Use of IT in Photographic Equipment Industry - Case Study Example

Use of IT in Photographic Equipment Industry The photographic equipment industry has undergone some drastic changes in the last few years. For over acentury, photography was about capturing an image on a film. But with the advent of the digital cameras this has changed for ever. With a digital camera, people can immediately check the quality of the picture taken and then decide whether they want to keep it or not. The reusability of the memory card means that digital photography is also cheaper than film photography. It is also much easier to get prints of your digital photo, which can be done online, from the comfort of the home. No wonder, digital photography has taken over the world with a storm and manufacturers of traditional photographic equipments are struggling. The Case of HZ Electronics HZ Electronics is a traditional company which has so far stayed away from modern technology. Although, they have worldwide presence, they are still mostly depended on their resellers and dealers to sell their products. With customers increasingly going online to get their prints, the sales at their photo printing shops is also declining. They are also facing stiff competition from low end cameras and cheaper models. Mobile photography is also proving to be a problem for HZ Electronics. Another problem faced by the industry is that many consumers no longer take paper prints of their photographs but rather store these photographs online. As mentioned by Intihar (2006), a number of companies, including photo giants like Kodak and search firms like Google, are offering the facility of unlimited storage on their websites. The digital photography industry, although new, has already matured to an extent where the rules of the game are changing on a daily basis. In view of the present circumstances, HZ Electronics need to drastically change their business model to be able to compete in this fast changing industry. Assumptions In an increasingly digital world, no company can afford to ignore technology if it wants to remain competitive. We are assuming that HZ electronics has so far hesitated in adopting the latest technology. This will have to change in near future if HZ electronics hopes to compete in the fast changing business environment. We are also assuming that most of HZ electronics competitors have already adopted the latest technology. This means that any technology adopted by HZ at this stage will not be new technology but a something which is already in wide use across the industry. This will reduce HZ electronics chances of failure on adoption of new technology. Electronic Business Model In view of the challenges faced by the photographic equipment industry in general and HZ electronics in particular, it is suggested that HZ adopt the Electronic Business model. Electronic Business, also known as e-business or e-commerce is the way most companies are doing business in twenty first century. There are many competitive advantages of the Electronic Business Model as suggested by a survey carried out by Beheshti, Salehi-Sangari & Engstrom (2006). According to them, when e-business is integrated into the core business processes it can “provide economic and competitive opportunities by lowering costs, boosting sales, and improving customer service and supply chain/distribution channels.” This is just the kind of boost HZ Electronics needs in order to recharge its business model. Disadvantages of E-Business As Behesti et al (2006) have rightly pointed out, the development and maintenance of e-business is a costly affair and hence it requires a well thought out strategy. An effective e-business plan must have “a champion, a vision, a plan to achieve the transformation, a rigorous communications strategy, and a healthy company culture.” Besides the high cost, another issue related to E-business is security related. However, it must be kept in mind that proper implementation of the e-business model would include a comprehensive security system and the benefits far outweigh the disadvantages. The B2B and B2C Models There are many e-commerce models but in relation to HZ Electronics, the most suitable models would be B2B (Business to Business) and B2C (Business to Consumer) models. The B2B model will help streamline the supply chain. HZ Electronics current business model is heavily dependent on its resellers and dealers. These resellers and dealers procure their stock from HZ electronics. However, due to the time lag between order and supply of new equipment, the resellers always maintain a large enough inventory so that they do not run out of supply at the critical moment. After implementation of the B2B model, HZ will have direct access to the available inventory with their dealers. With this information, HZ can ship new equipments to their dealers when the available inventory with the dealer is low, instead of waiting for the dealer to order for fresh supply. The dealers will also have access to an updated online catalogue where they can find all kinds of information regarding the products including technical information, which will help them improve their sales figures and hence those of HZ Electronics. The B2B model will also provide after-sales service to help