State owned enterprise of Shanghai Material and Equipment Group Co. Ltd.

, was backed by the government

Customers had the ability to inspect and test the quality of the products
Large inventory of products with varied specifications would ensure successful completion of all the orders and
avoid back orders.
SHMEC had profound experience of nearly 40 years in industry with complete information of centralized
procurement and selling through multi channel system
SHMEC had an established customer base and had developed good relationship with many big customers of the
industry
SHMEC had a large base of fixed assets
It had a rich base of suppliers accrued from 40 years of experience

What were the strengths of the traditional business model of SHMEC prior to
E-business transformation?

No economic liberalization since the SHMEC was privately owned

More demand than supply less inventory management cost
Stability in prices determined companys performance
Efficient and effective sales force less sale on credit; Less bad debt
Proper book-keeping and lack of monopoly of business staff
The traditional model in which many products were sold on credit required customers who are credit worthy to avoid bad debts
Efficient order processing, logistics and information flow
Fast recovery of credit provided to maintain healthy liquidity for expansion in operations and good financial status
Building inventory posed risk by absorbing liquid capital and reducing capital efficiency. So increasing demand for the products
of different specifications stored as inventory was necessary
Better methods were required to manage client related information available with business staff and to combine available
information on production with client requirement

What were the environmental factors that were necessary for the success of the
traditional business model?

 The needs of a wide range of customers could be fulfilled because of the variety of products in the inventory.
Due to the high levels of inventory maintained, they could fulfill almost every order from the customer.
The customers could attain products on credit by developing a good rapport with the sales staff as the sales
person were given considerable authority.
The relationship and trust between customers could be strengthened.
Buyers could decide quantity of products and the time of payment.
The traditional model helped SHMEC develop large amount of experience in the distribution of products in
the industry.

What was the value of the service provided by the traditional SHMEC to its
customers (i.e. Why were customers ready to pay a higher price to SHMEC for the
products they bought)?

 High Efficiency:
Members could effectively control and monitor their inventory and regulate the distribution management
Enjoying zero inventory which cut the cost down drastically
With the implementation of e-business buyers had to operate according to a regulated business process which led to more transparency
Specialty: Information & Trading section
The new business model with the help of thorough checks and approvals ensured good quality of the products at the source
Extension:
Chain business helped in establishing distribution networks rapidly and operate at larger scale

ME-Online was first company to issue value added tax invoices directly online
Only system carrying out mechanical and electrical equipment transactions in real time
Had a large customer base and relatively stable syndicate with enterprises in the upper and lower chain
Resource providers could enlarge their sales rapidly at relatively low cost by speeding up payment receivables, regulating product prices and
monitoring sales effectively through internet

What were the strengths of the new business model of Me-online after to Ebusiness transformation?

The model is dependent upon the increase in internet awareness and penetration
Change in the mind set of employees for the smooth implementation of e-business system
Proper integration between internal information system of Me-online & its suppliers
Business model innovation and system improvement by establishing future cooperation with large international
manufacturers
Integration of the model with suppliers working process and information systems
Customer perception about the new ordering system and sharing of customer information by sales staff
Security and integrity of the data system used

What are the environmental factors necessary for the success of this new
business model?

SHMEC provided a unified platform to collect information about different products

Resource provider member could enlarge sales at low cost
Resource provider member can speed up payments receivables and also effectively monitor the sales
Users benefitted from improved collaboration with the supply chain and reduced the product procurement costs
SHMEC streamlines their logistics with information processing and set up their own fleet which could cater to
highly specific requirements of customers in an efficient manner
The different processes like distribution, procurement, inspection could operate at the same time decreasing the
total time
Through the use of information technology both the resource providers and user can provide 24 hours transaction
through the unified platform thereby making it more convenient
Buyers could directly choose their suppliers and also the quantity of the product

What was the value of the service provided by Me-online to its customers (i.e.
Why were customers ready to pay anything for the service they received)?

 Enjoyed large customer base and an important position in the distribution chain (centralized procurement and selling)
Me-Online had patents for 9 systems and 128 functions issued by National Copyright Administration of the Peoples
Republic of China which restricted its competitors from employing a similar model
Had the experience of troubleshooting and understood the nuances of the sector
Currently SHMEC has 31 franchise stores and plan on continuous expansion ensuring stability during the period of
transformation
This model was built on the core competencies of the company

How sustainable is the Me-online business model? How easily can competitors
replicate it?