Chemunity.Com Case Study Analysis

Take Home Exam Questions Question 1 When ChemUnity. com began, Herman Rijks was a 37 year old, Masters of Science graduate from the technological University of Delft, Netherlands. He was born in South Yemen and grew up in Africa. Rijks had work finished in green-field chemical distri cedeion cabbage-ups, and oecumenic management experience in various chemical companies. He worked for HCI, a chemical comp any(prenominal) for triple years, and prior to ChemUnity. com, he was damp of the HCI corporate e-commerce task force. Mark-Jan Terwindt was a 34 year old graduate from Nijenrode transmission line School in Netherlands.He worked for octet years in the chemical distributions in countries such as Ecuador, El Salvador, and Venezuela. Later, he went to the Czech Republic to manage HCI Operations, and before ChemUnity, he was in South Africa managing the integration of an acquired society. Both the founders spoke Dutch, English, Spanish, and a working experience of German, an d additionally, Herman spoke French. Also, the founders sh ard similar interests, equivalent sports and plumping (flying), and two hurl wives and children. The founders start a right amount of experience in fear, e-commerce and the general industry to succeed.They both control some(prenominal) years tenure in companies related to the industry. Also, they be mellowly educated in argonas that atomic number 18 historic to the ac fraternity (for example, championship and Science). The linguistic abilities of the founders allow them to understand and communicate with partners and customers in Western Europe, modify communication channels and attend quality. The helpingd interests they make believe could mean that they understand distributively other(a) more than, have a well friendship, and allow them to work unneurotic on the lodge more often snips than just regular founders.Alternatively, this could mean that they allow foring reinforce each others creativ e thinkers without truly considering all the occurrenceors intricate. Question 2 The product that ChemUnity provides fits exceedingly well with an online counterchange beca engagement its a commodity. Meaning that all variables (grade, parsimoniousness & packaging) washbasin be standardized and price is the determinate factor. The system utilize protects the buyrs and sellers, and works a serious and profitable environment for all, and makes buy and selling tripping.A buyers order has a favorite(a) and highest acceptable price, and sole(prenominal) the preferred price is transferred to the providers. Potential suppliers within the right geographical region be forwarded the message via email and SMS. The supplier has 25 hours to respond with a bid, and this except happens once to avoid price erosion of auction-like bids. ChemUnity compargons the bid, informs the buyer and supplier who got the deal, and they orchestrate worry of the movement. Additionally, no pa rties female genitals withdraw from the deal, and inquiries are rattling serious.The relief in the variables makes commodities easy to trade in an online exchange and the trade ideal developed by ChemUnity bring abouts a profitable, safe, and easy buying & selling environment. The characteristics of the products fit, and foot be successfully sold online in an online exchange. Question 3 locomote (1) through (5) explain the trading process at ChemUnity and are listed below. (1) An enquiry is posted from a buyer on the ChemUnity website that includes the name, grade, concentration, and packing of the commodity establish on a predetermined list, deli literally date, geographical region of the buyer, and a price indication. price indication includes preferred and highest acceptable price, and the preferred is inclined transferred to suppliers) (2) Potential suppliers, determined by instruction given by companies, are forwarded the inquiry. (Both supplier and buyer can exclude parties or regions outside of their telescope to trade. ) (3) erstwhile an email or SMS message is received by the supplier they have 25 hours to respond with its bid. (Which only can be do once to pr charget price erosion) (4) ChemUnity compares the bids, informs the supplier who got the deal, and connects the buyer and seller where the transaction is managed betwixt the two parties. transaction is binding and because of credit insurance, supplier honorarium is certain) (5) The supplier ships the product and the buyer receives it. The trading process is streamlined and change in a concise number of steps. This seems like a real efficient process that does non even revision and it serves its purpose. Question 4 Value Proposition for Both Buyers and Sellers * Time efficiency in buying & selling products. * Access to good buyer & seller track records. * feeling free deals with no room for confusion. * Multiple ways to access profit or WAP ph ace cap index. Clear legal framew ork adds simplicity. * No time zones. * Future linkage to your order entry. * Credit insurance. * More efficient add chain. * Optional usage and ability to react whenever sine qua noned. * Higher margins as non- regard as added middlemen are eliminated. Value Proposition for Buyers * No lease to contact multiple sellers with each purchase of products. * Quick responses to requests. * Proactive & filtered instruction with no overload or irrelevant postings. * Post your preferred price. * Able to source from new companies more efficiently and at lower prices. Value Proposition for Sellers Receive only interesting requests from buyers that are profitable through filtering of information based on sellers profile. * Possibility of serving smaller customers and reaching customers in new geographical foodstuffs. * Freedom in making bids. * Set your admit prices. * Payment coverage and easy credit checks. * Ability to exclude regions or parties in a buyers list. * Ability to do normal crease and travel as bids only trained to be checked once a day. * Eliminate regional boundaries and ability to reach the whole food market. * Other sellers in market go forth non dump products. No Price erosion from auction like bids. thither are several advantages for both parties at what would seem like little to no make up to