The SolutionTo maintain its image and contain costs, Raffles must addresstwo types of issues—B2C and B2B. On the B2C side, Rafflesmaintains a diversified corporate portal, www.raffles.com, thatintroduces customers to the company and its services. The portal includes information on the hotels, a reservation system,links to travelers' resources, a CRM program, and an online store for Raffles products. The Web site capitalizes on the under-lying qualities of the luxurious Raffles hotel product to commu-nicate to the online audience. It has a clearly defined and well-constructed multitiered navigation which integrates the brandlevel site with the individual hotel Web sites.

The Web site uses an architecture with logical and consis-tent navigational tiers, which has proven to be a highly success-ful approach. Based on the individual hotel strategy, productmix, and target audience, the Web site navigation reflects multi-tiered navigation structure. Each tier represents an order ofauthority that helps lay out the organization of the Web site. The tiered structure moves users comfortably and easily toward a set of services, including the reservation process. This helps to focus on incremental reservations growth and dynamic con-tent management.

The Web site has an integrated online reservation systemthat provides bookers with instant online booking facility. A spe-cially dedicated section of Raffles Direct is designed to providethe corporate market with a user-friendly tool to book with theirnegotiated rates online. The strategic focus of using the Internetas a key driver for distribution is based on it being the ultimatedirect-to-consumer distribution medium. It conforms to the low-est cost and most inexpensive method to distribute hotel room

inventory. A direct-to-consumer model provides long-term com-petitive advantages. It lessens dependence on intermediaries,discounters, and traditional channels that are slowly becomingobsolete.

The Group's raffles.com Web site with improved bookingfunctionalities and new interactive features will be re-launchedin the second half of 2005. The site includes multi-language Webto leverage the fast growing Internet booking trends in some ofthe company’s key markets.

On the B2B side, in 2000, www.hospitalitybex.com, an e-marketplace for the hospitality and service industry, was setup with a few strategic partners to offer a solution to streamlinethe procurement process and enable the hospitality and serviceorganizations to reduce costs across the supply chain by elimi-nating inefficiencies. The portal offers product and servicesourcing, negotiation, selection, ordering, fulfillment, payment,and reporting. Buyers and suppliers have real-time access tobusiness intelligence to assist in the successful and efficientmanagement of their procurement and supply operations. Allprocurement activities are deployed through the HospitalityBexdata center, so users do not need to purchase or lease any newhardware or software. Buyers use online catalogs of more than30,000 products and services including office stationery, laundryand cleaning products, and perishable goods, and submit orderrequests via a standard Web browser. User organizations incurconsiderable cost savings because the portal aggregates ordersthrough strategic partnerships with major suppliers and serviceproviders. Procurement negotiations now take place online.Buyer–seller relationships have been strengthened by the pri-vate, online marketplace.

The ResultsIncreased bookings through Raffles’ proprietary Web sitesresulted in a strong growth of 77 percent in rooms revenue fromthis channel, exceeding both 2004's strong growth of 64 percentand the industry-wide 2004 Internet growth rate of 32 percent(as reported by TravelCLICK in their 2004 eTRAK report).

In 2005, the global portal community consists of over5,900 organizations. Annually, more than 470,000 purchaseorder transactions worth over S$100 million are accrued. Forty-two active buying organizations including hotels, offices, and

retailers from around the world provide more than US$1 millionin savings. The portal also generates regular reports for buyers,showing savings gained from this competitive pricing model.Buyers and sellers garner improvements by using technology toincrease productivity per human capital, linking to supply chainsolutions through the Internet, and increasing inventory man-agement, procurement operations, and B2B collaboration in aknowledge-based environment.Source: Compiled from www.raffles.com (accessed October 2004).Used with permission of Raffles Holdings Limited.

ONLINE FILE W2.1HOW RAFFLES HOTEL IS CONDUCTING E-COMMERCE

The ProblemRaffles Hotel, one of Singapore's colonial-era landmarks, is part of a group of luxury and business hotels worldwide. Raffles Hotel operatesin a very competitive environment. To maintain its world-renowned reputation, the hotel spares no effort on every facet of its operation.The success of the Group and each of its hotels depends on the Group’s ability to attract customers to its hotels and facilities and on itsability to contain costs. The Group also operates the Swissôtel brand of hotels worldwide. Both the Raffles and Swissôtel brands share areservation system.

