MTB130 - Reflective Journal Topic 4

I believe RFID (Radio Frequency Identification) is the next big wave of technology to impact the way we do business.

RFID tags (like bar codes) consists of a microchip attached to a radio antenna which is then mounted on to a substrate. Chips can store up to 2KB of data which can be read by RFID readers.

RFID reader is a device with one or more antennae that emits radio signals and receives feedback from the RFID tags. Once data is read from the tags, the reader then passes this information in the digital format to other systems. Since the radio frequency is used to read the tags, there is no need for the stock to be in a dedicated area such as when scanning bar codes.


The advantages of using RFID applies to many industries. Supply chain management is one of the areas that can benefit immensely. When transporting large stock piles, use of RFID tags eliminates the need of scanning (bar codes) which involves human intervention. For example Company ABC which manufactures clothing can attach RFID tags to its clothing items either individually or on to pallets. As the stock leaves the warehouse RFID tags are read and data captured in to the Supply Chain Management System, which automatically lets the Company XYZ that the stock has left the Company ABC. When ABC receives the shipment and as it enters the warehouse, its RFID readers will read the tags and confirm its validity, and send information back to Supply Chain Management System, which will notify Company ABC that the goods have arrived.

During the entire process of tag identification and updates to Supply Chain Management System, there is no human intervention required.

In my personal experience, my Company together with a partner organisation and Victorian Racing Club (VRC) embarked on RFID tagging on horses. Tiny RFID tags were attached to horses and the VRC were able to instantly identify the location of the horse which includes it breed, age, owners, trainers, VET records and many more information. This information has enhanced VRC's horse handling work much efficient, especially during race meets.

However, my interest in RFID spans beyond these projects. IBM retail systems together with some smaller players are introducing RFID tagging in to supermarkets. Just imagine a situation where a 'would be' thief enters in to a supermarket and stuffs his jacket with some smaller items such as razors, perfume, shampoo and couple of bottles of beer. The unsuspecting thief, decides to leave the shop, walks through the checkout counters. At the exit door, a security guard stops the 'would be' thief and gives him a shopping docket and asks him to pay at the counter saying 'sir/madam..you forgot to pay for these items..'

Even though it's controversial, I also believe RFID tagging could be used to monitor human movement in a myriad of scenarios. For example fire fighters fighting blazes across wide terrain could be supplied with RFID tagged clothing. In scenarios such as recent bush fires, the fire department will be able to locate its members and if in extreme threat areas they can be evacuated.

Therefore applications and their benefits of RFID tags are 'enormous'. Costs have come down to 20 -40c per tag depending on features, however the aim is to produce them at a 5c or less per tag. To achieve this, the World should consume 30 Billion tags each year. The RFID tag industry believe this will be possible one day. However unless more companies use the technology the costs will remain high,and while the cost remain high, only a few companies would adopt it. This is a typical scenario of which come out first...the chicken or the egg!

To overcome the 'chicken or the egg' situation in someway, Walmart in USA made it compulsory for its top 100 suppliers to use RFID tagging in supplies. Today, increasing number of industries are rapidly adopting RFID technology.

The day we will be wearing a tagged clothing item at work, or driving a tagged vehicle or farms tagging their cattle or correctional departments tagging prisoners, weather controversial or not would not be too far away.

For further comprehensive reference, http://www.rfidjournal.com/.

Case Study: Has 'Video killed the web promotion star'

1. Advertising on YouTube

In my view as a casual user of YouTube, acceptance of advertising while watching videos on YouTube depends on the quality and relevance of content being viewed.

I believe a content portal should maintain financial stability to continually provide services and deliver content. In this case I see two possibilities YouTube can adopt. A subscription based membership model, where members pay a reasonable amount on agreed terms. The other would be a ‘fee free’ based membership model as YouTube currently operate.

Content delivered to ‘paid’ members could contain little yet targeted advertising content – similar to Pay TV advertising model.

There is no doubt, overtime consumers will agree that they need to pay for the value created by quality content delivered in quick time.

From YouTube’s point of view, they can place more emphasis to content’s appropriateness to a user’s profile. Maintaining the quality of the advertising content as well as of Videos available for view is extremely important.

An example site that has lost its initial ‘charm’ due to commercialisation that I’m aware of is www.dnsreport.com, which used to provide free network analysis tools, and now charging a subscription based model.

However losing the ‘charm’ does not necessarily mean loss of visitors and 'death' of the site. After the subscription model was introduced I have noticed a considerable improvement in the quality of the services. On the downside, you can see on blogs such as these (http://www.webhostingtalk.com/showthread.php?t=606200) where some users looking for alternative free solutions.


2. Copyrighted Materials

From a commercial point of view, I believe YouTube’s decision to adopt the Digital Millennium Copyright Act, is a smart one. However as a key player in the digital content broadcasting, I feel more should be done to protect intellectual rights of the content creators and owners.

Digital Millenium Copyright Act is a good solution for YouTube for obvious reasons. Imagine having to filter around 200,000 uploads on daily basis, essentially meaning a massive workforce screening content 24x7 basis.

