Analysis of strategic issues at Bewari.com: a B2B case study in the Middle East.(Instructor's Note)

Rao, Ananth ; Awan, Mahmood A.

CASE DESCRIPTION

The main subject of this case is B2B e-commerce in the Middle East. Secondary issues examined are: strategic factors facing the company examined in the case study; the B2B business model; privacy and security issues of e-commerce; and new business strategies for B2B.

This case has a difficulty level of four and is best utilized in a senior level Strategic Management / E-Marketing course. Depending upon the depth of analysis, the case can be taught in three to six hours and requires a preparation time of three to six hours.

CASE SYNOPSIS

The introduction of Internet use and the resulting growth in e-commerce has changed the service industry in the 21st century. These factors have led to changes in online transactions and have introduced new, Internet-only services companies, forcing traditional service institutions to quickly develop and implement an e-commerce strategy.

The current case analyzes strategic issues surrounding e-business at Bewari, a B2B company established in June 2000 that allows companies in the Arabian Gulf region to buy and sell goods and services online. Bewari is a hypothetical company. At the request of the real company's management, its name is kept confidential since Bewari did not want to disclose its operations to its competitors. This case study is chosen since the Arabian Gulf region is unique in terms of culture, tradition, business practices, human and organizational values compared to those in developed economies. Most of the economies in the region are oil-rich. Business development practices in one economy in a particular sector are rapidly imitated by businesses in the neighboring economies in the region. The economies in the region form a major trade bloc of major importance to neighboring European and Asian economies.

Bewari has chosen to create and maintain the highest standard B2B customer service and trading facilities in the Middle East. The case shows that Bewari:

* is an ideal partner for helping companies reach new markets in real time

* is agile enough to respond to fast changing market opportunities

* provides innovative online B2B services, enabling B2B firms to extend their reach and enhance their competitive standing, and integrates supply chain.

Nevertheless, growing pains have ensued. From its inception, Bewari has given access to the resources and culture thought necessary to allow it to succeed. While Bewari was given the right resources and freedom to succeed, it was asked to do so within an organization incapable of producing the desired product. Bewari faces pressure from its stakeholders to improve performance and maximize synergies from recent alliances. In addition, decisions and options regarding Bewari must be taken into consideration as part of Bewari's overall strategy.

INSTRUCTORS' NOTES

STEPS COVERED IN STRATEGIC DECISION-MAKING PROCESS

[ILLUSTRATION OMITTED]

CASE OBJECTIVES

The purpose of the case is to engage the students to analyze the:

1. Customer profile of e-commerce customers

2. Strategic factors facing the company

3. B2B business model

4. Privacy issues in e-commerce

5. Security issues in e-commerce

6. New business strategies for B2B

SUGGESTED CLASSROOM APPROACHES TO THE CASE

1. We suggest the placement of this case in the first half of your Strategic Management/Internet Marketing/E-Marketing/International Marketing Strategy course or anywhere you do a segment on the Internet.

* This case makes a nice package to discuss the B2B e-commerce business model.

* We suggest that you have the students review the case

2. This is a very high interest case for the students.

3. If you want a team presentation we suggest the team be limited to three or four students. It worked well as a team presentation.

4. A typical team presentation of their strategic audit using PowerPoint may last about 45 minutes.

5. This case can be developed into an interesting lecture/case discussion package on the Internet.

In addition to the substantive learning objectives discussed above, the case would have students learn to develop formal oral presentations covering the following specific questions:

DISCUSSION QUESTIONS

1. What are the strengths and weaknesses of Bewari?

2. What are the opportunities and threats facing Bewari?

3. What are the strategic factors facing Bewari?

4. How do each of Porter's five forces impact on Bewari?

5. What will be the impact of cannibalizing of Bewari's customers by Bewari's associates and competitors?

6. What are the security and privacy issues in online e-commerce?

7. What are the supply chain management issues involved in B2B e-commerce?

8. How can the following issues facing Bewari's Management be effectively handled:

* Maintain its systems and operations to share info and learning across Bewari's online expertise,

* Convince buyers to change

* Create trust in the minds of buyers and suppliers of B2B

* Facilitate the acceptance of online transactions as legal by the courts

* Increase internet penetration by buyers and suppliers

Further to the above set of questions,

9. Ask your students whether they transact via the Internet: This allows you to discuss with your students the advantages and disadvantages of online e-commerce.

10. Ask your students whether their parents transact via online B2B e-commerce.

11. Ask your students what services are offered online by B2B e-commerce firms.

12. Is B2B the future e-commerce of today?

STRATEGIC AUDIT PAPER

Bewari is owned by Bewari Management for B2B e-commerce. The teaching notes prepared by the case authors, cover in depth, the factors normally covered in a strategic audit, so we provide only Authors' Teaching Notes for this case.