improve the relations between HZ and its dealers. The B2C model on the other hand sells directly to the end customers. This helps eliminate the middlemen such as dealers and resellers. Also, since HZ would be shipping its products directly from its manufacturing facility, the B2C model will also help reduce the inventory costs. Online selling will also help HZ save on paper based costs by providing automatic billing and funds transfer. It will also reduce the delivery costs. The savings made in all these processes will directly benefit HZ’s consumers who can be offered lower competitive prices. This cost advantage will help HZ compete in the stiff competitive market. Another benefit of the B2C model is that through this model, the company will be in direct touch with its end consumer. This will help them learn what the consumer wants and innovate accordingly, thus maintaining their competitive edge. Yi and Diao (2005) have summarized the various benefits of electronic business. These include: helps construct new markets, increases transparency, improves rate of successful transactions, cuts costs, reduces transaction costs, offers higher price elasticity, and lowers price dispersion. All these factors help improve the profits of an e-business. In fact, e-tailing businesses such as amazon.com save up to 62% by eliminating the retail aspects of their business (Atkins, Ali & Shah, 2006). Hence, adopting an electronic business model is the best option for HZ Electronics in the current scenario. Online Photo Storage and Printing Facility The fast changing technology means that the way businesses are done is changing constantly. Before the advent of digital camera, consumers needed to bring their films to a photograph developer in order to get them developed. In the initial years of the digital age, consumers continued with the trend, bringing in the memory chips to the developers to get them printed. However, in the last few years even this has changed. Now anyone can get their photographs developed without leaving the comfort of their homes through the numerous online sites. Many consumers don’t even bother to get the prints, and are happy storing them on these online storage sites. Some of these online companies are in the business of photographic equipment, such as Kodak, but most are web-based companies who have grabbed this money making opportunity. The only way to beat this kind of competition is to join them. In other words, HZ Electronics could also host a photo sharing and printing website to compete with other online competitors. Since, HZ manufactures photographic equipments and chemicals; they can provide the printing facilities at a fraction of a cost of its other web-based competitors. Database and Data Warehousing As discussed above, the only way to compete in this increasingly technological environment is by adopting technology. However once the Electronic Business Model is implemented, it would entail managing huge amounts of data regarding suppliers, dealers and resellers and customers. Huge amounts of storage space would also be required to provide online storage facilities to the end customers. All this requires creating a database and data warehousing. A database is a collection of information stored on a computer in such way that it can be easily accessed. Database storage requires certain software tools such as SQL, ORACLE, Sybase etc. A data warehouse, on the other hand, is defined by Jones (1998) as being “made up of snapshots of an enterprise’s multiple operational databases. It consists of hardware and software optimized for executive information systems (EIS) and data decision support systems and is integrated to support on-line analytical processing, rather than the on-line transaction processing which characterizes the operations world.” In other words, a data warehouse is more than a database. It processes and analysis information. The data warehouse of an organization is based on the organizations “information needs, competitive requirements and investment criteria.” The purpose of the data warehouse is to support the decision making of the management, that is, it forms the foundation of the Decision Support System (DSS) of an organization. In very simplistic terms, a data warehouse uses data to provide information to the management. A data warehouse simplifies many routine functions of the management. In addition, it “improves access to integrated data”, “ensures data integrity and quality”, “lowers IT costs”, provides an effective decision making tool and hence, improved business intelligence, gives “greater productivity, profitability and quality” and enhances customer interaction in sales and revenue and service and satisfaction. Data warehousing can also help analyze sales results, improve risk management, asset management, human resource management and quality assurance (Jones). In short, a data warehouse can help HZ Electronics solve a number of existing and undetected problems and help improve its profitability and efficiency. Data Warehouse and E-Business Zurek & Kreplin (2001) have discussed some of the factors which help a data warehouse adapt to e-business platform. As they have pointed out, introduction of e-business can drastically reduce the direct contact between the consumer