E-commerce

About the Company
HMV is a UK based leading store specializing in selling products ranging from DVDs to computer games. HMV started as a typical bricks and mortar company in 1921 by the celebrated composer, Sir Edward Elgar. (HMV Homepage 2010, p.1) Following the years, the company expanded its operations to open up 200 stores in 200 different locations nationwide and further stores in different cities of Europe. It employs a total of 500 people (HMV Group Design Council 2010, p.1) thus contributing significantly to the economy. It went through a major acquisition in 1998 and eventually got listed on the stock exchange in 2002.
Being an organization, one of the primary objectives of the company is to satisfy the customers and provide them timely delivery of the products. The company devised strategies to satisfy their goals and came up with a mail order operation in 1992 and subsequently with an online website to keep abreast of the technological opportunities that emerged as a part of the changing business environment.

E-Business

The company started out its e-business operations in 1997 by launching its first ever website. The website at that time offered DVDs, Videos and Computer Games. Downloads for the MP3 player were also a unique feature of the site. The main purpose behind launching the site was to stay focused on the changing business needs and to remain committed to keeping itself ahead of the competition. The website project was a huge success for the company. The sales reached its peak and soon it acquired Waterstone and HMV and Dillons from the two big groups in the music industry. The website is a typical example of a B2C model which aims at providing business services to the customers (Fildes 2007, p.1).

Reason for the investment
The main idea behind the acquisition of the firm was that the company was not doing well prior to the acquisition.

It was having trouble implementing new e-commerce solutions Also, HMV was not doing well in the music download area. It also expanded into the e-books market but was not doing well because of the monopoly of the e-book giant, Amazon.

The company was not making enough profits in the e- business industry because of the competitors and the fact that the business functions were not adding value.

Because of the late entry in the market, the company was not able to gain a large market share.
Implementation of e-commerce solutions were costing a lot of money
The company did not have sufficient resources to manage the site even if it did in-house development.
It was having difficulty in integrating the orders of the customers to track the records.

Result
As a result of these problems, the investment in 7 Digital took place so that 7 Digital could provide services to power HMVs online music store and its expansion into e-books operations. The deal was to combine 7 Digitals catalogue service with HMV to make things simpler.

Geoffrey Moores Adaption Cycle
Geoffrey Moore is a consultant who gave his theory on the Technology Adaption Life cycle. In his model, he identified five major segments of people
Innovators
Early Adapters
Early Majority
Late Majority
Laggards

The cycle mostly talks about the disruptions and failure of the product in the early stages of its life cycle. The most important concept is that of Chasm which means that a disruption is created in the market because of either the consumer behavior or the acceptance level of the risk.

Therefore the firm must do adequate research and devise strategies to successfully transit from the visionaries of the product to the pragmatists (Robbins  Judge 2004, p.117).

HMV Technology Adaption Cycle
The era of late 90s brought with itself a lot of new technology internet, MP3 players, DVD players, laptops, PCs etc. the abundance of this technology was accessible by a lot of people and therefore the need arose for doing work by merely sitting at home. The trend of conducting e- businesses started. HMV came into the market a bit late because of its traditional bricks and mortar functions. At the time of the launch of the HMVs website, there were a number of competitors already in the market including Amazon.com.

Late Majority
HMV can be identified as the late majority group. They came into the market late and hence attracted very few customers. Although 7 Digital was providing its core services to HMV, the company failed to track the demand earlier. Hence, HMV can be called conservative.

Laggards
HMV is also for people who are laggards. They arent up to date on the technology and hence HMV provided a platform for those laggards but the company still didnt expand much because of the abundance of competitors.

Industry value chain
The value chain of the industry corresponds to the specific activities that a firm must perform in order to stay in the industry.

Following the outline of the industry value chain, HMVs can be described best as below

Inbound logistics
Inbound logistics mean that the firm is up to date on the latest developments so that they can provide better services to the customers. HMV was no doing a good job and hence it invested in 7 Digital in return for their help.

Operations (Production)
The operations of the company included updating the music library and the e-books library so that the customers could get the products of their choice.

