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					  Service Innovation of
Enterprise E-commerce in

                Xie Kang

School of Business, Sun Yat-sen University
          May 19, 2006, Qingdao
         What to
       share today

I. Innovation environment of enterprise
e-commerce service of China
II. Innovation mode of enterprise
e-commerce service of China
III. Summary
  I. Innovation environment of enterprise
        e-commerce service of China
First of all, about social environment, e-commerce of
developed countries has grown up based on a developed
urbanization. Process and behavior bases of enterprise
and social management have provided supporting
conditions for e-commerce.
Enterprise e-commerce of China has developed under a
circumstance of incomplete urbanization. Neither social
public management nor enterprise management has
formed mature process and guiding rules and can not
provide favorable supporting conditions for e-commerce.
Secondly, about industrial environment, information technology of developed
countries has grown out of a rather developed industrialization and sprung up
along with the progress in mechanization, electrization and automation. The
developing pattern takes on an order of industrialization first and then
information technology. However Chinese information technology has grown up
in an environment of incomplete industrialization and its pattern is the
industrialization goes along with the development of information. This pattern of
parallel development of industrialization and information faces opportunities as
well as crucial challenges.
                       of/above College

                             4.7%                 7.6%

                                                                 Primary School

      Senior High School/                                          33%
     Secondary Polytechnic


                                                High School

Finally, e-commerce of developed countries has grown up
based on a mature environment of social public management
and enterprise management theories, methods and tools of
management and researches. The development of
management concepts and practices needs supports form
information technology and the latter naturally becomes the
tools of management concepts.
Tools of information technology represent the existing
management concepts and basis. Enterprises e-commerce of
China lacks its own management concepts and basis and
has adopted the ‘bring and use’ method to borrow from
others technically or hopes to improve current management
abilities by introducing into tools of information technology.
But in this way, the introduced management concepts and
tools of developed countries can hardly adapt to Chinese
situations, thus result in the many phenomenon of lack of
investment and management in e-commerce. Lack of
organization and management basis is one of the reasons of
the low efficient e-commerce of China.
Because the developing countries such as China have
to face exterior environment and basic conditions
different with developed countries when they try to drive
their information technology. Only market force cannot
provide a striding development, so the government
plays an important role in its national economy and
social information industry.

What resources does the government have to
drive innovation of enterprise e-commerce ?

          1. Information resources
          2. Policy resources
          3. Power of Deployment
 How does the government do to drive
 innovation of enterprise e-commerce
Based on a global scope, the overall attitude of all
governments to e-commerce is to promote actively. The
functions of governments, especially governments of
developing countries and regions, in the development of
enterprise e-commerce can be highly concluded into the
following four sentences:
   Follow up trends and
   create environment;
             Cultivating market
             and set up rules;
                      Promote integration and
                      conduct development;
                                  Improve efficiency and
                                  increase national power
      II. Innovation mode of enterprise
         e-commerce service of China
Mode one:new blossom in old trees---
Citrip and eLong
 Project operating
  management of Citrip
  traveling net             Mixed up    Off-line
 Challenges from eLong
                             market     market
 Competition from joint-
  venture travel agency
 Intervention of local
  forces: regional
  competition from                On-line
  Zongheng Universe               market
     In 1998, Liang Jianzhang, CEO of Citrip, left ORACLE and set up Citrip traveling
net. At the beginning, Citrip hoped to imitate operation mode of American traveling
e-commerce website and learned from profit mode of national portal websites to
attract internet users by information service and then to profit from advertisement.

     Advertisement income hasn’t made Citrip rich,
but endued it a .com identity, which was actually a
forceful financing tool. Within one and a half year,
Citrip completed three times of financing that amount
to 18 million dollars.
Liang Jianzhang led Citrip turn from a pure internet
website to a comprehensive traveling service
company with on-line and off-line sources and
formed a “mouse + cement” business mode from on-         Liang
line to off-line. In Nov of 2000, Citrip purchased the   Jianzhang
earliest and biggest national room-booking center ---
Modern Yuntong and became China’s biggest hotel
distributor. In April of 2002, Citrip purchased the
biggest air ticket booking company of Beijing for
room booking of individual customers --- Beijing
Seabank Air Service Company and set up its national
uniform air ticket booking service center.                                 Shen
Overall concept of Citrip project    * the largest call-center in
                                       Asian traveling industry
operating management:                * advanced customer relationship
                                       management system (CRM)
                                     * quality control system for
                                       booking service
                                     * unique room status
Venture                                management system
Investment                           * E-booking system
          traveling service
                           list on US
                        exchange market
                                       invest small building
                                           and rebuild
                                          into chain-Inn

Comment: to extend from on-line to off-line, counter to the
usual process of from off-line to on-line.
Home Inns hotel Xu Jia Hui
Shang hai Xu Jia Hui Inn is one of the economical chain inns of Home Inns Hotel
Company and is located in the commercial center of Xu Hui District. The style of the inn
is simple and unique with all necessary facilities, which will provide the customer a
“clean, convenient and comfortable” accommodation. Chain inns of the company are
consistent in three aspects: same building facility that the interior and exterior styles are
designed by foreign architect; same service that provides services of three-star hotels,
laundering, internet, fax and document copy, etc.; same hardware facility that provides
24 hours warm water bath, air conditioner, television, telephone and standard bed
mattress and matching furniture as well as tea restaurant.

     appearance                          lobby                       guestroom
  Standard room (double bed):248 Yuan; luxury business room 285 Yuan;
  standard room (two beds) 285 Yuan/Day
Challenges from eLong
In 1999, when Citrip has already put forward its on-line
traveling service products, Tang Yue, the director and
president of eLong, brought with him 1 million US
dollars back to China and in October that year he started
the website, which was locating at providing
city life information service. The strategic goal of the
website is to become a big portal website.