1. Identify the e-marketplaces of the case.

2. List all the EC mechanisms used by Raffles and how they are used.

3. What other EC mechanisms would you recommend to Raffles?

4. List the EC business models used by the company.

5. List the type of transactions conducted by Raffles.

Questions

2 Part 1

Chapter Two 3

ONLINE FILE W2.2

NTE EVENS THE LOADThe hauling industry is not very efficient. Though trucks arelikely to be full on outbound journeys, they are often emptyon the way back. (About 50 percent of the trucks onAmerica’s roads at any one time are not full.) NationalTransportation Exchange (NTE) has attempted to solve thisproblem.

NTE (nte.net) uses the Internet to connect shippers whohave loads they want to move cheaply with fleet managerswho have space to fill. NTE helps create what is called a spotmarket (a very short-term or one-time job market) by settingdaily prices based on information from several hundred fleetmanagers about the destinations of their vehicles and theamount of space they have available. (Such a spot marketdiffers from repetitive arrangements that are negotiated andsecured by a long-term contract.) NTE also gets informationfrom shippers about their needs and flexibility in dates. Itthen works out the best deals for the shippers and thehaulers. When a deal is agreed upon, NTE issues the contractand handles payments. The entire process takes only a fewminutes. NTE collects a commission based on the value ofeach deal, the fleet manager gets extra revenue that theywould otherwise have missed out on, and the shipper gets abargain price, at the cost of some loss of flexibility.

When NTE was first set up in 1995, it used a proprietarynetwork that was expensive and that limited the number ofbuyers and sellers who could connect through it. By using

the Internet, NTE has been able to extend its reach down tothe level of individual truck drivers and provide a much widerrange of services. Today, drivers can also use wirelessInternet access devices to connect to the NTE Web site onthe road.

In 2001, NTE expanded its services to improve inventorymanagement, scheduling, and vendor compliance along theentire supply chain. NTE’s software is integrated with its cus-tomers’ operations and systems. The company also offerssuch value-added services as insurance, performance report-ing, and customer care. NTE’s business is currently limited toground transportation within the United States. In HongKong, Arena.com (arena.com.hk) provides similar port ser-vices with its product called LINE (Logistics InformationNetwork Enterprise).

Sources: Compiled from The Economist, June 26, 1999; Davidson(2001); nte.net (accessed October 2004); and arena.com.hk(accessed October 2004).

Questions1. What type of transaction is done at NTE? What type of

business model does NTE use?

2. What are the benefits of NTE’s services to truckers? Toshippers?

4 Part 1

ONLINE FILE W2.3

REVERSE MORTGAGE AUCTIONS IN SINGAPOREHomebuyers like to get the lowest possible mortgage rates.In the United States, Priceline.com (priceline.com) will try tofind you a mortgage if you “name your own price.” However,a better deal may be available to homebuyers in Singapore,where reverse auctions are combined with “group purchas-ing,” saving about $20,000 over the life of a mortgage foreach homeowner, plus $1,200 in waived legal fees. DollarDEX(dollardex.com 2004) offers the service in Singapore, HongKong, and other countries.

Here is how DollarDEX arranged its first project: The siteinvited potential buyers in three residential properties inSingapore to join the service. Applications, including financialcredentials, were made on a secure Web site. Then, seven lend-ing banks were invited to bid on the loans. In a secure “elec-tronic room,” borrowers and lenders negotiated. After 2 days ofnegotiations of interest rates and special conditions, the bor-rowers voted on one bank. In the first project, 18 borrowersagreed to give the job to United Overseas Bank (UOB), payingabout 0.5 percent less than the regular mortgage interest rate.The borrowers negotiated the waiver of the legal fee as well.From this first project, UOB generated $10 million of business.Today, DollarDEX allows customers to participate in an indi-vidual reverse auction if they do not want to join a group.

The banks involved in the auctions can see the offersmade by competitors. Flexibility is high; in addition to

interest rates, banks are willing to negotiate down paymentsize and the option of switching from a fixed-rate tovariable-rate loan. On average, there are 2.6 bank bids percustomer.

As of summer 2003, in addition to mortgages,DollarDEX offers car loans, insurance policies, and travelservices. It also allows comparisons of mutual funds thathave agreed to give lower front-end fees. It also offersinsurance (including health, motor, home, home content,and SARS insurance). Customers also can choose one ormore unit trusts in which to invest and set up online giftregistries for weddings or specials events and invite friendsto place funds in them. Reports and advice are availableonline as well as face-to-face.

