SBM4202 IS Strategy, Management and Acquisition

APIC Asia Pacific International college

Assessment Overview

Assessment 1: Quiz

Assessment Details:

This in-class quiz will assess your knowledge of key content areas (Week 1,2 & 3 content) and to identify further support needs. For successful completion of the quiz, you are required to study the material provided (lecture slides, tutorials, and reading materials), engage in the unit’s activities, and in the discussion forums. The prescribed textbook is the main reference along with the recommended reading material. By completing this assessment successfully, you will be able to identify key aspects of information systems. This will help in achieving ULO3 and ULO4.

The quiz will be completed in class.

Marking Information: The quiz will be marked out of 100 and will be weighted 10% of the total unit mark.

Assessment 2: Case Study-1

Assessment Details:

Students need to read the following case study, relevant to IS and business strategies, and answer the questions at the bottom.

Can Instacart Deliver?

The online grocery store Webvan was perhaps the most well-known flop of the dot-com boom. Its 2001 failure led many pundits and investors to concluded that the online grocery business model was untenable. However, Webvan’s downfall was due mainly to pursuing a first-mover advantage strategy. It paid more than $1 billion to build huge distribution warehouses, bought fleets of delivery trucks, and invested heavily in marketing. Then it offered free deliveries on any size order, at virtually any hour, at prices that trumped its brick-and-mortar competitors. This was not a formula for generating profits.

In recent years other companies are testing the waters again for online grocery sales. FreshDirect in New York City has succeeded by combining fresh local produce, organic and kosher items, and customprepared meals with standard grocery store fare. Established brick-and-mortar firms including Albertson’s, Safeway and Peapod.com (the online entity for both Stop & Shop and Giant) took over as pure play online firms perished.

The newest entrant, Instacart bypasses the expenses of warehousing and transportation altogether by using a legion of independent contractors and local food retailers. These personal shoppers receive orders via the Instacart smartphone app, fill them from grocery store aisles, and use their own vehicles to deliver them to customers’ doors. Like fellow “sharing economy” firm Uber, Instacart minimizes labor costs by requiring its personal shoppers to pay for their own auto and health insurance and Social Security contributions. Purportedly paid between $15 and $20 an hour, depending on how quickly they can fill and deliver an order, most Instacart shoppers work part-time on flexible schedules.

Instacart co-founder and CEO Apoorva Mehta believes Instacart’s competitive advantage is two-fold. First, customers are not limited to a single vendor and can combine items from multiple stores on one order, so product selection is truly customized. (Instacart uses special software that can track inventory across multiple supermarkets.) And since personal shoppers are on call around the clock, customers have to neither order many hours in advance of delivery nor wait for a delivery window. In fact, customers can have their grocery list filled and delivered in less than an hour!

Instacart’s app provides a detailed map of each local establishment including store aisle contents. The customer’s grocery list, compiled using extensive drop-down menus either on the website or

in the app, is organized by merchant and aisle to provide maximum order fulfillment efficiency. Inventory is tracked for all of Instacart-affiliated merchants. As a personal shopper skims an aisle, bedecked in a bright green T-shirt flaunting the Insta-cart logo, items can be selected for different orders placed at different times. The software can also plan delivery routes and predict future customer orders.

iPhone users can connect to the Instacart app from Yummly, the largest recipe search engine in the world, and have the ingredients delivered in time for dinner. Visitors to Food Network websites, with more than half a million recipes, can browse recipes online and then click a button to add ingredients they need to their Instacart shopping cart. The Instacart app is integrated with Google Now cards so that Android users can place orders for either delivery or pickup using a token generated within the app.

Instacart’s core competencies thus dictate its target market: the price-insensitive, convenience shopper. At first, item prices were marked up (20 percent in one sampling) and a $3.99 delivery fee charged. An Amazon Prime–like service called Instacart Express requires a certain volume of business and a $99 yearly fee in exchange for free delivery. One of Webvan’s big mistakes was pursuing a mass-market strategy. It was never going to be able to turn a profit by providing quality and selection at rock-bottom prices—with free delivery to boot. Instacart is instead catering to shoppers who are willing to pay a premium to have both quality and selection.