Outbound logistics
This refers to the timely delivery of the products to the customers. HMVs inbound logistics werent efficient till it acquired the services of 7 Digital.

Marketing Activities
The marketing of the firm was good. It came up with constant discounts on the items during events. The sales department was not efficient as the functions especially prices were not in correspondence with the demand of the products. The company can improve its operations by comparing itself with the other firms in the industry. This practice is called benchmarking. HMV did not follow the standards that were set up by competitor firms. Although HMV didnt bankrupt like Zavvi but it failed to move upward like other successful firms.

Key Relationships
For HMV, there are a number of people with whom it has to maintain its relationships.

Suppliers
Being a product offering firm, HMV has to maintain long term strategic alliances with its suppliers. The suppliers include 7 Digital who help them in providing catalogue services to the customers. Also, Prime Business Solutions (McDonough  Kocherp 2010, p.1) is a supplier to HMV because of which HMV has been successful in implanting a strong business network

Customers
Customers are an important component for the firm. HMV has gone to peaks to provide excellent services to the customers. It provides them the flexibility to purchase the products of their choice, make online payments through their credit cards and secures their information.

Value
HMV continues to provide value to all its customers- direct or indirect. Following are some of HMVs features which add value for the customers
HMV has positioned itself as a Multi- Media Entertainment Supplier and not just any record store (Moore 2009, p.1).

Providing downloads in which people do not have to worry about copy right issues
Relatively lower prices as compared to that of competitors.

Cut in the prices of the products on big events like Easter and Christmas (Andrews 2009, p.1).
Its not just an online store but also operates out of the Internet World on the real streets in form of physical stores.

Building of HMV Digital on Microsoft products and technology thus boosting the digital entertainment market (Altaner 2010, p.1).

Not only confined to selling products but also offers the services of the digital cinema (Wimbledon).

Competitors
The company has many competitors. Recession and unsuccessful e- commerce strategies have drove many companies out of the business including Zavvi (Altaner 2010, p.1).

Some of the major competitors are
Amazon.com
iTunes
Boarder Group
WH Smith PLC
Lookers PLC

The competitive advantage of the Amazon.com and iTunes has been primarily the consolidation strategies and integration of the supply chain. Both these companies have preceded HMV in disintermediation of their business. Though the firm also has a free delivery offer for its customers in the UK, it relies on the absorption of these costs into the product costs resulting in slashing profit margins for HMV. There has been no forward or backward integration from HMV as a result of the strategies adopted by Amazon.com and iTunes.
The intense competition with Amazon and iTunes has led to HMV adopting a price-focused marketing campaign  rebates and price reductions are the focal point of the marketing strategy of HMV. It has also led to HMV exploring a wider market than Amazon and iTunes  it offers games, movies and music combining all these under one roof. This distinctive all-under-one-roof approach has been central to its success in the highly competitive industry.

Revenues
The company has made sufficient profits ever since it expanded its business by going online. Soon after the launch of the website, the company reported revenue of 298 million for the year 2000. Also, when the competitor firms were closing because of recession and going out of business, the company generated 1.96 billion (HMV Group Financial Results 2008, p.2) of revenue in the year 2009.
Revenue Table
EventRevenueLaunch of the Website (1997)
Revenue for 2000
298 millionGlobal Recession (2008)
Revenue for 2009
1.96 billion

HMV has been successful in the business because of its adaption to the changing business needs. Where firms like Zavvi ceased its operations, HMV continued grow. Referring to the Geoffery Moores cycle, the firm was a part of the late majority and the laggards. Also, as compared to competitor firms, it hasnt made many profits in the e-commerce business. Also, the firm was unable to make operations successful in different countries because of their inefficient market research and logistics. It continuously failed to benchmark itself against the competitor firms. Whereas advancement of technology helped HMV in reaching the top and grabbing the market share, lack of a well developed e-commerce strategy failed the company in many ways thus creating hindrances in the business. It is because of these problems that HMV bought a stake in 7 Digital so that the large multimedia solutions giant could offer HMV its services (Fildes 2007, p.1).