Electronic Business: Concepts, Methodologies, Tools, and Applications (4-Volumes) P130

Fotogenika.com printing and delivery. The Mexican lab oper-ated during the day, and the commitment was to process customer orders within 24 hours from receiving the order. In the cultural dimension, traditional organi-zations share a common culture, whereas virtual organizations are multicultural (DeSanctis et al., 1999). Fotogenika was related to a multicul-tural environment. The company had links with American and Mexican organizations. Also, customers, mainly Mexicans, are immigrants who have developed a particular cultural identity (chicano culture) different from that of Mexicans living in Mexico. would be able to assess market trends and know about customers’ demands. If customers were WRGHPDQGIUDPHVIRUWKHLUSLFWXUHVRUVSHFL¿F products, such as pictures printed on calendars, Fotogenika would assess the need to provide new services. By June 2004, Fotogenika had no employees. The founders rendered all services from Perezca-no’s house. In the future, Fotogenika might need WRUHQWDQRI¿FHDQGKLUHHPSOR\HHVWRSURYLGH services for its increasing customer body. Fotogenika’s business proposition was based on the following three strategies: In the boundary dimension, traditional orga-nizations establish mainly internal relationships as opposed to virtual organizations that establish external relationships (DeSanctis et al., 1999). Most of Fotogenika’s business processes were outsourced. Thus, the company mainly had es-WDEOLVKHGH[WHUQDOUHODWLRQVKLSVLQRUGHUWRIXO¿OO its needs. One of the main advantages of a virtual organization is that it allows managers to focus on core activities (Matthews, 2004). But what constitutes a core activity has changed over the years (Matthews, 2004). For Fotogenika, customer service and logistics were its core activities. This allowed the company to deal with marketing and customer preferences. This strategy had been used successfully before by Dell and is called direct business model (Lawton & Michaels, 2001). With the direct model, Dell establishes a direct link with individual customers and gets a great deal of information on customer preference trends, which Dell shares with its providers (Lawton & Michaels, 2001). Dell observes customer prefer-ences on a daily basis (Lawton & Michaels, 2001). If, for instance, customer preferences were shifting to larger PC monitors on a certain customer seg- 1. Print at the delivery point. Transmitting digital information is faster and cheaper than transporting physical information. This is not a new concept. For instance, USA To-day, the top-selling U.S. newspaper, sends the digital version of the newspaper to its national and international sites where it is printed (McMeekin, 2002). 2. Locate production facilities where costs are low. Again, this is not a new strategy. For instance, it is well-known that the software industry oustources systems development to India, where costs are lower than in the U.S. 3. (VWDEOLVKFXOWXUDODI¿QLW\ Companies that IRFXVRQVSHFL¿FPDUNHWVHJPHQWVSURYLGH services and products close to what their customers are used to. Fotogenika’s Web site was in Spanish and displayed pictures of Mexican people. A Spanish portal not only allowed Mexicans who do not speak English to use the service but also transmit-WHGFXOWXUDODI¿QLW\&XVWRPHUVHUYLFHDOVR was provided in Spanish, which developed a close relationship with its customers. ment, Dell would share that information with its suppliers, allowing them to adjust their inventory (Lawton & Michaels, 2001). Similarly, Fotogenika Fotogenika’s strategies were not new, but when applied to the company’s service and target market, it gave it a competitive advantage. As op- 1224 Fotogenika.com SRVHGWRODUJH¿UPVVPDOORUJDQL]DWLRQV³PXVW start out in a niche market with some means of differentiating themselves from their competition (differentiation focus)” (Jeffcoate, Chappell, & Feindt, 2002, p 27). Fotogenika used both service and price as a competitive advantage. In terms of service, Fotogenika rendered its services in Spanish and XVHGLWVFXOWXUDODI¿QLW\WRGHYHORSDVHQVHRIWUXVW in its customers. In terms of price, Fotogenika’s services were cheaper than those provided by its competitors. The total price paid by customers had two components: the price for the printouts and a shipping charge. For the pictures, Fotogenika’s prices were slightly lower than those of its com-petitors in most print