kotler, 1994) “Procedure to segment the market, pick the appropriate target market and increase the offer’s value positioning is called segmenting targeting and positioning (Jorge A. Restrepo, 2009). Kalahari.net can follow the same marketing strategy.

Segmenting: The first step is to set the group of consumer together by the side of the ordinary variable which is called segmenting. Kalahari.net can segment the market in numerous ways to recognize a choice of sub market. Kalahari.net can segment the market into different groups on basic of geography, demographic, psychographic, and behavioural.

Targeting: Once the market is developed an entire outline of the changeable segments is established in the market. One or more segments must be selected for a concentrated marketing approach, which is known as targeting. (M. C. Cant, 2006). The different types of marketing strategy for targeting the product are undifferentiated (mass) marketing; differentiated and concentrated strategies. For Kalahari.net it is appropriate to ask these five question to identify target market. The questions are: Who are our customers; how are their needs changing; which do we target and on what basic; how can we add value and how can we become first choice (Seybold, 1999). After answering these five questions Kalahari.net can position the market following the concentrated marketing strategy.

Positioning: Once kalahri.net has selected its target market, a decision has to make about: what position should the company occupy on those segments? A product position is the method in which the product is positioned on the basis of the consumers’ attributes- the place, the product inhabit in consumers’ mind, qualification to challenging price and the exiting promotion (Thomas. P. Reilly, 2003). The 4ps (product, price, promotion and place) are the pillar of the market positioning. kalahari.net (e business) has to differentiate its 4ps (product, price, promotion and place) in following ways:

Product differentiation: Kalahari.net should differentiate its products using number of different dimensions such as product forms, features, conformance, style, service, and idea. (Philip Kotler, 2008).

Image differentiation: Kalahari.net should differentiate its price on the sum of the value which customers correspond to what they are willing to pay for the product or service. Price can be positioned as premium price, low price, value added price.  For example: Kalahari.net can offer the same product with different price range. Further it can offers different value and price line according to the customer ability to purchase. The same laptop that Kalahari.net has offer could be from different price ranges depending on brands, technology and others.

Promotion: Advertising, sales promotion, personal selling, e-commerce, digital media and media channels are raising promotion means of marketing communication. Kalahari.net can use Prestige promotion, fun promotion, and powerful promotion as positioning strategies in order to differentiate their product in the market place. For example: Kalahri.net can give weekend offers, Christmas offers, student discounts, gift cards and vouchers to promote customers.

Channel differentiation: Distribution or channel could be classified as intensive distribution, selective distribution, and exclusive distribution. Kalahari.net can use to differentiate their channel of distribution from rival which will give fast delivery to customer. Customers are ready to pay for fast and articulate delivery. Therefore, Kalahari.net should focus on delivery in time.

After segmenting, targeting and positioning the market, Kalahari.net can used Ansoff marketing model (1957) to attract new customers and retaining existing one.  Kalahari.net can establish current products in existing market; existing product in new markets; new products in existing markets; new products in new markets, to extend its marketing strategies.

 

5. Conclusion:

In conclusion, after facing major business and technical issues Kalahari.net re-launch its business in more professional way. The re-launch of the websites has made it more successful. The effective change management, change in human resource management pattern, development of creative strategy are the factors that led Kalahari.net to the success. After re-launch and change in management, Kalahari.net is now recognised as best e-commerce brand in South Africa among 1000 short-listed websites (including amazon.com).

Kalahari.net is an e-business venture and runs through internet and extranet, therefore it should manage the flow of internet and extranet data in a more fluent and organised manners. Kalahari.net should also consider the technical issues of hacking and pirating, so that customers may not turn to other brands. Kalahari.net should use internet security such as cryptography, digital autographs and licenses, and verification to make website more secure.  The company should look for customer feedback and try satisfying their needs. Furthermore, it can segment customer market according to their preferences and give promotion periodically to increase sales and loyalty. Proper management of human resources can play a significant role in building the success of the company. Therefore Kalahari.net has to ensure that all employees are satisfied and well trained, reward and motivation is provided to them because staffs are an intangible and valuable asset for all companies.

Total word: 3560

 

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[1] Information technology