Chapter 9

Case Study

1.      What characteristics of the restaurant market made it difficult for a reservation system to work?

The United States has over 47,000 restaurants to eat at alone, but there is are issues with the reservation systems. First, restaurant reservations only benefit local restaurants and little to nothing for places that are outside the home city. There is also the fact that consumers have the ability to post reviews, view menus, and other information about the restaurant. Another issue is that customers have no way of making reservations only and that they can only reserve by time consuming phone call which may result in errors. Finally, most restaurants didnít even have computers to make these reservations in the first place.

2.      How did OpenTable change its marketing strategy to succeed?

The company began to retool their hardware and software to create the user-friendly ERB system and deployed a door-to-door sales force to solicit subscriptions from high-end restaurants. OpenTable has developed their company in active, local networks of restaurants and diner that continue to grow. The company has now seated over 1.7 billion diners and 58% of reservations came from mobile devices. The company launched an IPO once they grew and their shares went up by 59%. They streamlined operations, which helped fill additional seating, improve quality of service, and provides a concrete return on investment. This led to higher customer satisfaction and high retention rates.

3.      Why would restaurants find the SaaS model very attractive?

Software as a Service is attractive for restaurants because it allows them to draw their consumers in, make reservations, and results in less errors. The exposure that SaaS gives the business is great for businesses and has allowed them to draw in more customers then ever before. While in the past most restaurants have relied on word-of-mouth, companies now have the ability to draw in anyone. Overall, they have increased the growth of the industry ability to grow by allowing customers to gain insight into the business and new exposure.

4.      What challenges does OpenTable face?

OpenTable has seen a growth in competition in the last few years that have led to their company changing their business model. One example is Yelp, who used to have a partnership with OpenTable but Yelp eventually cancelled that partnership to start their own booking service. Another competitor was American Express who decided to enter the same type of business as OpenTable. There are also cheaper options then OpenTable that has caused them to rethink their revenue model as well. There were also companies that feared that OpenTable was getting between restaurants and customers, which has caused some to abandon the service.

Projects

1.      Access the EDGAR archives at Sec.gov, where you can review 10-K filings for all public companies. Search for the 10-K report for the most recent completed fiscal year for two online retail companies of your choice. Compare the financial stability and prospects of the two businesses, focusing specifically on the performance of their respective e-commerce operations.

Target Corporation has been fairly financially stable based on their 2018 10-k, however, they have seen a fluctuation in sales over the past 5 years that shows that the corporation is not entirely stable. Their gross margin rate has decreased and their SG&A has increased over the last few years. This is an issue since this means that the price at which they are selling their goods is lower or their COGS is higher and their expenses are increasing. They have also increased their assets and paid some long-term debt off which could be beneficial in the long term. Overall, Target is financially secure and has a great business structure behind their corporation that will allow them to grow to even greater heights.

eBay has seen growth in the last few years, albeit fluctuating, but the major issue is that their Income from Continuing Operations have been negative in multiple years. The company had taken on short-term debt a few years ago that they have been paying off and have incurred a large amount of long-term debt over the last few years. Although the current assets have decreased over the last two years, the long-term assets have increased at a greater rate, but liabilities are increasing just as fast. Finally, eBayís net income has been negative after performing at one of their most profitable year in a few years. Overall, eBay is not as financially stable as target, but they should be able to continue to be profitable in the coming future.

               2. Describe your views on the major social and legal issues facing online retailers.

During the last decade, the online retailer business has increased drastically which has led to major business changes and corporate thinking. The social issues are absences of online identity verification, no omnichannel customer experience, competitor analysis, old school approach to selling, no shopping cart, and cannot maintain customer loyalty. Some legal issues are that the company is that they lack the ability to incorporate, trademark security, copyright protection, transaction, privacy, and security issues.