E-BUSINESS TRANSFORMATION AT ME-ONLINE

Group 6 | Section D

“Feng Huang Nie Pan”

Introduction

Shanghai Me Mechanical and Electrical Equipment Chain Co. Ltd. – SHMEC (Est. 1955) Mechanical & Electrical equipment distribution

company

Faced problem during China’s socio economic transformation process Opening up of the economy to the foreign companies Private companies emerged with the ability to

speedily distribute large quantities

Company established Me-online as a trading platform, using e-business to transform its business model

Strengths of the TBM of SHMEC

Group of 16 corporations - State owned Focused – Distribution of mechanical and

electrical equipments, machines, tools, etc.

Buy first – Sell later approach Rich fixed assets Rich supplier base Large distribution network – Chain Stores Diverse customer base Inventory – different product portfolio

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Environmental Factors Necessary for Success in TBM

• Remain a Seller driven market• No economic liberalization• More demand than supply – less inventory

management cost• Less fluctuation in prices• Efficient and effective sales force – less sale

on credit; Less bad debt• Proper book-keeping and lack of monopoly

of business staffs• Efficient order processing, logistics and

information flow

2

Value of Service Provided in TBM

Cater to different product specifications Large distribution network Chain stores – Easily accessible to

customers Products sold on credit Good business relationship

3

Vulnerability due to Changes in Business Environment

• Competition becoming stiff – Private players entering the market

• Competitor’s ability to speedily deliver large orders

• Fluctuating Market Prices – Inventory piling up – Incurring huge losses

• Bad debts – Ineffective monitoring of credits• Manual book keeping – Improper supplier and

user database – Monopoly of business staffs• Slow information flow• Slow response to market – Couldn’t keep

pace with changing market dynamics

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Causes of piling up of

Inventory

Buy first & sell later business practice

Need to build a large inventory of products with different specifications

Commitment to procure products worth Rmb 1million after acquiring an agency of a reputed manufacturer

Supply of M&E equipment was greater than demand

Inefficient management of client requirements

5Bad Debts

Many products were sold on credit

Absence of effective management measures

Unlimited rights for the sales staff

High accounts receivables

Diverse customer base was built on a complex network of relationships

Strengths of the NBM of Me-online Entire trading process was conducted fairly, equitably and

properly High efficiency: Users could manage their inventory scientifically,

regulate their distribution management & procure products easily with no inventory

Specialty: Information & Trading section Easy usage: Only a computer with internet connection Extension: It was applicable to material & equipment companies

of similar nature Originality: 1st company to issue value-added tax invoices directly

online Me-online e-business platform was of international standard with

sophisticated technology Obtained a patent certificate issued by National Copyright

Administration of the People’s Republic of China Contained a huge amount of information about capital & logistics Employed the digital certificate to ensure that the transactions

were done by real parties, and were secure and irrevocable

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Environmental factors necessary for success of NBM

Competition doesn’t have a better trading platform and information

Expansion of franchise to ensure stability during transformation

Attention to opportunities offered by the new model Ex: Logistics & transportation services

Increase in internet awareness and penetration Enterprises in the upper & lower chain should cooperate more

closely Proper integration between internal information system of Me-

online & its suppliers Dealing with emergencies by having internet exchange

platform for backups Development of appropriate human resources Innovation and system improvement by establishing future

cooperation with large international manufacturers

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Value of the services provided by Me-Online to its Customer

All the information about the products available at one site

Improved cooperation along the supply chain

Distribution done in real time so quick response time for customers

24 hour business conduct Integrated services

8

Key success factors of the Me-online business model

Streamlining the business processes -Regulation ensured greater transparency

Order driven approach - Reduction in the inventory

Integration of all the functions Improved customer relationship

management Procurement done in real time

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Sustainability in the Me-online business model

This business model is sustainable and difficult to replicate because : Large customer base in the sector Stable syndicate with enterprise in lower

and upper chain Continuous expansion of the franchise This model was built on the core

competencies of the company

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