Discussion 4
Earlier this week we were having a conversion on the Walmart BOPIS kiosk, and one of my colleagues jumped on and said that my next car is going to be from Carvana. How many times you have seen people using Best Buy kiosk at the airports, and buying a car from Kiosk??, I asked with disagreement. Coincidentally I see the topic on the market disrupters here, and I decided to choose "Carvana" as my cutting edge company that may be dominant in the next 5 or 10 years.
Last year when I purchased a car, the experience continues to be the same as it was 15 years back. Although technology has
ought many price comparison tools, but getting to a dealer, negotiations, follow-up calls, multiple fees (many hidden), return policies, wa
anty haggling etc. continues to be a nightmare that many pre-owned car buyers always want to avoid. However purchasing a car from a vending machine sounds too good to be true. Surprisingly, it is the reality. Carvana has expanded to 75 markets with 13 car vending machines nationwide and more than 11,000 used cars for sale. One of its unique value propositions is a vending machine that is included at each facility (Hyken, 2018).
As per Hyken, Carvana is using following convenience principles,
1. Reduce Friction: Carvana wants to provide an easy, no-hassle experience
2. Technology: It all starts online. The customer’s experience begins with an easy-to-navigate website.
3. Self-Service: Right up until the time the car is delivered, the customer has total control of the process.
4. Delivery: Customers are given a choice. They can go to one of Carvana’s locations and have the vending machine experience, or Carvana will deliver the car to them.
5. Access: Carvana is expanding. Cu
ently, it has 13 locations, and it is growing. That said, even if the customer is not in a Carvana town, Carvana will pay up to $200 for the customer’s airline ticket and have him or her picked up at the airport.
While the company is growing aggressively, but the net profits are still down. Last quarter it reported a net loss of $64.4 million for the third quarter, bigger than its net loss of $39.8 million in the year-ago quarter (Muller, 2018).
In order to assess Carvana's cu
ent position in the marketplace, we can do the strategic analysis for analyzing the external and internal environment. Let's discuss Porter Five Forces Analysis to analyze industry and understand underlying levers of profitability. As per Porter, Five (5) Forces are (Schilling, 2017, p.111),
· Potential of new entrants into the industry
· Bargaining Power of Suppliers
· Bargaining Power of Customers
· Threat of Substitute Products
· Competition in the industry
Potential of new entrants into the industry: New entrants will
ing innovation, new ways of doing things and put pressure on Carvana. through lower pricing strategy, reducing costs, and providing new value propositions to the customers. Carvana Co. has to manage all these challenges and build effective ba
iers to safeguard its competitive edge.
Bargaining Power of Suppliers: Carvana needs to build a solid supply chain so it is not driven by the bargaining powers of the suppliers. They may have to go more auto auctions and ensure that they don't create dependencies on the sources.
Bargaining Power of Buyers: Buyers are demanding lot, they want to buy the best offerings available by paying the minimum price as possible. This is putting a continuous pressure on their profitability. They may need to build a large loyal customer base, and continue innovating to attract new customers.
Threat of Substitute Products: When a new product or service meets a similar customer needs in different ways, industry profitability suffers. Carvana should continue being service oriented, and ensure that they understand customer needs better than their competition.
Competition in the Industry: Carvana Co. operates in a very competitive Auto Dealerships industry, and this impacts their overall long term profitability. They need to make sure that they build a large network so that customer confidence is higher.