By mid-2015 Instacart had 200 employees and 4,000 personal shoppers in New York, Los Angeles, San Francisco, San Jose, Washington, DC, Chicago, Boston, Austin, Seattle, Philadelphia, Atlanta, Boul-der, Denver, Houston, and Portland, Oregon. It continues to grow. Grocery purveyors, from large chains such as Costco, BJ’s Wholesale Club, Safeway, Kroger, Super Fresh, Trader Joe’s, and Whole Foods to local specialty shops such as Erewhon Organic Grocer & Café in LA, Marczyk Fine Foods in Denver, and Green Zebra in Portland are now welcoming Insta-cart as a way to expand their customer bases ahead of the full national rollout of Amazon subsidiary Amazon Fresh.

While many analysts predict that matching the bargain basement prices of Amazon and Walmart is unavoidable, Instacart is instead modifying its business model. Partnerships with Petco and Tomlinson’s Pet Supplies in Austin, Texas, hint of additional product areas on the horizon, while Mehta speculates that expansion into general logistics is conceivable.

Many of Instacart’s grocery store partners now set their own prices, paying Instacart a cut of each order. This has freed Instacart of the burden of mark-ups, protected it from the vagaries of variable food prices, and provided a more stable profit structure. Retailers have been willing to pay Instacart in the hope of gaining more business because Instacart enables a single store to serve people across a larger geographic area. Affiliated retailers are reporting gains, although the numbers are small. Nilam Ganenthiran, head of Business Development and Strategy, maintains that different types of agreements have been reached, declining to specify whether partners are outsourcing their ecommerce to Instacart for a monthly fee or are charged per item purchased, per order placed, or per customer serviced.

With national chains achieving just 1 to 2 percent margins on grocery delivery, the Instacart model of layering labor on top of the existing grocery infra-structure is still unproven. According to a Wall Street Journal analysis, an order of 15 common items such as frozen peas, milk, cereal, and fresh fruit costing about $68 from a San Francisco Safeway store would produce a profit of only $1.50 for Instacart. If the order were smaller by one 28- ounce jar of peanut butter, Instacart would break even, and a smaller order could push it into the red. Without price concessions from participating merchants, can Insta-cart attract enough customers? And maintain a pay scale that ensures the top-notch customer service demanded by its target market? And still make a profit? And can retailers’ sales gains from Instacart be sustained? Instacart may be a great idea, but it’s a very big bet.

CASE STUDY TASKS:

1. Give a brief introduction about the company Instacart.
2. Analyze Instacart using the value chain and competitive forces models. What competitive forces does the company have to deal with? What is its value proposition?
3. Explain how Instacart’s business model works. How does the company generate revenue?
4. What is the role of information technology in Instacart’s business model?
5. Is Instacart’s model for selling online groceries viable? Why or why not?

Marking Information: The case study 1 will be marked out of 100 and will be weighted 20% of the total unit mark.

Marking Criteria and Rubric:The assessment will be marked out of 100 and will be weighted 20% of the total unit mark

Assessment 3: Case Study-2

Assessment Details:

In this assignment students are required to conduct research and address the following case study questions and find solutions to company problems.

Kramp Group, A Million Spare Parts- and Counting

Kramp Group is Europe’s largest distributor of accessories and parts for motorized equipment, agriculture, and construction machines. That may sound glamourous, but as IT manager Robert Varga explains ‘’Modern agriculture is highly mechanized: it is impossible to run a farm successfully without tractors, harvesters and other machinery. If a critical component fails and puts one of our customers’ machines out of action, the loss of productivity can cost them serious amount of money. We have a catalogue of more than 700,000 spare parts which can be delivered within a single working day from any of our European warehouses to their nearest dealership, helping them get back up and running as quickly as possible’’.

Kramp Group CEO Eddie Perdok says ‘’We believe in the future and the power of E-commerce. Compared to other sales channels, the internet gives us significant cost advantages’’.

Yet, to Kramp’s customers using the internet isn’t automatic. Kramp takes more than 50,000 customer orders every day from various channels. Prior to 2010, ‘’nearly 40 per cent of our customers still placed their orders by phone, which means that our call centre staff had to spend a lot of time on basic order- processing, ‘’says Varga. To reduce that figure, Kramp had to make its online store easier to use- but their existing store, which had been developed in- house, did not have the flexibility to achieve this goal.

Kramp turned to software packages from IBM and German software firm Heiler AG to modernize its E-commerce systems. Hans Scholten, a member of Kramp Group’s executive board, says ‘’We deliberately opt for the ‘best of breed’ solution for all packages. That means we choose the best available software for different applications’’. That philosophy helped determine the packages the company chose.