sizes. Having lower printing costs provided the company with an attractive marginal income. The shipping charge is what really made the difference for the customers. Fotogenika shipped from Mexico City at substantially lower prices. A customer shipping to Mexico City would pay approximately $20 for delivery if ordered within the U.S. Ordering through Fotogenika, the ship-ping price was $2. Fotogenika’s competitors can be divided into two groups: (1) American companies delivering pictures worldwide, such as ofoto.com1 (owned E\.RGDNVQDS¿VKFRPDQGVKXWHUÀ\FRPDQG (2) Mexican companies such as upfoto.com and mifotodigital.com (owned by Kodak). American companies shipping to Mexico charged interna-tional delivery prices. Even Mexican companies charged more for shipping than Fotogenika did. The major threat might be Kodak, who had worldwide facilities. Kodak had proprietary sites in the U.S. as well as in Mexico. However, both sites were operated independently; that is, pic-tures ordered through ofoto.com to be delivered in Mexico were charged international shipping fees. See Appendix 2 for a summary of prices offered by Fotogenika’s competitors. Being a virtual organization had allowed Fotogenika to start as a small business, requiring a small investment. Brick-and-mortar companies move toward a virtual organization in order to WDNHDGYDQWDJHRIFRVWVDYLQJVÀH[LELOLW\DQG RWKHUEHQH¿WV`H6DQFWLVHWDO)RWRJHQLND was born as a virtual organization. No transition from brick-and-mortar was made. Figure 1 depicts Fotogenika’s organizational structure as a virtual organization. To sum up, Fotogenika had been established as a small e-business in terms of investment. However, the margins that had been obtained from printing and delivering at low costs had Figure 1. Fotogenika’s organizational structure Printing Lab in Mexico •Printing Accounting firm •Tax reporting Fotogenika •Logistics •Customer Service Fed Ex or similar •Delivering ISP •Hosting 1225 Fotogenika.com made Fotogenika an attractive investment. Proxy income statements are shown in Appendix 3. In-formation on type of customers and market growth DUHVKRZQLQ$SSHQGL[3HUH]FDQRZDVVDWLV¿HG because Fotogenika was achieving its goals. SETTING THE STAGE Perezcano’s partner was an expert in photographic technology. He had a thorough knowledge of the Mexican photography market and personally knew people who worked in the most important Mexican labs. The management of relationships in virtual organizations is a strategic variable (Lawton & Michaels, 2001). He had established an alliance with the lab in Mexico based exclusively on a pre-established fee per picture and delivery. There had EHHQQR¿[HGFRVWVDVVRFLDWHGZLWKWKHDOOLDQFH that is, Fotogenika only paid for the pictures it sent, and there was no commitment to send any minimum number of pictures. Due to the large volume of operations, UPS and FedEx charged the Mexican lab discount prices that Fotogenika by itself would not have been able to apply for. ,QWKLVVHQVHWKHVWUDWHJ\RIWKH¿UPKDGEHHQWR successfully manage a network of relationships (Lawton & Michaels, 2001). When business areas are outsourced, the out-sourcer transfers the provider not only the task itself but also the knowledge to complete the task. (Lawton & Michaels, 2001; Matthews, 2004). The outsourcer then relies on the provider to perform a task. The risk for the outsourcer, therefore, is that the provider underperforms (Matthews, 2004). When a provider is not performing at the expected level, the outsourcer either can switch providers or re-establish in-house control (if it is still feasible). Either option is costly and time-consuming. The dependence on the provider increases the risk for the outsourcer (Matthews, 2004). Fotogenika’s alliance involved a low risk. If the alliance with the Mexican lab failed or if it became unable to IXO¿OO)RWRJHQLND¶VRUGHUV3HUH]FDQR¶VSDUWQHU would be able to reach an agreement with a dif-ferent lab. Just like Dell computers, Fotogenika was competing as a network of alliances. Being a small startup business, Fotogenika had faced the challenge of how to actually get people to order products from its Web site. People need to trust that an online business will deliver a satisfactory product. The perceived reputation DQGVL]HRIWKHVWRUHLQÀXHQFHVFRQVXPHUWUXVWLQ an Internet store (Jarvenpaa, Tractinsky & Vitale, 2000). People trust large organizations more than small business (Jarvenpaa et al., 2000). However, the effect of size