either party. ChemUnity assists these companies in making transactions while they focus on their respective specializations. This allows for over a good deal more buying and selling efficiency. The foster proposition is extremely muscular. The value proposition seems ample on paper, but in fact could be improved greatly. As the alternative ChemUnity. com Case (2002) suggests the chemicals market is large one and has a long inefficient supply chain.A consortium might non wipe out all the companies, and classifications and regulations in Europe is still faraway from consistent across all countries. A rattling large part of customers do not use a Complete Tender centering system, they use catalogues. A large addition to the value added for a supplier and buyer would be to have one of these systems implemented. Sourcing/access to the information will give value added and not just a yellow pages progression to the system. Question 5 There are several major holy terrors to the ChemUnity Business model and four of them are summarized below.Potential price collusion betwixt suppliers cardinal little terror to ChemUnity business model is the collusion of prices between suppliers. If they decided to label all the prices high it could affect the ability for the company to create value for the buyer. Also, even if these prices werent high, it would affect the ability for ChemUnity to negotiate prices. This threat is strong because it would eliminate the value added, but is rattling unlikely to happen as the suppliers want to compete naturally in sales and would require n proto(prenominal) type of elaborate conspiracy. Sup plier and buyer post purchase relationshipAnother threat to the ChemUnity business model is if the buyers and sellers decide to keep makings transactions later on the scratch line sale without ChemUnity in the picture. This would probably maturation seller margins and make products cheaper for the buyers. ChemUnity would not have control over the situation as much, cod to the fact they bring the buyer and seller together and let them take care of the transaction. Competing websites (Catalogue, Aggregator and auction sale) Catalogue, aggregator, and auction site business models are in rule competition with the ChemUnity business model.They can take away market trade because we all compete for the same customers. If users have no problem meddling through the catalogues and finding the deal they want, in that location is no value added for the intrusive and time cost that ChemUnity offers. Aggregator business models can add colossal amounts of leverage to the buyer as they a re all working together to get the best prices. They go to the supplier, speak for the buyers and get the best deal. sell sites can but a herd of pressure on suppliers and can support dumping practices and price erosion. It is genuinely attractive to a buyer when he can get much lower prices as a result of these effects.Traditional Distributers These traditional distributers could be considered validatory competitors as they do not compete online, but have a presence in the industry. They could have strong relationships with buyers especially in their local geographical areas. They could compete on convenience and logistics with the buyers, especially if it was a convenient automatic replenishment system, where the traditional distributers handled e actuallything. This is based off of the idea that managing slightlything might have more be than its worth, especially if its in small quantities or cost values.Consortiums According to the flip out ChemUnity. com effect study (2 002), ChemUnity could encounter problems if a companys grouped together to start their own market place. This is cognize as a consortium, and ChemUnity could find it heavy(p) to get suppliers and buyers to go on-line, and this is a drawback compared with a consortium. It further explains that if key suppliers were to launch a consortium it would crush the market place credibility of ChemUnity. boilers suit Threat Analysis There are several threats that the ChemUnity business model faces in this environment.Potential price collusion between suppliers eliminates the value added by the company and supplier & buyer post purchase relationship prevents revenue from repeat purchases. Catalogue, Aggregator, and Auction sites the direct competition for the company, jeopardize the business model as they compete for the same customers. Traditional distributers our indirect competitors, still have a presence in the industry through customer relationships, convenience, and time saved. C onsortiums are future competitors they can crush the credibility of the company if created.ChemUnity can meet its threats as it a differentiated service than can add a lot of value, but if it cannot meet its threats it will have huge problems with market penetration. Question 6 Below you will find a Porters Five Forces summary employ to find the magnet of the industry. Bargaining Power of Buyers (-) Bargaining power of buyers is very high, because buyers are not dependant on this way of purchasing a product. They can use multiple other channels to purchase it. There is a high availability of substitute services, so buyers have a lot of power in harm of options.Buyer switching costs are nothing compared to firm switching costs, buyers can ingest to go anyplace and this service has a small amount of buyers (because of the large size of orders). In addition, there is high buyer price sensitivity and buyer information is extremely high. They can search a lot of places to find info rmation on prices. Lastly, the products do not have uniqueness, they are simplistic in the amount of variables and standardized. Overall, bargaining power of buyers is high and I rated this as damaging for the attractiveness of the industry.Bargaining Power of Suppliers (+) In general, there are there are several suppliers who offer similar products so there are a lot of alternatives for the firm to work with other suppliers who want the demand. There is besides a high presence of substitute inputs for these chemicals as other manufactures can create identical chemical products. There is also a very weak distribution channel so the suppliers may rely some of the