Zappos Value Chain Strategy

E-Business is using the conduct of transactions by means of electronic communication networks, primarily the internet. It is about integrating company processes with an internal organizations process. E-Business is only a fraction of how big the internet is, but it is one of the fastest growing markets in the business world today. This can be seen on how reliant we have become on E-businesses to purchase products from global companies such as Amazon, Ebay and Macy’s who are based in the United States.

Question 1 – Carry out an analysis of how E-Business can influence the nature of competition in the industry in which the company operates and the resultant implications for e-business strategy. Also consider the impact that the business environment

All companies including this case of ‘Zappos’ have an internal value chain. By using this model, management can analyse activities of the value chain and linkages both internally and externally to the business. They may also use it in assisting to identify opportunities to enhance firm’s value chain or to gather a larger share of profits in the industry.

This distinguishes between primary and secondary activities. Primary activities are those which are directly involved in the marketing, production and distribution of the product or service. Secondary activities on the other hand support the primary activities. This can be seen in further detail in the diagram below *1.

By improving one or more of the primary activities, it could most definitely lead to an increase in competitive effectiveness whereas changes in secondary activities may lead to improvements in efficiency.

Businesses will need to increase value adding as well as reducing costs. Value to the customer is critical. The key question before a business uses the model is 'How does the customer understand value?' and once this is understood ' How can we ‘Zappos’ improve our primary activities to achieve

As Electronic business or E-Business as we commonly know it as is growing this model is also important in helping management to think about business integration internally and integration externally with customers and suppliers. Again this can be seen greatly in Dell with the way they manage their supply chain and also with their JIT operations.

‘Zappos’, have implemented a value chain to great extent by establishing their problems that they may occur and then providing a solution on how to overcome these problems. Prime examples of these situations are

1. Problem - ‘Frustrated in finding the right size, color, and style of shoe’

Solution – ‘Swinmurn decided to create one, using the internet’

2. Problem - ‘they could return those that did not’

Solution – ‘free returns for initially 60 days, later extended to 365 days’

3. Problem – ‘issues about products, returns or other issues’

Solution – ‘call center operator trained to look on at least three other internet websites to find what the customer wanted, and then talk the customer through finding the product on the competitive