perception might depend on the type of merchandise (Jarvenpaa et al., 2000). When there is not too much at stake, the size of the company might not be important. The amount of money spent in each order of digital printouts is generally low, usually less than $100. As such, customers’ perceived risk on the transaction might be low, and they might be willing to try out Fotogenika’s service just to see if it works. In terms of reputation, people favor companies with which they are already familiar (Quelch & Klein, 1996). Therefore, Fotogenika was at a dis-advantage compared to big names in the industry such as Kodak. Fotogenika needed to build up a reputation and to transmit to its customers that the FRPSDQ\ZDVDEOHWRIXO¿OOWKHLUH[SHFWDWLRQV Information Technology (IT) is the critical enabler for virtual organizations (DeSanctis et al., 1999; Strader, Lin & Shaw, 1998). Virtual orga-QL]DWLRQVDVDQHWZRUNRI¿UPVUHTXLUHDJUHDW deal of integration and coordination (Strader et al., 1998). IT is a cost-effective tool that provides the capabilities to store and share information among participants. According to Strader et al. (1998) the information infrastructure for vir-tual organizations should include the following FRPSRQHQWV³DJOREDOLQIRUPDWLRQQHWZRUN for electronic brokerage, 2) electronic access to external environment data, 3) electronic connec-tions between organization partners, 4) electronic access to virtual organization operational data, and 5) intra organizational information system 1226 Fotogenika.com support” (p. 82). The Internet is a technology that can be used in all components. However, the Internet lacks the security to hold communications among virtual partners. For interorganizational communications, an intranet provides a solution to security concerns (Strader et al., 1998). Small organizations such as Fotogenika usu-ally lack the skills or the time to implement an e-business application (Wagner, Fillis & Johans-son, 2003). Therefore, Perezcano decided to com-pletely outsource the IT function. The web site was developed by a third party and was hosted E\DQ,QWHUQHW6HUYLFH3URYLGHU,63IRUD¿[HG monthly payment. The ISP took care of basic security measures, such as backing up informa-tion and securing server’s operations. The initial development of the site cost approximately $4,000. Updates to the site would have to be agreed upon on a one-by-one basis. In terms of interorganizational communica-tion, Fotogenika did not need to transfer custom-ers’ credit card information to the Mexican lab. For each order, the Mexican lab needed access only to the pictures to be printed and the customer’s delivery address. To deal with interorganizational communication, Fotogenika had an intranet de-veloped by the third party as part of the initial project. Within the intranet, the Mexican lab had secured access to Fotogenikas’ customer database and was able to download directly the orders to be processed. Fotogenika’s philosophy was to provide customers with a simple, short, and friendly buying experience. Therefore, Fotogenika’s Web site was small, well organized, and easy to use. Fotogenika’s functionality was simple. The Web site was able to do the following: For security reasons Fotogenika did not store customers’ information online. This meant that every time customers wanted to place an order they were required to type in their information. Also, since all order information was kept off-line, customers who wanted to know about the status of their orders had to contact customer service directly. CASE DESCRIPTION One of the main challenges that Fotogenika faced was to compete in terms of functionality. Ameri-can residents were already used to high levels of service doing e-transactions. For instance, returning customers are not asked to provide their information every time they do a transaction. However, at Fotogenika, as a security measure, no credit card information was accessible after a customer placed an order. This practice protected the company and its customers against phishing attacks. In a phishing attack, customers get an e-mail, supposedly sent by a company with whom they are customers, asking them to update their personal information. The e-mail is really sent by a hacker who replicates the company’s Web site and obtains customer information. Phishing attacks are costly, not only in terms of the frauds resulting from stolen infor-mation but also in terms of customer service. For instance, EarthLink