1. Describe the role of technology in the Webvan model. What Webvan problems cou
ID: 384668 • Letter: 1
Question
1. Describe the role of technology in the Webvan model. What Webvan problems could computer technology solve, and what could it not solve? Explain your answer
2. Critique the Webvan strategy and give your views as to whether this strategy is or can ever be viable. Explain your answer. Use numbers wherever possible.
3. What management, organization, and technology factors were responsible for Webvan’s failure? Explain
4. Look at the Capitalization Table in the S1 and 10Q spreadsheet posted on the wikispace. What made sense or did not make sense about the timing of their IPO relative to their investments in new distribution centers?
5. Describe how you might approach the online grocery shopping and delivery business differently today, given our advanced technologies.
Explanation / Answer
Analysis of the Demise of Webvan
Answer 1:- If we look at the concept of Webvan’s business model, we see a customer service based, quick turn-around, complete eCommerce model. This model is for online ordering and delivery for groceries. Looking at the value chain, the steps used were: Website/eCommerce ordering site, operations, outbound/deliveries, customers. Looking at a competitive force model using Porter’s Five Forces, we see the bargaining power of Suppliers and Buyers, threats of new entrants into the market, substitutions, and industry rivalry. Assumptions driving this business model were using a single distribution center to fulfill a 60-mile radius, 24-hour ordering, a rapid roll-out, and customers would include homemakers and office workers with little or no time for shopping, then expand into non-grocery items.
Answer 2:- Webvan had a highly developed automated information system centered on receiving orders, breaking them down into categories, and packing them for delivery. The company had 41 ½ miles of conveyer belts to move the totes to different carousels for packers to pick what was ordered. The complexity of the computer software solved the distribution problems, packing, using barcodes to specify orders and locations, and customer information. What the technology couldn’t solve were the low sales order amounts, traffic problems, and the large investments being made for a smaller sized operation.
Answer 3:- The Webvan strategy seems sound as a baseline for this type of service, but for a large, established company already in the industry. Webvan expanded too quickly, not establishing themselves in a heavily saturated market, and expecting people to come to them without prepping themselves with solid industry data. If a larger corporation used the same business model, with small adjustments, this could be a great idea, if used more slowly and methodically.
Answer 4:- Management had no clue how to run a company in the supermarket industry. They spent way too much money up front for infrastructure, without the sales to back up expansion. They purchased dying dot.com companies, so Webvan incurred their debt and untested demographics. The technology was sound but too big for their smaller company. Overall, too much money went out before sales were established and profit was coming in. Management failed to research, move slower and establish themselves. Great concept, poor execution.
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