1.2.Market Conditions
Two significant opportunities can be predictable at the Internet Company in the wine market. First, U.S. wine market is slowly but steadily growing and this trend is expected to continue. From the case, it is said that its annual growth rate is 5% or 6%. There should be a potential to provide wines with upper value to customers. Second, the Internet commerce is surprisingly expanding; therefore the size of the future market will be also expected to be huge. All these determinant market conditions can be helpful for Virtual Vineyards to start up its business.
1.3.VV’s Structure and Culture
1.3.1Structure
In network-based companies, technological factor has played a great role in organizational structure. John Woodward (1965) has addressed the importance of technology as dominant and determinant of structure and that is the best-known research on the technology-structure relationship. According to Chaffey & Mayer, there are four major types of online organizational structures. Based on their respectively different characteristics, Virtual Vineyards belongs to a separate operating company that owns a different organization structure to develop and build its e-commerce system. A separate operating company has some advantages and disadvantages.
With a staff of 17, the organizational structure of Virtual Vineyards is composed of an engineering team, marketing, management, and customer support as the following table shows:
Technology refers to the knowledge, method, or process of accomplishing the organization’s basic purpose. Among those departments, the engineering team is very crucial to develop and maintain the organizational structure.
1.3.2.Influence of IT on structure
In today’s Information Age, the principal component for success is the ability to leverage technology to add value to the business process. Virtual Vineyards have used a broad range of Information Technology (IT) initiative to realize electronic commerce strategies in the digital age. In terms of its leading-edge technology, Virtual Vineyard has differentiated itself from other wine sites. IT has great influences on Virtual Vineyards’ structure in the following ways:
- The successful implementation of new programs and policies often requires more than changes in systems and procedures.
- IT links up with transregional or transnational corporations as suppliers, value-added providers or other market intermediaries.
1.3.3.Culture
Culture can loosely be defined as the shared assumptions, beliefs, and "normal behaviors" (norms) of a group. As an intangible asset, culture has great influences on management process and business activities of a company. Virtual Vineyards’ culture is informal, and all staffs work in a friendly atmosphere. They work cooperatively and coordinately. The development of IT may require a change in the culture of the organization, the underlying values of an organization and the way in which management reinforces those values.
1.3.4.Influence of IT on culture
Virtual Vineyards used database technology to deliver targeted e-mail messages for potential and retained customers. In terms of advanced technology, Virtual Vineyards is aimed to construct not only personalized relationships with individual customers, but also to create a virtual community that binds the customers to each other and the host company.
- IT allows companies to enter niche markets on a worldwide basis and get quicker trade opportunities.
- IT adopts marketing strategies that are highly responsive to customer needs.
- IT can be a lever to implement their strategy and re-engineer their organization; they would like to take advantage of both innovation and efficiency, and to turn both autonomy and control to account.
1.3.5.Key Factors in Marketing
Though Virtual Vineyards has reached a great achievement, there are some discreet considerations that need to be taken into seeking to integrate their corporate, marketing and e-marketing strategies. First, having corporate objectives and stratege is a crucial factor to gain competitive advantages. Second, Virtual Vineyards needs to explore emerging opportunities and maximizes threats. Third, in the context of the Internet marketing, market structure and demand needs to be researched carefully because they are easily changeable. Third, developing an appropriate online value proposition can help Virtual Vineyards to build new competitive advantages that lead to differentiate it from other rivals. Furthermore, a clear online value proposition can help Virtual Vineyards staff are clear about the purpose of the site. The success of leading e-commerce companies is often due to matching value propositions to segments successfully.
2.Marketing Perspectives
2.1.Online Customer Interface
Customer interface has been an important key to the company’s future and the advancement of heat pipe technology. According to Peters (1998), there are four major communication styles in customer interface. In Virtual Vineyards, customer interface mainly depends on electronic commerce. The customer interface makes the transferring of data from the customer table in VV’s database easy accurate and quick.
Comparing Media
Higher
Personal Selling
Social Presence Telemarketing
Electronic Commerce
Lower Direct Mail
Synchronous Asynchronous
Communication Style
From: Peters, L 1998: 1to1 but Who to Whom?