Sources: Compiled from DollarDex (2000) and from dollardex.com(2004 and 2005).

Questions1. How is group purchasing organized at dollardex.com?

What services are offered?

2. Why does a reverse auction take place?

3. Can this model exist without an intermediary?

Chapter Two 5

ONLINE FILE W2.4

BOMBAY SAPPHIRE IN VIRTUAL GLASSESBacardi USA, marketer and distributor of Bombay Sapphiregin in the United States, was looking for a new way to mar-ket the product in a competitive market. In its print adver-tisements, the company had used one-of-a-kind martiniglasses designed by big-name designers like Karim Rashidand Dakota Jackson to symbolize the “classiness” of thedrink. Likewise, the company’s Web site was stunningly exe-cuted. However, it was a one-way communication effort—from the company to the consumer.

Bacardi decided to team up with MFP Interact (MFPI) andMass Transmit to plan an interactive campaign for the product.They developed a “make-your-own-martini-glass” campaign,which was launched in October 2001 at asexpressedbyyou.com.Visitors to the site can design their own martini glasses bymanipulating properties such as transparency, scale, and color.Bacardi provided detailed specifications on how things couldvisually appear (e.g., only bright blues are available to matchthe brand). Site visitors create their own virtual martiniglasses and can then e-mail them to friends.

The campaign showed early signs of success. Within thefirst month online, 8,921 glasses were designed; and two-

thirds of the users agreed to receive advertisements forfuture Bacardi promotions. The average visit to this site is 5 to 20 minutes. Considering that the usual visit to a similarsite is measured in seconds, this is a solid accomplishment.Consumer feedback is very positive, and the company plansto go global with the campaign.

Source: Compiled from bombaysapphire.com (accessed October 2004).

Questions1. How is personalization done in this case?

2. Why do you think the glasses are virtual and not manu-factured by the company?

3. What lessons for online branding can be learned fromthis case?

4. Enter bombaysapphire.com and design a glass.Comment on your experience.

ONLINE FILE W2.5

CISCO’S VIRTUAL CLOSE Cisco Systems, the company that supplies the vast networksthat connect computers to the Internet, is using technologyto develop a product, Virtual Close, with which a companycan close its accounting records (its “books”) more quickly.This will be done by connecting the accounting and financialrecords of an entire company, even one with operations indozens of countries, via an intranet. Cisco’s infrastructurewill permit information sharing almost instantly.

Cisco is implementing such a system for itself. Closingthe quarterly accounts used to take up to 10 days. Withinfour years, the chief financial officer worked the close downto 2 days (and significantly cut its cost). And, within five years,Cisco achieved its goal: It closes its books at the end of thequarter, the month, and the year by noon the next day.

The advantages for Cisco and any other company thatuses Virtual Close are:

◗ It provides strategic advantage to corporations, enablingthen to make better decisions.

◗ Companies can become proactive, spotting problems at anytime, instead of just once a quarter. Problems that wouldotherwise have remained unseen for months can be quicklyaddressed and their damage minimized.

◗ New opportunities can be detected early, allowing compa-nies to exploit them quickly.

◗ Virtual Close will enable quick “drill-down” analysis, whichlocates the causes of either poor or excellent performance.

◗ It will bring huge productivity gains related to corporatefinancial reporting.

Implementing Virtual Close in a large company is alengthy process that may end in failure due to the project’scomplexity. However, not implementing it might result in acompetitive disadvantage.

Sources: Compiled from McClenahen (2002); Beiser (1999); andpress releases at cisco.com (accessed 2000; 2003).

Questions1. What are the advantages of a virtual close?

2. How can Cisco benefit, as a vendor, from marketingthis concept?

3. Is this EC? Why or why not?

ONLINE FILE W2.6

ROSENBLUTH INTERNATIONAL MOVES TO AN E-BUSINESSThe ProblemRosenbluth International, now part of American Express(americanexpress.com) is a major international player in thecompetitive travel agency industry. The digital revolutionintroduced the following threats to Rosenbluth and the travelagent industry in general:

◗ Airlines, hotels, and other service providers are attemptingto bypass travel agents by moving aggressively to directelectronic distribution systems.