and a company’s employee. This brings in the need to customize the service according to the individual customer. Data warehousing helps a company bridge this gap. In the last two decades, the data warehousing technology has matured and can perform a lot of functions which were earlier considered unnecessary. For example, in the past, data warehouse used to be updated on a weekly or monthly basis. It was assumed that management decisions were based on historically data. However, with the advent of e-business, this is no longer true. E-business requires real-time analysis of data and hence the need for real-time updating of data warehouse. For example, in order to give a personal experience to website users, the system needs to analyse data of the websites visited and based on that open a personalized page for the user. This requires real time data warehousing. In short, e-business has drastically changed the way data warehousing was historically done. Database, Data Warehouse and HZ Electronics If HZ Electronics decides to adopt e-business practices, they will need to install a data warehouse. As explained earlier, a data warehouse has multiple functions. It can help improve the efficiencies within the organization by providing a Management Information System. A data warehouse can also help HZ electronics reach out to more customers directly and help give them a personalized web experience. A good experience will result in repeat customers and help HZ increase its profitability. Also, if HZ Electronics decides to offer the “store and print” facility on its website, it will need to store huge amounts of data and will need a database tool which can handle such huge amounts of data. Most modern database tools, such as Oracle are capable of handling such huge amounts of data. E-business on Mobile Another threat to HZ Electronics’ business model is from low-end mobile camera. One way to tackle this problem is to use mobile technology to access web-enabled databases to extend competitive advantage of the e-business model. As Atkins et al (2006) have pointed out, the new 3G mobile phones support HTML text and can be used to make purchases directly from the phone. If HZ electronics were to adopt the e-business model, it could be extended to make the websites mobile phone compatible. Since, it is not always possible for a consumer to be near a computer, a person taking a photograph using his mobile camera could directly upload this photograph on the HZ electronics’ website and order prints. Another potential use of mobile based e-business could be that a person shopping for camera could instantly check the price of HZ equipment over his mobile phone and even place the order through his mobile. Thus the use of mobile devices for e-business or the adoption of m-commerce can improve the productivity rate. M-Commerce Technology The wireless technology has grown by leaps and bounds since 2000. New wireless technologies like Bluetooth and Wi-Fi enabled laptops have revolutionized the way businesses are done. Atkins et al mention an innovative use of wireless technology that can be seen in Germany for registration of insurance. The insurance company has extended their e-business model to wireless PDAs. A staff member carrying a PDA can help answer customer’s queries and then help them register online through the PDA. HZ Electronics could use similar technology to improve its sales figures. A consumer surfing the web may want to see the product before actually buying it and walks into a dealers shop. However, as mentioned earlier, the online prices can be several times cheaper than the prices offered in retail stores due to shortening of the retail chain. Under the circumstances, an HZ staff member could help the customer place order online and secure the purchase. Similarly, Bluetooth technology could be used to quickly transfer information from the computer to the mobile and vice versa and make it easier for consumers to transfer photographs from one medium to another. Finally, the wireless and Bluetooth technology can help HZ electronics counter the threat from low-end cameras. All they will need to do is incorporate the Wi-Fi and Bluetooth technology on their camera equipments, so that customers can take high quality photographs from their cameras and order prints of these photographs online directly from their cameras. By introducing this technology in their camera equipments, HZ electronics will improve the perceived value-for-money of their cameras and help beat the competition. Implementation of E-Business Model As we have established, not adopting the e-business model could mean huge losses in missed opportunity costs. However, adopting the e-business model is not easy. Adopting an electronic Business Model is an organizational strategic decision and entails drastic changes in the way the company does business. Employee readiness is an important issue to be considered before adopting the e-business model. This is because the adoption of technology is going to mean a major change in the way the company does business. As has been pointed out in a research conducted by Lai et al (2008), changes associated with companywide adoption of new technology could be as drastic as “redesigning business processes and restructuring management”. The