estimated that one phishing attack cost the company at least $40,000. These costs come from providing services to custom-ers calling call centers and resetting customer information (Dragoon, 2004). Storing customer information is, without any doubt, a feature highly convenient for returning • Display information • Register customers • Administer customer electronic albums • Execute transactions customers. However, storing customer informa-tion exposed Fotogenika and its customers to costly risks that small businesses can hardly af-ford. So far, the company did not know whether 1227 Fotogenika.com customers valued this security measure or con-sidered it inconvenient. Functionality was also an issue in terms of customer service. The Web site did not offer auto-matic order tracking. Customers needed to contact customer service directly to inquire about the status of their orders. The lack of automatic tracking might be inconvenient for some customers. Also, it increased the workload of customer service. Perezcano had been assessing whether the limited functionality of the Web site would be an obstacle to acquiring and retaining customers. A better functionality would imply an increase in costs. The current Web site would need to be re-designed and implemented. However, estimating the costs would be easier than estimating the real impact of providing more functionality. Perezcano wondered whether such increased functionality would pay back. As a small startup e-business, Fotogenika had faced other challenges. Fotogenika had not developed a reputation yet. Therefore, the com-pany had to rely on different strategies in order to build trust with potential costumers. Consum-ers need to assess the seller’s competence (Tan & Sutherland, 2004); that is, customers need to believe that the seller has the abilities, skills, and expertise to provide the service (Papadopoulou, Kanellis, & Martakos, 2003; Tan & Sutherland, 2004). For this reason, Fotogenika displayed the Kodak logo on its Web site and indicated that Kodak paper was used to print the pictures. Another strategy to build consumers’ trust is to display privacy and consumer protection prin-ciples (Lee & Turban, 2001; Patton & Josang, 2004; Shneiderman, 2000; Tan & Sutherland, 2004). Therefore, Fotogenika displayed its customer satisfaction policies, including privacy protection and consumer refund policies. 7KLUGSDUW\WUXVWFHUWL¿FDWLRQVDUHNH\WREXLOG-ing consumer trust in Internet shopping (Hoffman, Novak, & Peralta, 1999). Fotogenika needed to ensure its customers that its store was a secure site and that its transactions were handled securely. For this reason, Fotogenika obtained a third-party WUXVWFHUWL¿FDWLRQZLWKWUXVWORJRFRP Shneiderman (2000) also suggests disclos-ing patterns of past performance and providing references from past performance. Fotegenika’s site did not offer this information. These features could be added to the site. It also has been suggested that culture might be an important factor in the disposition to trust (Jarvenpaa & Tractinsky, 1999; Tan & Sutherland, 2004). Customers develop trust when interacting with salespersons with similar background (Jarv-enpaa & Tractinsky, 1999). Culture is manifested, among other things, by the language used (Luna, Peracchio, & De Juan, 2002). Language not only WUDQVPLWVFXOWXUDODI¿QLW\EXWDOVRUHGXFHVWKH cognitive effort to process the site (Luna et al., 2002). Fotogenika’s site was in Spanish. It also stated that it was a company created and owned by a Mexican. The company, therefore, expected LWV:HEVLWHWRJHQHUDWHDVHQVHRIFXOWXUDODI¿QLW\ in potential customers. Along with the technical measures and the FXOWXUDODI¿QLW\)RWRJHQLNDEHOLHYHGWKDWEHLQJDQ American company would increase the customers’ levels of trust. If Americans happened to order digital printouts from a Mexican company and run into some problem, they would not be protected by American laws. Americans, therefore, would prefer to deal with an American company. Since Fotogenika operated across borders, the company needed to deal as well with the mana-gerial issues that arise when companies operate internationally. According to Sheldon and Strader (2002) there are at least four internationalization issues: (1) standardization of content and appear-DQFH¿QDQFLDOLVVXHVWUDQVSRUWDWLRQLVVXHV and (4) legal issues. Standardization of content and appearance im-plies that all information must be understandable 1228 ... - tailieumienphi.vn