Page 128 - E-Bussiness and E-Commerce Management Strategy, Implementation, and Practice

M02_CHAF9601_04_SE_C02.QXD:D01_CHAF7409_04_SE_C01.QXD 16/4/09 15:39 Page 95

Chapter 2 E-commerce fundamentals 95

The impact of the dot-com phenomenon on traditional
organizations

The failure of so many dot-coms has accounted for much adverse publicity in the media and
e-commerce and e-business were perhaps perceived by some as a fad. However, for every
story about dot-com failure there is perhaps an untold story of e-business success. In the
background, traditional companies have continued to adopt new technologies. The changes
made by existing business are aptly summed up by David Weymouth, Barclays Bank chief
information officer, who says (Simons, 2000):
There is no merit in becoming a dot-com business. Within five years successful busi-
nesses will have embraced and deployed at real-scale across the whole enterprise the
processes and technologies that we now know as dot-com.
What then is the legacy of the dot-com phenomenon? What can we learn from the dot-com
successes and failures? We look at the strategic reasons for many of the dot-com failures in
Chapter 4 and Case Study 5.3 on Boo.com highlights many of the classic problems of dot-
com businesses.
The following guidelines can be suggested for managers developing e-commerce strategy
for their own companies:
1 Explore new business and revenue models.
2 Perform continuous scanning of the marketplace and respond rapidly.
3 Set up partner networks to use the expertise and reputation of specialists.
4 Remember that the real world is still important for product promotion and fulfilment.
5 Carefully examine the payback and return on investment of new approaches.
As a conclusion to this chapter, consider Case Study 2.3 which highlights the issues faced by
a new e-business launched in 2005.

Case Study 2.3 Zopa launches a new lending model

This case shows how it is still possible to develop radical opportunities of launching a new business online, espe-
new online business models. It shows how an online cially a business with a new business model.
business can be launched without large-scale expendi- Zopa stands for ‘zone of possible agreement’ which
ture on advertising and how it needs to be well targeted is a term from business theory. It refers to the overlap
at its intended audience. between one person’s bottom line (the lowest they’re
prepared to receive for something they are offering) and
Context another person’s top line (the most they’re prepared to
pay for something). In practice, this approach underpins
It might be thought that innovation in business models
negotiations about the majority of types of products
was left behind in the dot-com era, but still fledgling
and services.
businesses are launching new online services. Zopa is
an interesting example of a pureplay social or peer-to-
The business model
peer lending service launched in March 2005 with US
The exchange provides a matching facility between
and Italian sites launching in 2007 and a Japanese site
people who want to borrow with people who want to
planned for 2008.
lend. Significantly, each lender’s money is parcelled out
Zopa is an online service which enables borrowers
between at least 50 borrowers. Zopa revenue is based
and lenders to bypass the big high-street banks. Since
on charging borrowers 1 per cent of their loan as a fee,
launch in March 2005, £20 million in unsecured personal
and from commission on any repayment protection
loans have been arranged at Zopa in the UK. There are
insurance that the borrower selects. At the time of
over 150,000 UK members and 200,000 worldwide. Zopa
launch, Zopa estimated it needs to gain just a 0.2 per
is an example of a consumer-to-consumer (peer-to-peer) cent share of the UK loan market to break even, which
exchange intermediary. It illustrates the challenges and it could achieve within 18 months of launch.