Due to Lack of Income

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

1. Lack of market power due to competitive industry environment and weak business model:

a. Lack of autonomy

b. Sharing of important client information among industry players

2. Weak business model shaped an unprofitable e-commerce:

a. Lack of inventory control

b. Customers adjust inventory to stay below a subscription level

c. Thin contribution margin from the subscription fee

d. Inability to utilize customer information collected

e. Inability to collect commission

3. Potential opportunity of commission collection faces the following challenges:

a. Thin contribution margin from potential commission

b. 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

1. Porter's Forces of the online book exchange websites:

a. 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)

b. Low threat to substitute: for unique books for collection purposes (ex. First editions);

c. High bargaining power of buyer: the customers have easy access to price information. (issue 1b)

d. High bargaining power of supplier: the suppliers has a lot of inventory control, and also easy access to price information (issue 2 a, b)

e. High level of rivalry:

i. with the dealers themselves because they can choose from means of transactions that will not benefit the company (issue 2e);

ii. with Biliofind.com, Alibris, Bibliocity has lots of overlaps in customers (issue 1)

2. Capabilities and competitive strategies:

a. ABE's 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)

i. Describable: the books can be very well described with clear product specification.

b. Personalization: ABE provide browsing of books, and allows customer to create "wants" lists of books. Nevertheless they cannot build system from