Not only this option would be financially viable for YouTube and Google but also will have a direct impact on its shareholders. It will also will arguably limit the number of users browsing the content on YouTube if up to 50% of copyright infringed content is removed.

Adaptation of Digital Millenium Copyright Act would be a poor solution for content creators and owners, because onus falls on to them to ‘police’ the copyright infringements on YouTube, which can be time consuming and costly. It is a fact that most start-up creative talent would have neither the time nor the money to take such measures to protect their copyrights.


3. YouTube for Brand Establishment ?

Major concerns I would have would be exposing my customised designs on the YouTube. Since I would look at to gaining a competitive advantage in the market place by providing innovative sporting goods, I will certainly have concerns about the protection of my product differentiators from the rest of the market.

Of course I would not like to see a container load of ‘look alkies’’ being sold over the Internet for a fraction of the cost! I would also have doubts if I’m reaching the target audience with YouTube.

How many of the viewers will be in the ‘mood’ to watch a video on sporting goods (unless they are watching really 'boring' content and find my advertisement is more appealing - which would be a positive)?

I will definitely consider other methods of brand building methods before considering YouTube.


4. Google Response Rates & Long Term Sustainability

I agree that there would be a higher rate of responses (clicks) on its Flash animation on the bottom of the video screen, however find it hard to believe it is 10 times likely. After all, these are claims made by Google and not verified by independent research.

Long term sustainability depends on multiple variables. Since adaptation of broadband is definitely set to increase every year it is likely more and more people will be entertained/ educated (or even humiliated) by the ever increasing content o YouTube.

However the quality and appropriateness of content are fundamental items that will dictate the long term sustainability. YouTube operates in an open playing field and therefore inherently at the risk from fierce competition.

It is very clear with today’s share prices of Google that it has lost more than 50% of its ‘paper’ value from its peaks in 2007. In order to ascertain the long term viability of a business, we also have to ask other questions such as what is the ‘true’ value of a portal such as Google/ YouTube and how do we measure it?

While companies such as Google have not directly contributed to the current Global financial crisis, we see that they are not immune to setbacks. Therefore, personally, I will measure the sustainability of such organisations in shorter terms rather than 5+ years periods.

Therefore I believe the sustainability over 5+ years is extremely hard to predict. Depends on what values we measure sustainability; for example is it the share value, users’ satisfaction, revenue from advertising, revenue from possible memberships etc

MTB130 - Reflective Journal Topic 2

Entertainment Industry

Internet is a powerful medium that the entertainment industry has very strong associations with. Creative common licensing can help artists such as song-writers to share their work and use others work ‘legally free’ to create new content without having to go through the hassle of copyright laws.

For example a budding musician who needs to build awareness and reputation may release his/her music under a Creative Commons Attribution 2.5 Australia licence.

An established music director in the USA may come across the budding musician’s work (say on YouTube) and reproduce the work and include in a new release album. The music director by law must give credit to the budding musician in his new work (say on his web site and music albums) and this can open up huge opportunities to our young talent.

Creative Commons licence not only provides opportunities for new talent, but also helps the entertainment industry as a whole to develop exciting new content and remove unnecessary barriers.

Just imagine an Aboriginal artist mixing their music with a South African tribal music without having to go through all the red tape of international licensing laws. This may create totally new music with huge commercial potential for all parties involved.

By using CC licensing, the process of creating, releasing and sharing within the public domain becomes quick, helping artists to do what do they best, and contribute to the improvements of the industry.


Business (Large Corporate Entities)

Creative Commons provides the legal framework to protect a creator’s rights while sharing the knowledge to improve business activities.

Let’s assume a multinational biomedical research company has developed a new method of identifying a certain type of cancer cells in half the time compared to current practices. And another publicly funded research body such as the anti-cancer council of Australia with extensive amount of experience in cancer research, than the bio medical company that created the new method of identification of cancer cell can immediately benefit from this new creation.

If the bio medical company licence the new technique under a CC licence, the cancer reaserch organisation can immediately commence using this new technique. According to the law, the research organisation has to identify the bio-med organisation as the creator. Both the invention and the organisation (and the team) will receive immediate recognition and this action may even lead to some cure for a certain type of a cancer and the development of a new drug.

In this scenario it is possible that all parties involved commercially benefit from the sale of new drug across the World. It would be a win-win situation for everyone, and CC license has allowed this to happen in no time compared to dealing with traditional licensing methods.

Large organisations can benefit from multiple ways than one. Moral obligation of returning to the larger community is also achieved without losing rightfully due recognition.


Education (Higher Education & Corporate)

Creative Commons licensing allows the education community to share their work effectively within the community as well as with corporate education/ training arenas.

Let’s assume a PHD student at a leading university has developed a new flow chart to identify potential human resources issues within a large organisation, such as a university or a large business. The PHD student decides to release his work with a Creative Commons Attribution, Non Commercial License. This allows the education community to use the creator’s theory in educational material so that millions of other students can possibly immediately benefit from the new flow chart.

