Key factors of successful e-commerce - what HP can learn from Dell

Executive Summary

Today Dell is a market leader that constantly gains competitive advantage with its effective e-commerce strategies. The following report was prepared for the Chief Executive Officer of HP in order to demonstrate the opportunities his company could realize by changing its traditional distribution system and starting to make use of e- commerce as a main distribution channel and to efficiently manage the supply chain through the internet.

Advanced e-commerce strategies hold many benefits. Dell was able to benefit from opportunities as they consequently considered some key factors of successful e- commerce:

• A continuous information flow enabled them to improve the relationship between all participants of the supply chain. As a result the company could reduce its inventory costs and deliver customers products and services they require.

• Dell further recognized the importance of a premium customer service as a key element for success. The selling of products directly through the internet without an intermediate is including cost saving potential but also risks due to the missing face-to-face contact between buyers and sellers.

• Further to that Dell aims to meet exactly the needs of its customers by offering mass customized products.

A company like HP should first start to establish e-commerce initiatives as an

additional distribution channel as the electronic sale platform is getting a key role in the business life of today.

For a short-term step-by-step introduction of e-business the following recommendations could serve as a guideline:

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1. integration of the internal databases in order to provide comprehensive

information

2. create an e-business platform and make product range offered through

catalogues available through an internet store.

3. establish electronic supply chain management.

4. Offer an effective online customer service through personalized web pages

and the establishment of customer interaction centres.

This way the company can prevent losing market share to competitors like Dell and other successful e-business companies.

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Table of contents

  Executive Summary - 2 -  

Table of  contents - 4 -  

  Introduction  6

  Importance of the Internet  6

  E-Business and E-Commerce  6

  Dell as an e-business pioneer  6

1.  Success factors of e-commerce  7

  Innovative culture  7

  Focusing on Core Competences  7

  Customer Relationship Management (CRM)  8

  Efficient E-Supply Chain Management  9

  Mass Customization  9

2.  Importance of the integration of information across the whole supply chain  

   10

  External integration of information  10

  Internal integration of information  10

3.  Benefits and risks  11

3.1.  Benefits  11

  E-business facilitates operating globally  11

24-hours  open stores  11

  Cost reduction  11

  Efficiently constructed supply chain  11

  Mass customization  11

  Customer relationship  12

  Availability of the latest information materials  12

3.2.  Risks  12

  Security  12

  No face-to-face contact  12

  Products cannot be touched  12

4.  Critical appraisal of the Dell e-business initiatives versus HP s current model  

   13

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  Business model of Dell  13

4.1.  Distribution channels  13

  Direct sale system of Dell  13

4.2.  Supply chain management  14

  Information flow  14

4.3.  Customer Service  15

  Conclusion  16

  Reference list  17

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Introduction

Importance of the Internet

The internet has a dramatically impact on every kind of organisation. It forms completely new challenges on the one hand but on the other hand it offers entirely new facilities. Through the establishment of digital networks, a considerably faster and less expensive way is created to change information with others. Additionally spatiotemporal borders disappear (Pörner, 2002). Totally new business models were developed during the last decades and companies discovered completely new strategies to gain competitive advantage (Phillips, 2003, p.33).

E-Business and E-Commerce

According to Turban et al. (2005, p.4) e-commerce is the realisation of all business activities realised via computer networks. E-Business in contrast does not only include the buying and selling process but everything else like e.g. the customer service, the corporation with suppliers and every internal process of the organization handled via an established digital network.

Dell as an e-business pioneer

Today Dell Computer Corporation is considered to be the market leader in doing successful e-business through the Internet. Dell was the first company that was using the direct-marketing business model to sell such an expensive good like a PC directly to its customers without the intermediation of a reseller (Turban et al., 2005, pp. 2–3). The new Chief Executive Officer of HP instructed the author as the business consultant to write a report about the opportunities the new e-business strategy can offer for HP’s product marketing. The following report will give an overview of general requirements to a company to operate successfully in e-business. Further it will highlight the importance of the continuous integration of information in business workflows. Furthermore benefits and risks of e-commerce are given. To put all findings in context, the third section is giving an evaluative comparison of the business models of Dell and HP. A short conclusion is listing recommendations for HP.

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