Webvan failure

Topics: Supply chain, Cost, Investment Pages: 4 (1125 words) Published: January 19, 2015
Webvan
Q1. Describe the Webvan business model and then analyze it using the value chain and competitive forces models. What were the assumptions that drove this business model? Ans: Webvan’s Business Model used the following Points: 1. Revenue in relation to capital investment and margins. 2. Margins in the US grocery business. 3. Obtaining customers at affordable cost. 4. Gross margins compared with cost structure

Analysis:
1. According to Webvan huge upfront investment was to be considered Adequate of all other things unlike the perspective of value chain and competitive forces model. 2. Webvan considered Publicity means everyone would know about Webvan but had it emphasized on customer acquisition and cost retention more then it could have overcome it failure takes. 3. Webvan considered in incurring the customer labor cost itself. 4. Webvan could not find of any problem except spoilage. Riti A009 B. Tech IT

Assumptions made by Webvan were: a. Huge upfront investment would be better than revenue. b. Publicity would be obtained more by advertisements than acquisition and cost retention. c. Management believed that leverage in groceries was distribution. d. The company decided on a hub-and-spoke model in which orders would be filled in the massive warehouses and then taken to tiny transfer stations that served specific neighbourhoods where they would be transferred to a leased fleet of Webvan trucks for delivery. Q2. 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. Ans: Role of technology in Order Placing: 1. The ordering process began when customers placed their orders on Webvan‘s Web site. 2. When the order was completed, customers selected a delivery time slot in any of the next seven days. 3. The delivery optimizer marked slots as taken if they had already been reserved or if they were too far away from the delivery location of the new order for...
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