◗ Commissions caps have been reduced (from $50 to $10),and most major airlines have decreased travel agents’ com-mission percentages from 10 to 5 percent.

◗ Large numbers of new online companies (e.g., expedia.com)provide diversified travel services at bargain prices in an effortto attract individual travelers. However, these online servicesare now penetrating the corporate travel market as well.

◗ Competition among the major players is based on rebates.The travel agencies basically give part of their commissionback to their customers by using the commission to subsi-dize lower prices.

◗ Innovative business models that were introduced by e-commerce, such as name-your-own-price auctions andreverse auctions, have been embraced by many companiesin the travel industry adding competitive pressures.

The SolutionRosenbluth International responded to these new pressureswith two strategies. First, the company decided to get outof the leisure travel business, becoming a pure corporatetravel agency. Second, it decided to rebate customers withtheir entire commission. Instead of generating revenues bycommission, Rosenbluth now bills customers according tothe service provided. For example, fees are assessed for con-sultations on how to lower corporate travel costs, for thedevelopment of in-house travel policies for corporateclients, for negotiating for their clients with travelproviders, and for travel-related calls answered by theRosenbluth’s staff.

To implement the second strategy, which completelychanged the company’s business model, Rosenbluth now usesseveral innovative e-commerce applications. The companyuses a comprehensive Web-based business travel manage-ment solution that integrates travel planning technology,policy and profile management tools, proprietary travelmanagement applications, and seamless front-line service/support. This browser-based service allows corporate travel-ers to book reservations any time, anywhere, within minutes.The specific tools in this system are:

◗ DACODA (Discount Analysis Containing Optimal DecisionAlgorithms) is a patented yield-management system thatoptimizes a corporation’s travel savings, enabling travelmanagers to decipher complex airline pricing and identifythe most favorable airline contracts.

◗ Electronic messaging services allow clients to manage theirtravel requests via e-mail. These services use a Web-basedtemplate that permits clients to submit reservation re-quests without picking up the phone. Additionally, a struc-tured itinerary is returned to the traveler via e-mail.

◗ E-Ticket tracks, monitors, reports on, and collects theappropriate refund or exchange for unused e-tickets. As theamount of e-tickets usage grows, so does the amount ofunused e-tickets that need to be refunded or exchanged.

◗ Res-Monitor, a patented low-fare search system, tracks areservation up until departure time and finds additionalsavings for one out of every four reservations.

◗ A global distribution network electronically links the corpo-rate locations and enables instant access to any traveler’sitinerary, personal travel preferences, or corporate travelpolicy.

◗ Custom-Res is a global electronic reservation system thatensures policy compliance, consistent service, and accuratereservations.

◗ IntelliCenters are advanced reservations centers that useinnovative telecommunications technology to manage callsfrom multiple accounts, resulting in cost savings and per-sonal service for corporate clients.

◗ The Network Operations Center (NOC) monitors the manyfactors impacting travel, including weather, current events,and air traffic. This information is disseminated to the com-pany’s front-line associates so they can inform their clientsof potential changes to their travel plans. The NOC alsotracks call volume at all offices and enables the swiftrerouting of calls as needed.

In late 2002, Rosenbluth International opened a Web-based exchange where SMEs can post their travel needs.Airlines, hotel chains, and other suppliers can bid on thebusiness. SMEs were, until then, shut out of the negotiateddiscount process; now, companies provide their needs, includ-ing travel policy and data on employees’ historical travel pat-terns. They also post desired discounts. The negotiation canbe completed online. First introduced in North America, theexchange moved to include Asia and Europe in 2003.

The ResultsIn 1979, the company had $40 million in sales, primarily fromleisure-oriented travelers in the Philadelphia area, by 1997that figure had grown to over $3 billion, mainly due to sev-eral EC and IT innovations. Today, the company operates in24 countries and has about 4,500 employees. Since the intro-duction of the Web-based solutions in 1997, sales increasedto about $5 billion in three years (a 60 percent increase). Thecompany not only survived the threats of elimination but alsoincreased its market share and profitability.

Sources: Compiled from Clemons and Hann (1999) and from informa-tion at rosenbluth.com (January 2002).

Questions1. Describe the strategy the company uses to counter

disintermediation.

2. Explain how EC facilitated the strategy.

3. Analyze the competitive solution using Porter’s five-forces model.

4. Visit carlson.com to examine its EC initiatives. Comparethem with Rosenbluth’s.