companies services. Overall, the bargaining power of suppliers is low and I rated this as positive for the attractiveness of the industry. Threat of New Entrants (-)A website with a similar business model could good be implemented at a very low cost. confusable software that the company uses could tardily be imitated b ecause of the very simplified variables in commodity products and intuitive idea. Websites can be up in a matter of weeks or days, and overall it is very easy for new entrants to start a company. Alternatively, the exit barriers are very low as well, as a website can be shut down at any moment and the company holds no inventory or major facilities. Overall, the threat of new entrants is high and I rated this as banish for the attractiveness of the industry.Threat of qualify Products or Services (-) The threat of substitute services is very high. any company could keep up up with a similar idea and there are several substitute business models that threaten the market cope. Catalogue, Aggregator, and Auction sites can easily be substitutes for the service. Traditional distributers can also easily service anyone in this market. In addition, key suppliers could create a consortium and take over instantly while killing the market credibility of this service. Overall, the threat of s ubstitute services is high and I rated this as negative for the attractiveness of the industry.Intensity of Competitive Rivalry (-) Intensity of Competitive Rivalry is high in the industry, as the case tell there were a lot of players in the market place that established operations and gathered customer base. These companies, on with us compete for the same customers. There are several firms in the industry competing (high firm concentration ratio). Strong competition between online and offline service offerings mixed with difficulty in maintaining a sustainable agonistical advantage leads to a high intensity of rivalrous rivalry.Overall, the intensity of competitive rivalry is high and I rated this as negative for the attractiveness of the industry. Overall the attractiveness of the industry as seen in the above Porters Five Forces analysis is one out of five which leads me to believe the industry isnt very attractive. The bargaining power of buyers, threat of new entrants, th reat of substitute products or services, and intensity of competitive rivalry were all negative in terms of attractiveness in our analysis. The buyers have power, entrants can easily get in, there are many substitutes, and it is very competitive.The only attractive part is that supplier power is not that high, even though they are still very important to the firm. Question 7(a) As indicated in the case, the major categories of ChemUnitys costs were related to trade, wad, and IT. Also, in the originatening marketing was the biggest cost at 60%, leaving 30% to people, and 10% to IT. Later, the people costs were assumed to fig out and the marketing costs were assumed to go down. I estimate this would issue us at 50% marketing, 40% people and 10% IT. It was note in the case that there were two venture capital companies providing early pay in the amount of 1. billion (27. 5% of the company). victimisation this number, marketing would cost 750,000, people would cost 600,000, and IT would cost 150,000. Question 7(b) As noted in the case, the average size of a deal was estimated to be 5,000 to 10,000. Using the 2% transaction fee, and the most conservative deal estimate, you get ascorbic acid per transaction (5000 ? 2%). This would mean that you would require 1,500,000 transactions to break even with the early financing that was made. This could be attainable over time but is not likely to happen quickly, especially with the low amount of buyers the business serves.Question 7(c) Using the 3000 daily customers to the website from the case, the 1995 cluck through rate of 2. 1% , and a estimate of 0. 19 per click ( high pay-per click estimate is delinquent to the fact that these customers are very focused), the website could generate 11. 9 daily (3000 ? 2. 1% ? 0. 19), and 359. 10 monthly. This is not a very significant amount of money. The pros of this signifier of income is that it is basically free, as long as you have a website and takes not much managem ent of the ads to generate the revenue.The cons are that there is a very small amount of money per click, and with only 3000 customers daily you are very limited to how much you can make. If you had for example a hundred super acid or so a day, this would be much better. Question 8 Short-Term Challenges The main short-run contest was to test the concept with a couple of products to see if the company is on the right track. Successful death penalty starts from marketing and the company involves to make sure suppliers are conscious(predicate) of the exchange and get product leaders. The belief at the time was that the buyers would come as soon as the sellers were onboard.Once buyers and sellers are established, the company postulates to offset them to get the market liquidity up. Once the company is known for these products, they have succeeded in the first challenge. The second short-term challenge was a gay resources issue they needed people a chemical history background. T hese people would communicate with suppliers and buyers and should bring devotion and belief in the business idea. The tertiary short-term challenge was an IT issue the technology needed to work cleanly in its execution.The service is not perfect at the moment the company is working towards improving it. Long-Term Challenges The major long-term challenge was blowup of operations. By targeting a couple of strategical suppliers and many fragmented buyers in each product, they believed they could have a total of 200-500 suppliers, and up to 10,000 buyers. They believe they need to proceed with one product at a time, giving them the ability to test the concept and digest efforts on a focused segment. The real challenge was to pick the right products.They could also expand their service portfolio, by providing more financial services to gain revenue. They could also get touch on with transportation, but would be a difficult avenue as they need to choose the right services, good p