Due to Lack of Income
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Background
Due to lack of income from the subscription revenue model, ABE find themselves in a desperate situation. Their inability to adopt the transaction revenue model forces them to look outside for opportunities.
Issues & Problems
Lack of market power due to competitive industry environment and weak business model:
Lack of autonomy
Sharing of important client information among industry players
Weak business model shaped an unprofitable e-commerce:
Lack of inventory control
Customers adjust inventory to stay below a subscription level
Thin contribution margin from the subscription fee
Inability to utilize customer information collected
Inability to collect commission
Potential opportunity of commission collection faces the following challenges:
Thin contribution margin from potential commission
Complicated transaction process takes too long and may be subject to many risks.
Decisions: Whether or not to collaborate with B&N on their business proposal with a one-year renewable contract
External Analysis
Porters Forces of the online book exchange websites:
Medium threat to new entry: the capital requirement on setting up an e-commerce business is minimal. Nevertheless, there is substantial requirement on network externality with both the dealers and customers to achieve global reach of the e-commerce (issue 1)
Low threat to substitute: for unique books for collection purposes (ex. First editions);
High bargaining power of buyer: the customers have easy access to price information. (issue 1b)
High bargaining power of supplier: the suppliers has a lot of inventory control, and also easy access to price information (issue 2 a, b)
High level of rivalry:
with the dealers themselves because they can choose from means of transactions that will not benefit the company (issue 2e);
with Biliofind.com, Alibris, Bibliocity has lots of overlaps in customers (issue 1)
Capabilities and competitive strategies:
ABEs primary strategy is differentiation. They have a niche market, but since the role of supplier and buyer is interchangeable and has high bargaining power. (issue 1)
Describable: the books can be very well described with clear product specification.
Personalization: ABE provide browsing of books, and allows customer to create “wants” lists of books. Nevertheless they cannot build system from