By comparison with face-to-face retail and direct mail, electronic commerce has its remarkable advantages. Electronic commerce has medium social presence and lies between synchronous and asynchronous. In terms of electronic commence, Virtual Vineyards can gain the following advantages: (1) Computers are perfectly suited for the task of searching for key words and comparing numbers. Virtual Vineyards is able to provide rich value added information about wines to their customers. Their electronic mailing list informs subscribed users of new prices and products. (2) On-line retail reduces marketing costs because it is available to potential customers 24 hours a day, 365 days a year. Virtual Vineyards incurs virtually no inventory costs, and has low fixed costs. (3) A Web site can sell directly to customers, eliminating middlemen and distribution costs. Virtual Vineyards is able to bypass traditional distribution intermediaries and to avoid storefront rental and labor costs.
2.2.Channel structures
Channel structure describes the way a manufactures or selling organization delivers products and services to its customers (Chaffey & Mayer, 2002). The relationship between a company and its business partners can be greatly changed by the opportunities afforded by the Internet. In electronic markets, there are three major distribution channels that link suppliers to customers as the following section shows:
2.2.1.Disintermediation
Disintermediation is the bypass of traditional intermediaries and creation of new market spaces. It means the removal of intermediaries such as distributors or brokers that formerly linked a company to its customers (Chaffey&Mayer, 2002). Disintermediation is often the result of high market transparency, in that buyers are aware of supply prices direct from the manufacturer. As a result, buyers will bypass the middlemen (wholesalers and retailers) in order to buy directly from the manufacturer and thereby pay less. Buyers can alternatively elect to purchase from wholesalers. The ability of communicate at low cost through the Internet allows firms to completely disintermediate various intermediary roles in transacting or connecting to supplier and customers. Virtual Vineyards is regarded as a broker between supplier and customers, as a result, it is obvious that Virtual Vineyards does not follow disintermediation channel model.
2.2.2.Reintermediation
Reintermediation is the creation of new intermediaries betwwen customers and suppliers providing services such as supplier search and product evaluation(Chaffey&Mayer, 2002). In other words, reintermediation are new intermediaries that emerge to faciliate transctions by aggregating markets, brokering transactions, and providng information. Sarkar et al.(1996) desribed rentermediation shoud be evaluated for suitability for partering with for affiliate arragements. In a competitive environment a successful integrated intermediary must provide a bundle of services that balances the needs of consumers and producers and is acceptable to both. Virtual vineyard’s electronic store is implemented through partnership with Well Fargo Bank, different vineyards, a third party warehouse and Federal Express for transportation. Based on actual operating activities and marketing position, it can be concluded that Virtual Vineyards follows reintermediation strategy.
2.2.3.Cybermediaries
As new market makers, Cybermediaries are new network-based intermediaries. Cybermediaries will substitute for traditional intermediaries to drive consumers to the online commerce site, and to facilitate online transactions, and they are used to attract large target audiences for online businesses to market to.
2.3.Target Market
Defining potential and profitable customers is a challenge for Virtual Vineyards. A study by the Wine Industry Council showed that 80 percent of wine drinkers own a computer and use it on a regular basis. According to the statistical figure, the average age of the e-commerce customer is 41 years old. In order to understand more about whom profitable customers are, additional analysis of customer behavior, identity, and preferences have to be conducted. Vice president Cyndy Ainsworth of Virtual Vineyards said the success of wine online is due to the common demographics of Internet users and wine drinkers. According to the detailed statistical information, in U.S. market, professional managers covered 29.0% market share in domestic table wine. And consumers of a high income over $75,000 covered 22.5% market share in domestic table wine. Consumers between 35-44 years old covered 25.4% domestic table wine. In addition, 43.2% of wine-drinkers in U.S. have high education level of gradated college. As a result, based on statistical figures and information about wine purchaser, it can be concluded that Virtual Vineyards should focus on two markets:
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Professional managers- who are 33-44 years old with high income of more than $ 75,000. It is very convenient to surf the Internet for them. Besides that, they want to learn sophisticated knowledge of wine.
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Suburban Female – who are computer users with high education and income level; between 25-54 years old. They are strongly interested in a good glass of wines.