Discussion 1-
Tencent is a Chinese company that was founded in 1998. Even though the name might not be familiar, in the next few years their applications and technology will be entering the U.S. market. According to their Tencent’s website, their mission is “to improve the quality of life through Internet value-added services. This will be done via the delivery of integrated internet solutions to billions of netizens through its ‘user oriented’ business philosophy” (tencent.com, XXXXXXXXXXOne of their main business entities is called, “WeChat Pay.” WeChat Pay is a mobile payment platform that is revolutionizing the way Chinese consumers conduct financial transactions from their mobile phones. Using Porter’s Five Forces Model, the Tencent
eakdown is as follows;
1. The Degree of Existing Rivalry
Even though there are many mobile payment platforms all over the world, Tencent’s main competitor is Alipay. In order to understand the level of competition between these two companies, their past and cu
ent market shares need to be compared. In 2015, Alipay controlled 74.92% of the market while WeChat Pay only controlled 11.43% (aseantoday.com, XXXXXXXXXXAs of June 2018, Alipay controlled 54% of the market and WeChat Pay controlled 39% (technologyreview.com, XXXXXXXXXXThe largest mobile payment platform in the United States is Apple Pay with 127 million users. This is a small drop in the bucket compared to WeChat Pay’s 900 million monthly active users (businessinsider.com, 2018).
2. Threats of Potential Entrants
At this stage of the game, even though it is possible, the main players in this industry have been identified. The main ba
ier to entry is retaliation by existing competitors. Alipay and WeChat Pay are so big that their capital and resources would greatly deter any new competitors.
3. Bargaining power of suppliers
The “suppliers” of WeChat Pay do not have much bargaining power. The platform is heavily engrained in day to day life that businesses have to use their technology for the ease of the consumer. The only suppliers that have true bargaining power against these mobile payment giants are companies like Walmart and Amazon. If WeChat Pay or Alipay was able to negotiate a deal with one of these giants, it could easily push one of these mobile payment systems to become an industry leader.
4. Bargaining Power of Buyers
The bargaining power of buyer is very strong. Consumers look for a service that is easy, efficient, and cost effective. If WeChat pay was to increase their transaction costs for the end user, it would offer its competitors an advantage by allowing them to offer the same or similar service at a cheaper rate. In the end, the value must be there for the end users.
5. Threats of Substitutes
As explained in the book, “substitutes are products of services that are not considered competitors but fulfill a strategically equivalent role for the customer” (Shilling, p.144, XXXXXXXXXXThe only threat from a substitute I can envision in the future would be blockchain technology and cryptocu
encies. People will always be looking for a platform that will allow them to make secure transactions, with the option to keep the transaction anonymous.
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Example 1-
During my research, I learned that it is not just the big companies that can benefit from big data. Persons just like you and I can also gain something from this emerging trend. Have you ever used Google Translate? If you replied yes, then you my friend have accessed the benefits of big data. “Google’s translate service studies millions of other pieces of translated text or speech, to determine the most accurate interpretation” (Ma
, 2017, Google section, para. 3). Yes, it is true that the typical household user of Facebook ® or other social media sites will not run algorithms of huge data sets to determine the best day of the week to advertise peanut butter, but a mom may notice that several of her peers are gaining donations through fundraising efforts and will tailor a direct message to those on her friend list. It appears social media is here to stay, use it sparingly and only present what you want the whole world to see or know about you.
References
Ma
, B XXXXXXXXXXWant to use big data? Why not start via Google, Facebook,
Amazon, (Etc.). Fo
es, Tech, #BigData. Retrieved from
https:
www.fo
es.com/sites
ernardma
2017/08/14/want-to-use-big-data-why-not- start-via-
google-facebook-amazon-etc/#25d7dba83d5d
Example 2
I echo your concern about privacy on the internet, but I will ask the hard question. Is there such a thing as privacy on the internet? I fear that Pandora’s Box has already been opened. Facial recognition software is in full use, so merely by attending a company party, you could inadvertently be in the background of a “selfie” shot and now you are online. “Advanced technologies pioneered by Facebook include image recognition – a Big Data technology which teaches machines to identify the subject or details in a picture or video, by training it with millions of other images” (Ma
, 2017, Facebook section, para. 3). What is the proper course of action? Do not go to parties? Of course not. With everything else in life you have to take the good with the bad, just be smart about it. Only “friend” those persons online that you would actually invite into your home to share a meal. Do not post that you have yoga every Tuesday at 10:00 am. The list goes on and on. Anyway, I am not on Facebook, so therefore my risk is limited.