General Framework

To begin the analysis, the case writing team has used two traditional corporate strategy frameworks, Porter's Five Forces and SWOT Analysis, which shed light on the viability of Bewari.com.

This Five Forces Analysis, though limited by its static nature, suggests that this industry is unattractive due to the high level of industry competition and high risk of new entrants. The case provides such evidence by stating the existence of over 500 online B2B e-businesses with more than 500 are predicted to be launched by the year 2007. In addition, the uncertain effects of suppliers and substitutes add further risk-potentially worsening the attractiveness of the crowded B2B online industry.

[ILLUSTRATION OMITTED]

The SWOT analysis for Bewari shows considerable strengths and opportunities that are nonetheless outweighed by the weaknesses and threats. Projecting the SWOT analysis into the future makes the weaknesses and threats even more significant as competition in this industry heightens.

Furthermore, B2B e-commerce faces the following challenges:

* Change Management

Buyers (end users) have been using their traditional or electronic procurement system for some time. They are happy with the results. Buyers are asking why they should change, and what value is added to their businesses by implementing changes. (For the instructor: This can be addressed by having a champion inside the buyer organization and work closely with him to make sure that he will get the full credit for the project success. Education and awareness can be created through different channels: seminars, road shows, workshops, participation in TV, Radio and Media programs which talks about benefits and values of e-commerce. Also share best practices and success stories. Undertake site visits to current buyers and suppliers to demonstrate benefits to others).

* Trust (Security and Privacy)

Buyers and suppliers need to be sure that their transactions have a high level of security and privacy. In addition, they need to be aware of security features available in the application. The challenge is: how can trust be created in the minds of buyers and suppliers of B2B? (For the instructors: This can be addressed by again educating students about the security features and functionalities available in the e-commerce application and demonstrate how they can use them to maximize the benefits

* Laws and regulation

Buyers and suppliers need to be sure that their transactions are accepted legally by the court and they need to be aware if there is any law which covers electronic transactions. The challenge is: how can these be ensured in the minds of buyers and suppliers? (For instructors: This can be addressed by again educating them that there are electronic transaction laws, explain the related articles if applicable to their business).

* Infrastructure

Buyers and suppliers need to have an internet connection in order to start using any web- enabled e-commerce application. The challenge is how to increase internet penetration on the part of buyers and suppliers. (For instructors: On a country level it is very important, that the targeted countries have high level of internet penetration among the business sectors).

Strategic Factors (SF) (Based on Case Authors' SWOT Analysis)

SF 1 Financial resources of Bewari to build the Bewari brand

SF 2 Leading edge technology and partnerships

SF 3 Fastest customer account growth among online B2B e-commerce

SF 4 Perceived value far below traditional B2B firms

SF 5 Limitations from Bewari culture and difficulties

SF 6 First mover onto Internet among major B2B e-commerce providers

SF 8 Access to leading Internet companies through First USA

SF 9 Increasing numbers of online banks

SF 10 Market entry by other financial services institutions

SF 11 Potential entry by major Internet portals (AOL, Yahoo).

DISCUSSION POINTS

The case writers recommend that some combination of the following questions be used to begin discussing the issues presented in the case. Knowledge from both general and innovations frameworks shows clearly the answers to questions posed in the case.

1. Is there cannibalization in Bewari and its associates? The analysis shows that Bewari must cannibalize its own customers in order to prevent the many other online B2B competitors from doing so. Unfortunately, the case demonstrates confusion at Bewari. Bewari management seems clearly to prefer a different target market. Their failure here can be seen earlier in the case, with Bewari.com having 2400+ member partners.

2. What strategy should Bewari take in the emerging B2B scenario? Bewari has four primary options:

* Engage associates through JV

* Issue franchises

* Internal B2B acquisition

* Spin-off innovation

Only the second option viz., issuing franchises, rectifies concerns regarding culture and market perception. The analysis in the teaching notes supports this strategy.

3. What is the future of Bewari in the era of e-commerce?

The case shows Bewari capable of recognizing potential innovations, but unable to capitalize on them. Thus Bewari's best position in e-commerce may be to serve as an "Internet incubator" for B2B services products, which identifies, develops, and then spins off innovations. Each of our recommendations stems from the "elements" of a B2B business model analysis.

Ananth Rao, University of Dubai

Mahmood A. Awan, University of Dubai SWOT Analysis Strengths Weaknesses * Financial resources of * Perceived value far Bewari to build brand below those of * Leading edge traditional B2B firms technology and * Limitations from partnerships Bewari culture and * Fastest customer difficulties account growth among online B2B e- commerce Opportunities Threats * First mover onto * Increasing numbers of Internet among major online B2B e- B2B firms commerce firms * Access to leading * Market entry by other Internet companies service institutions * New markets through * Potential entry by Dubai E-Government major Internet portals (AOL, Yahoo)