2.3.1.Online customer behavior
Consumer behavior should be the principle determinant of corporate e-commerce strategy. Understanding customer behavior is crucial for companies to maintain a competitive edge. However, Gaining an in-depth understanding of these target market is not easy for online companies. According to Forrester Research, only 23 percent of companies currently improve their online operations by making use of the data associated with how customers use their Web sites.
Therefore, Virtual Vineyards must make every effort to understand these potential customers behavior in the following aspects:
- The number of visits made to each web page
- The internet address of the computer used by each visitor
- The amount of time spent browsing at each page
- The usage patterns correlated with purchasing
Styler (2001) describes four consumer-buying behaviors. These behaviors are brand-focused, price-sensitive, feature-savvy and advice-led. Through those survey data analysis, Virtual Vineyards could understand customer lifecycles, preference to develop customer acquisition and retention programs. Customer acquisition is based on offering the right products and services to the right groups of customers at the right time. Customer retention is based on customer satisfaction. However, the data analysis needs a large amount of energy and time, Virtual Vineyards only analyzed approximately a third of visits to the site.
3.Recommendations for practice
3.1.New lines of business
There is no doubt that Virtual Vineyards has reached a great successful e-business in a niche market. However, Virtual Vineyards should improve and develop e-marketing strategies to build up new competitive advantages due to changeable and competitive environments. That resulted in Virtual Vineyards wanted to expand into new lines of business. It is an appropriate opportunity for Virtual Vineyards to enter new markets based on its good reputation and brand awareness. Not only specialized in selling wines, Virtual Vineyards should exploit fresh food market because there is a close linkage between food and wine, and wines are almost always presented in the context of a meal. Virtual Vineyard can introduce wine-related food such as savory sauces, perfect marinades, gourmet seasonings, and specialty oils. It is best to develop these new products and services under the “VV” name. VV has built brand awareness already. The reputation of VV can help new products to enter markets, and they can be easily acceptable by customers.
3.2.Online success
Based on those section mentioned before, it can be concluded that Virtual Vineyards online success depends on the following aspects:
- Developing customer-oriented content. According to Nigel Bevan (1999a), Web site development should be user-centred, evaluating the evolving design against user requirements. A customer-oriented content can lure customer to visit Web site. Virtual Vineyards’ content is attractive and updated.
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Peters, L (1998) addressed that time compression of order and delivery to consumer is one of successful drivers.
- Focus on technology. Virtual Vineyard has a stable Technology infrastructure. The Internet is about change – Virtual Vineyard took fully advantage of it.
- Expertise in wine- Granoff’s expertise as a key source of value.
- A key focus of Virtual Vineyards is providing personalized customer service.
- Be disciplined. People, processes, and performance are still fundamental to success.
7.Building good relationship with business partners-vineyards, transporter and banks.
In brief, in the future, Virtual Vineyards should not only focus on the attractive value of the new IT but also the special needs of an on-line marketing strategy building an interesting and ever-changing Web site, containing a lot of information and user interaction.
1.http://ecommerce.internet.com/how/customers/article/0,3371,10363_803701,00.html
2. Bevan, N.(1999) www.usability.serco.com
3.Chaffey,D ; Mayer R, Johnston K& Ellis-Chadwick,F (2001), Internet Marketing, FT Prentice Hall
4.Peters, L 1998: 1to1 but Who to Whom
5. Styler, A. (2001) Understanding buyer behavior in the 21st century, Admap, September
6.http://www.inc.com/magazine/19960615/1966.html
7. http://news.com.com/2100-1017-227344.html?legacy=cnet
Appendixes:
Background of Virtual Vineyards:
Virtual Vineyards is the Internet's leading online wine merchant, offering distinctive, and hard-to-find selections. Its BackWeb channel will supply subscribers with the latest information on new arrivals, and allow them to request specific updates, such as arrival dates of a new merlot. () Virtual Vineyards was created by two young men, Robert Olson and Peter Granoff. Robert Olson earned a master in electrical engineering from Stanford University and worked for 21 years in computer related areas. He determined to set up his own company inspired by a number of successful startups in Silicon Valley. His brother-in-law, Peter Granoff showed interest in Olson’s business and joined it. Granoff possessed a professional knowledge of wines and has some experiences in working as a sommelier. He not only got a best sommelier’s award but also passed the exam of the Master Sommelier with the highest score.