Ebi Case Study

Introduction

The era of new technologies revealed new threats that EBI failed to recognize and as a result lost its leading position on the market. Ineffective actions forced further changes and resulted in the change of old fashioned business model. New strategies were developed, new products implemented, and the corporate structure has changed. EBI has entered digital era after several years (1993-1997) of failing marketing strategies and product mix.

The Strategy - evolution from single industry firm to related diversified firm

In regards to corporate strategy, EBI is an example of a single industry firm, at least when the period of time between 1769 and 1996 is considered. The entity that adopts such approach, "...operates in one line of business" (Anthony & Govindarajan, 2007). The knowledge of the market needs and ability of developing solutions that met them put EBI in the strategically advantageous position. The focus on excelling the quality of information is characteristic for the strategy of core competencies.

We can talk about the shift towards strategy of related diversified firm at momentum when EBI acquired even greater market share with the release of Compton's Encyclopedia on digital media. The EBI's approach did not change when new entrant stated its presence on the market by releasing products that were multiple times cheaper. Microsoft's Encarta became a threat to EBI because of its budget conscious calculated price.

The core values and strategy did not change with the new ownership, EBI became a digital organization and "reliable knowledge in every topic imaginable" (Anthony & Govindarajan, 2007) remained its main focus. The change of the business model was reflected in new mission though, stating that EBI's main aim is "... to become the most trusted source of information, knowledge and learning in digital media" (Anthony & Govindarajan, 2007). EBI planned to achieve it by focusing on a digital version and implementation of online resources. The main goal was to earn revenues through e-commerce, not only by the fees for services but also through advertising space on the EBI's website. The organization finally had fully diversified product mix, sharing core competencies of the organization. Expansion in the e-market required reengineering of the business model from the traditional book seller to fully digital entity that managed to overcome difficulties resulting from the control system that failed.

The Controls - the drivers of success and main reason for failure

It appears that the only controls that EBI had in place throughout most of its history were supply (amount printed) and demand (level of sales). The distribution through the traditional bookstores was the only channel of distribution directly linked with both of them. With the beginning of the technological revolution the two controls did not change. The only novelty was the level of the direct sales force. The implementation of the product on the digital media boosted the profits thanks to conservative pricing. Implemented control system reacted only when new competitor (Microsoft) entered the market and the sales collapsed.

The new owner disbanded traditional sales force and the level of the employed sales representatives stopped being one of the control elements. The traditionally printed version stopped being the main generator of revenues, replaced by digital versions. Consequently the number of entries on the website became a control. It showed quickly that it has significant importance by revealing the weakness of hardware equipment that was used to manage web services. As a result new servers were installed. The plan to generate profits through advertisements placed on the EBI's site instituted the control in the form of the number of clicks on them to measure effectiveness of the pursued strategy. The level of prices in comparison with those of competing products is another indicator of the effectiveness of pursued actions in the relation to