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Strategy information technology

While the two EMPs have differing business strategies, both operate based on the same enticement to sellers: faster communication, sales boost, and differentiated brokerage of products and services online. On the other hand, there are stark differences between the two business models: EMPs that are highly price-transparent offer their costumers lower product prices by providing mechanisms to negotiate for lower prices while at the same time providing extensive information about the products and the seller that helps sellers achieve a degree of differentiation from other companies and products.

The target customer of such EMPs would necessarily be shoppers or buyers who are particularly keen of their budget or of getting their money’s worth from the products they buy, and sellers who want more exposure, whose products are very common or at least are offered by a large number of other sellers. Likewise, these EMPs could be expected to be more highly IT-dependent and with a much more streamlined workforce which afford them savings in their business operations.

They could even use dropshipping arrangements with sellers which would greatly minimize time and costs spent on post-sales support activities and prevent them from keeping costly inventories. Given that these EMPs tend to offer lower prices for products, they depend on repeat orders and steady customer traffic to generate a fair amount of profit and also to keep their existing seller clients. This makes it necessary for them to invest in resources, such as detailed electronic catalogs and product databases in order to be competitive, although sometimes their stance on price transparency makes sellers shun from participating in their business.

Meanwhile, EMPs with low price transparency are able to escape the tedious price comparison of customers by offering products that are highly differentiated, unique to a particular industry, or by ensuring faster response time which makes them highly useful for expedient or emergency needs. These EMPs therefore target customers who are in dire need of the products and who are looking to conserve time in their transactions, since, as Soh, et. al. contends, such customers are less mindful of the costs as long as they get the product they want in the soonest possible time.

Low price transparency EMPs would therefore tend to invest heavily in warehouse, systems, and personnel in order to carry out their strategic functions in the business and to assure high-quality customer relationship and to achieve the specific goals of the EMP, which is to keep customers satisfied to compensate for the high prices of their offered products which translate into better sales and profit for their participating sellers. However, these costs are usually recovered through the continued participation of sellers in their program. Comparison of Strategic Strengths and Weaknesses in EMPs

The need to keep both buyer and seller satisfied in an EMP therefore necessitates a clear strategic alignment of business and ICT strategies. Soh, et. al. notes that whereas low-cost or high price-transparency models are usually attractive to buyers, they usually lack the needed focus to “drive the value alignment of their value activities and resources,” or to “create a strategic fit between the position of the organization in the product-market arena and the design of an appropriate administrative structure to support its execution (Henderson and Venkatraman, 1999).

” This means that while low price-transparency EMPs are usually attractive to buyers, the very fact that they offer very little reason to attract sellers to participate due to lower product prices makes them vulnerable to failure. The fact that most EMPs need to invest in resources such as better ICT puts low-cost EMPs at a disadvantage since they will not be able to earn that much if they lack the sellers to materialize their value propositions.

Differentiated EMPs, on the other hand, have a clear cut strategy in attracting their customers and also have a clear picture of their consumer base. Although their products may often be costlier, they have the advantage of being able to provide value propositions that are unique and on demand. Based on Soh, et. al. ’s (2006) study, such EMPs are also likely to have a wider network of sellers due to the high profit potential that the EMP promises, and despite the higher prices may be preferred by customers because of the level of service that these EMPs offer in contrast to low-cost EMPs.

Over-all, the supposed strength of low-cost EMPs, which is based on lower product pricing of value proposition, could also be its weakness in the absence of a clear strategic resource management mechanism that takes into account the compensatory benefits that it would have to offer to sellers in exchange for higher profits.

Differentiated EMPs, for their part, present a better business model that is able to strategically align their ICT and their business function, and are more well-placed to offer compensatory benefits to their buyers such as better customer service and responsiveness, in exchange for paying a little more for the product that the EMPs offer.

References:

Soh, C. , Markus, M. L. , and Goh, K. H. (2006). Electronic marketplaces and price transparency: Strategy, information technology, and success. MIS Quarterly, 30(3): 705-723. Henderson, J. C. and Venkatraman, N. (1999). Strategic alignment: Leveraging information technology for transforming organizations. IBM Systems Journal, 32(1). 472-484. Osterwalder, A. , Pigneur, Y. , and Tucci, C. (2005). Clarifying business models: origins, present, and future of the concept. Communications of the Association for Information Systems, 15:1-25 Southern, A. and Tilley, F. (2000). Small firms and information communication and communications technologies (ICTs): Toward a typology of ICTs usage. New Technology Work, and Employment, 15 (2): 138-154.