From IBM, the firm obtained WebSphere Commerce for the customer- facing side of its system. This software’s multilanguage capability was important: Operating throughout Europe as Kramp does, being able to have one site that can operate in any of 10 languages was crucial. Nevertheless, Kramp had to translate the content into all the languages because 2012 even the best automatic translating software couldn’t replace a skilled person. However, the advantages was that the company didn’t have to develop and support different sites.

Kramp also uses Heiler Software’s Product Information Management (PIM) solution. That software manages product data in the catalog behind WenSphere Commerce. Kramp wants to expand its deliverable stock to over 1 million items and couldn’t do so without PIM. Expanding to more than 1 million stocked items is crucial to Kramp’s long tail strategy: the concept that each of the slow- selling items may not account for much revenue but that the total of all slow-selling items is large enough to make a difference to Kramp’s success.

Finally, though Kramp has the in-house capability to manage its E-commerce system, it turned to CDC software to help integrate the pieces. Doing so itself would have required the company to hire additional staff, which it wouldn’t need when the project was done.

The result was that after Kramp’s new system had been online, 90 per cent of their customers chose to order online via the WebSphere Commerce solution. As a result, the company saw a significant reduction in the average cost per transaction. Varga reported ‘’Our call centre staff now has more time to help customers solve complex problems, which improves customer service. Better service and lower operational costs are helping Kramp Group achieve 10 to 12 per cent annual growth, so the solution is making a real continuation to the success of our business’’.

Exercise

Imagine you are a manager of a company which is in need of IS solutions to your company needs- similar to Kramp Group, looking for ways that technology can assist with sales. By reading the above article, you want to implement online business. You are required to address the following in your proposal through considerable amount of literature review.

1. Select a company of your choice and provide an overview about the company background, products and services its offering.
2. How do other types of E-Commerce such as business- to- consumer (B2C), consumer- to consumer (C2C), business-to government (B2G), differ from business- to- business (B2B) E-commerce?
3. kramp sees e-commerce as a compliment to its call centre operations. In this light, what risks do you believe your company need to accommodate when creating the IT infrastructure you now process?
4. What is a long tail strategy and why do you think it could be effective or non-effective to your business needs? What other types of businesses and industries might benefit from the use of a long tail strategy?
5. Discuss the pros and cons of outsourcing to your company. Also consider the issue of offshore outsourcing.
6. Suppose you are considering setting up an online business, discuss advantages and disadvantages for using e-commerce as compared to traditional physical store.
7. Choose multiple industries and provide an example company for each industry in which IT plays a strategic role by adding value and providing a competitive advantage through innovative application of IT. Now identify competitive counterpart companies for which IT does not play a strategic role. Report on the successes/failures of each pair of companies.

Marking Criteria and Rubric: The assessment will be marked out of 100 and will be weighted 30% of the total unit mark

Assessment 4: Tutorial Participation and Submission

Assessment Details:

Different exercises assess students’ ability to understand theoretical materials on a weekly basis. Students will be given simple activities each week and will be required to provide answers and achieve identified outcomes. The assessment requires students to form groups, discuss weekly tutorial questions in class.

Students will not be assessed on work that the tutor has not seen them produce in class so that attendance is required as part of this assessment. Students are required to submit the work that they have completed during the tutorial session. The details of the tutorial work and requirements are provided on the online learning system.

Marking Criteria and Rubric: The assessment will be marked out of 100 and will be weighted 10% of the total unit mark

Assessment 5: Report

Assessment Details:

In this assessment students are required to write a report on a topic, given below. These topics are related to IS strategy, Management, Organization and Technology. Choose a topic from the list below please:

1. The IS strategies and evidences for gaining competitive advantage through technology and acquisition

OR

2. The impact of artificial intelligence on decision support system. OR
3. The impact of IS strategy on organizational performance.

Students are advised to do their own research on the topic selected, and make a report which will cover the followings

• Introduction
• Discussion of the core concepts
• Critical analysis of the impact of it (i.e. strategies/artificial intelligence/IS strategy) on (acquisition/decision support/organizational performance)
• Examples and evidences to support the arguments
• Conclusion

Marking Criteria and Rubric: The assessment will be marked out of 100 and will be weighted 30% of the total unit mark