artners and the proper expansion location. Cash feed in has been an issue so the company needs to raise more financing. A second round of financing was timed for a couple months after launching the service. The company wants to raise another 5 10 million from banks, venture capital, and market players. Meeting Short-Term ChallengesThe company needs to begin testing the concept as soon as possible. Successful execution of instrument begins with marketing efforts the company needs to raise supplier awareness of the exchange and get product leaders onboard. The next issue is raising market liquidity, and it can be foole by activating the sellers and buyers by contacting them. Once the company raises awareness about its products, they have succeeded in the first short-term challenge. The second short-term challenge can be solved by using a headhunter to find the best people the company can find.This would require some funding but will easily be worth the cost. These people would ne ed to be educated on the concepts of the company and know how to communicate well with suppliers and buyers about the service, and have enthusiasm and a strong belief in the business. The final short-term challenge can be solved by rigorously testing and improving the technology to work flawlessly. Meeting Long-Term Challenges The expansion of operations should be done by targeting more suppliers and buyers for more potential revenue.I believe these need to be higher than the estimates given in the case 200 suppliers and peradventure 5000 buyers is not adequate enough. It is possible they can try targeting an additional geographical location, perhaps in South/Central America or Africa where the founders worked. each way, with the market they have now, they need to test a concept and concentrate efforts on a focused segment and pick the right products. angiotensin converting enzyme option for expansion was to provide financial services, or get involved with the transportation of t he product.Personally, I am not a fan of this idea because they are losing focus on what they specialize in. But if they were to do these options, they would need to hire consultants and rework the business model entirely. Also, with transportation they need to choose the right type of services, good partners, and a good expansion location. finally for their cash flow problems, they will need to ensure they get that financing by fully disclosing information, addressing the problems they have, and working with venture capitalists to perhaps negotiate the share of the company for a given amount of funding.Question 9 As the alternate ChemUnity Case Study (2002) suggests, its easy to multiply figures and play round revenues and market volume on paper, but it does not address the habits of a given industry. Experience has shown that many internet service providers have failed due to the fact that many of them were not focused enough, spent too much money before making any, and didnt br ing enough value to its users. The main challenge lies in the art of change management.ChemUnity has this challenge for both buyers and seller, but it inhabits that these groups would benefit from a multitude of significant strategic advantages (if it had the ability to support change management processes) Also the case suggests that for the company to potentially succeed, the platform they develop must be flexible and characterized by short development cycles that will match the needs of the market and increase the functionality for its end users. They also need the right mix of employees with experience in the field and who are used to driving change along with a highly skilled sales team.If they had an online complete tender management system, they could save time and money and access more efficient markets. This is a great opportunity for the company to drive change in the company along with a complete business process reengineering of their buying and selling process. If the company followed these steps, they would have potential success in the market. I personally dont think they can be successful unless they do these things, and it seems like a big changes are needed. Question 10 (a) The three options for business model changes are belowStatus Quo This option would be to remain the same but focused on its specialization. Transportation Addition to Business computer simulation This option would be to introduce transportation into the model to create more value for customers. Financial Services Addition to Business Model This option would be to introduce financial services into the model to create more value for customers. The criteria we used to assess which business model to use includes the following Cost, Value Added, Revenue, Expenses, Ease of Change, and Adaptability.I decided to use a finding matrix and estimate the values from 1-10 using subjective data from the case and intuition. The best alternative according to the criteria is Added Financ ial Service to the business model. It would not cost a very high amount to implement, would add a decent amount of value and revenue to the business. The expenses are fairly high, beholding as you need more cash on hand and you need to develop this business model, and be able to setup a good financial plan for customers.The ease of change is pretty fair, is pretty easy to adapt into it, and has a moderate amount of risk involved. Finally, the market share is would increase a lot compared to status quo. The next close business model would have been transportation, its just a more precarious and more rewarding model because it requires large capital investments, but hard to adapt and change into. References Petri Lehtivaara (2002) ChemUnity. com Case Study. Retrieved From http//www. supplychain-forum. com/documents/articles/ACF41. df Nielsen Norman Group (2000) Methodology Weaknesses in Poynter Eyetrack Study. Retrieved from http//www. nngroup. com/articles/methodology-weaknesses-po ynter/ Wikipedia (2012) Pay Per Click. Retrieved from http//en. wikipedia. org/wiki/Pay_per_click 2 . Nielsen Norman Group reports a 2. 1% click through rate in 1995. 3 . Wikipedia reports that in 1997 the pay-per-click was from $. 005 to $. 25 (0. 003 to 0. 19 using March 26,2013 exchange rates)