only way such a change can be successful is if it is supported by all the stakeholders, especially the employees. Before HZ electronics can adopt the e-business model, it needs to ensure that the employees are ready to embrace the huge changes associated with companywide adoption of technology. One way of doing this is to carry out extensive training of the staff across the company. Implementation of IT and e-business requires enormous investments. But it would be wrong to assume, that once the e-business model is implemented, everyone can relax and allow the computers to do everything. Although e-business gives a company competitive edge, it requires radical changes in the organizations behaviour and “redesigning or reengineering of its processes and structures” (Chen & Ching, 2002) to ensure longevity of the business. In other words, simply introducing IT into the organization does not ensure business success, it requires total commitment from the entire management. Since introduction of the e-business model makes information the main resource of an organization, greater attention needs to be placed “on the exchange of information, leveraging the knowledge gained through the organization’s interactions with its entities, and subsequently, the integration and coordination of activities both within the organization and with others.” (Chen & Ching). The greater the knowledge available to an organization, the greater is its chances innovate. One example of such innovation is Customer Relationship Management (CRM). “CRM helps attract, develop and maintain successful customer relationships over time and builds customer loyalty through efficient and effective two way dialogue.” But in order to be successful with CRM, an organization must be “capable of sharing information and knowledge both within itself and between its customers and suppliers.” And this requires supporting IT adoption with implementation of major organizational changes. Since people by nature oppose change and adoption of the e-business model requires some radical changes, if not properly managed, the change can defeat the purpose of IT adoption. To successfully implement the electronic business model, it is necessary to ensure total commitment of everyone in the organization before the implementation starts since it is difficult to change the level of commitment at a later change. Once people orientation is achieved, the next step is making changes in strategy and technology. Next, the organization needs to make compensatory changes so as to align all the components. A resource based IT strategy “will draw upon the organization’s resources through all its components to capture a sustainable competitive advantage.” Successful implementation of the model depends on the strengths it inherits from “the interrelationships among its organizational components that maintain a balance or equilibrium through alignment among the organization’s functions and activities.” Conclusion In conclusion, the electronic business model can help HZ Electronics to remain competitive in the fast changing business environment. However, it must be kept in mind that for successful implementation of the model, it is necessary to change the way business is done and requires a complete restructuring of the business processes as well as the mindset of the people. If properly implemented, the e-business model will help HZ electronics achieve new levels of success by harnessing Information Technology to its advantage. References Atkins, A.S., Ali, A.K.H & Shah, H. (2006). Extending e-business applications using mobile technology. ACM International Conference Proceeding Series, 270, Retrieved on May 26, 2008 from http://portal.acm.org Beheshti, H., Salehi-Sangari, E., & Engstrom, A. (2006, June). Competitive advantage with e-business: A survey of large American and Swedish firms. Competitiveness Review, 16(2), 150-157. Retrieved May 26, 2008, from Business Source Premier database. Chen, J., & Ching, R. (2002, December). A proposed framework for transitioning to an e-business model. Quarterly Journal of Electronic Commerce, 3(4), 375. Retrieved May 26, 2008, from Business Source Premier database. Intihar, M. (October 10, 2006). Photokina 2006/ New trends in photography. (Joze Sveticic, Trans.). Retrieved May 26, 2008, from http://www.e-fotografija.com/artman/publish/article_1189.shtml Jones, K. (1998). An introduction to data warehousing: What are the implications for the Network. International Journal of Network Management, 8(1), 42-56. Retrieved on May 26, 2008 from http://portal.acm.org Lai, J.-Y., Ong, C.-S., Yang, C.-C., Wang, C.-T. (2008). Assessing and managing employee readiness for embracing e-business. Special Interest Group on Computer Personnel Annual Conference. pp. 79-87. Retrieved on May 26, 2008 from http://portal.acm.org Yi, F. & Diao, L. (2005). Electronic market and operating intermediary. ACM International Conference Proceeding Series, 113, 130-135. Retrieved on May 26, 2008 from http://portal.acm.org Zurek, T. & Kreplin, K. (2001). SAP Business Information Warehouse-from data warehousing to an e-business platform. Data Engineering, 2001. Proceedings. 17th International Conference on , 388-390. Retrieved on May 26, 2008 from http://ieeexplore.ieee.org Read More