On March 9, 2000, Tang Yue and Zhang Ligang sold eLong to of American for 23 million US dollars in cash and
stocks valued 68 million US dollars. On March 10, the
highest point in history appeared in NASDAQ exchange
market, then the index went down all the time. In May of 2001,
Tang Yue bought back eLong for 3 million US dollars.

  (2)Following movement of eLong
  As a follower, eLong began to follow Citrip on its market strategy. In 2002,
  eLong cooperated with more than 2000 star-level hotels and set up its own
  room booking center.
     Comparison of revenue between Citrip and eLong of
                 the first quarter of 2005
                                                     Citrip        eLong
Gross      Amount of gross revenue                 103.3million    39 million
revenue                                               Yuan           Yuan
           Increasing compared with the same          52%            46%
           period last year
Items:     Revenue from hotel booking              70.6 million   29.8 million
                                                      Yuan           Yuan
           Days of stay (first quarter of 2004)    About 850          375
                                                   thousand        thousand
           Days of stay(first quarter of 2005)      About 1.1         513
                                                     million       thousand
           Revenue from air ticket booking         28.6 million   3.7 million
                                                      Yuan           Yuan
           Number of air tickets booked (first     About 310      38 thousand
           quarter of 2004)                        thousand
           Number of air tickets booked(first      About 680          103
           quarter of 2005)                        thousand        thousand
           Revenue from other traveling services   3.4 million    3.7 million
                                                      Yuan           Yuan
Mode two: wash one’s foot and go on
internet --- Guandning Bamboo Wares
       Guangning bamboo wares from Zhaoqing city
       of Guangdong province are sold through
       internet, combining traditional sales with
       e-commerce to provide order negotiation.
Mode three: apparently do something,
but actually intend something else
 —— business mode and profit mode of Alibaba,
 Global Sources, Global Market

Global Market
owns 66 offices in
the world.
Business mode and profit mode of enterprises

Small market and small enterprise: business mode are
consistent with profit mode.
Big market and big enterprise: business mode are not
consistent with profit mode.
(1)take MengNiu as an example:

(2)Take Hainan Airlines
   as example:
Net profit (10 thousand Yuan)




                                                              241.79 -107.77



























               Profit constitute of Hainan Airline Group in 2004
                         (amount to 270.1612 million)
Mode four: to act on other’s platform,
and adjust when needed
  ---e-commerce mode of Avon (China) Co., Ltd
 As earlier as Oct 2000, Avon China began its trial in
  B2C internet sales and became the first of foreign fast
  consumable companies who carried out internet sales
  directly by its headquarter.
 At present, Avon China has opened its “Avon-loving on-
  line store” and “up2u 263 store” with the help of other
  portal websites.

      Operation mode of Avon internet
 Website platform: make use of the visiting hit of portal
  websites and set up its on-line store on the portal website.
 Payment: for nationwide customers, the portal website will
  collects payment by “e-payment”, “bank remittance”, “post
  office remittance” for Avon; and for main cities that provide
  “delivery to door” service, the third party logistics agent
  helps to collect payment when deliver the goods to the customer.
 Process of order and customer service: realized through Avon’s
  “regional customer service center” spread all over the country.
 Product sources and storage: Avon’s “regional customer service
  center” nationwide
 Logistics: provide “delivery to door” service with the help of
  logistics agent in nine big cities such as Beijing, Shanghai,
  Guangzhou and Chongqing; provide “common parcel post ” service
  with the help of China Post to areas that China Post can reach.
Mode five: detailed management and
focus on practicality
 ——B2B chain service mode of the Glorisun Group
 of Hongkong
   Mode six: adjust measures to local
   conditions and create demands
      —— Case of Zhaoqing branch of China Mobile trying
      mobile business mode to promote information
      construction of socialistic new countryside

   Traits of
  mountainous      Demand                     Means                  Mode        Policy
   Average         Low                   Business net,
    income         purchasing
                   power            agriculture net, SP, etc.
   Education       Low ability                                        Low       Implement in
     level                           Business information service   threshold     different
                                          station in villages                      stages
Industrialization Regional traits                                     Few
and information Inconvenient                                        training
                                         Mobile commercial                       Conduct in
   technology     transportation              channel                             different
                     Ineffective                                    Low price      levels
  Gender and        information
       age            Scattered      Mobile web       Fiber web                  Regional
                      residence                                     Low cost    management
     Medical           Lack of
       and            medicine
    education        Backward          All telecom and network
                     education                 operators
III. Summary

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