If an organisation needs this material to use or enhance further to develop new material for handling human resources issues within its business, then the organisation needs to contact the licence holder and receive necessary approval by an agreement; that may or may not involve financial transactions.

In this scenario, the licence holder gains immediate recognition as the top educators in the World use the new theory, free of charge and immediately. This awareness allows generating possible commercial gain by allowing commercial users to use the invention by agreement with the inventor. Overall, a positive outcome for all parties is achieved.


Government (Local & Federal)

Government departments are at top of the list among the bodies that can benefit from Creative Common licensing which removes ‘red tape’ that is inherent in most of the processes.

For example, let’s assume a regional local government (council) has carried out research on water quality downstream on a river that the locals use as the primary water supply. The Council has collected data for 20 years and from basic data analysis it has identified that amount of Phosphorus in the water has increased by 20% in the last 3 years. Local government decides to publish the raw survey data under a Creative Commons Attribution + Share Alike licence.

Since there are no restrictions to use the data, Federal Government’s environmental agency immediately accesses this raw data and decides to carry out further research as to where the Phosphorous is added to water stream. Now that they have reference data, it makes the environmental agency much less time to act and test the water upstream to establish the cause and take necessary action.

New data on findings from further research by the Environmental Agency which was also published under CC, now can be immediately accessed by the local government health department which decide to carry out health checks of the locals, especially as the families in the region (across multiple Councils) rely on the water from the river as no running water supply in some parts of the town.

In this scenario, once again all forms of Government and residents of all Councils gain immediate to benefit – a win-win solution for all.

MTB130 - Case Study - Reflective Questions 1

1. What are the core components of Priceline’s business model?

Technology, Marketing, Sales, Purchasing, Human Resources & Legal are core components of the Priceline business model.

Technology

Due to its pure existence on the Internet, technology plays a key role in all aspects of the business and is central to all associated business functions. Technology refers to both infrastructure and operational technologies such as Data Centres, High-Speed data links, workstations and E-Commerce systems development.

Marketing

Priceline needs to market itself to potential consumers. Such marketing activities needs to be carried out in both Internet based and traditional mediums. It is important to promote Priceline's value point over its competitors to attract consumers.

Sales

Sales component of the business model drives revenue for the organisation. While Priceline's patented "Name Your Own Price" reverse auction model is exclusive, there are other key players already established in the market segment Priceline operates. Therefore Sales component of the business model constantly challenged and needs to be reviewed regularly.

Purchasing

Priceline requires to maintain strong relationships with suppliers to negotiate discounted prices. To support its purchasing activities through acquisitions, Priceline bought Amsterdam-based Bookings B.V. in July 2005, following its purchase of UK-based Active Hotels the year before.

Human Resources

Currently Priceline employs over 1300 individuals. With a sizeable work force it is imperitive to manage the asset of human resources to ensure continued growth and sustainablity.

Legal

Priceline operates in multiple economies. Each economy has its own jurisdiction that Priceline needs to operate within. Therefore it is vital for Priceline to understand each economy it operates in, to legally exploit preferential business associations and employ effective sales & marketing activities.


2. Do you think Priceline will ultimately succeed or fail and why?

Ultimate success can only be predicted with multiple assumptions such as corporate governance, global financial market conditions and including the time period ultimate success is measured.

Assuming we are considering medium to long term operations (5 - 10 Years), I believe the business model can be successful if short term sustainability is maintained. I believe the performance of next 12 to 18 months period would be a crucial indicator for Priceline's medium to long term success.

Priceline's shares have tumbled from a high of $144.00 to a low of $45.00 in the last 12 months, and currently trading around $65.00. It is important to note that primary reason for share value fluctuations does have a direct correlation to current global economic crisis. Global markets analysts predict a slow down in business and leasure travel due to current economic conditions, and this would have further negative effects in the short term.

On the positive side, on November 06, 2008, priceline.com Inc reported 3rd quarter 2008 earnings of $2.39 per share. This result exceeded the $2.10 consensus of the 14 analysts covering the company and exceeded last year's 3rd quarter results by 51.27%. (Market Data Companies Reserarch, 2008)

Priceline’s expansion in to Europe and Asia would protect the business from volatility on its home (US) market. Therefore it is also important to strike the right balance between organic growths in each of its operational economies as well drive market share through acquisitions.

Assuming the strategic and operational management checks and balances in core business areas are maintained and the major market space Priceline operates is not negatively affected by Global financial, political and security issues outside control of the Company, I believe Priceline will succeed in the long term.


3. How has Priceline and similar online services (provide an example) impacted the travel services industry?

Online travel services are continuing to have considerable impact in many segments of the travel industry, especially in the air travel.

Increased competition and low cost of air travel has opened up new markets for both the airline industry and consumers. Birth of ‘no-frills’ air travel concept, online ticket auctions, self serve reservations and reverse auctions (pioneered by Priceline Inc) have impacted on low cost travel for consumers.

Web based self serve phenomenon has developed especially for domestic travel needs. Consumers are provided with powerful Web tools to select their own travel schedules, prices and service levels.

Competition and demand of both domestic and international air travel has contributed to introduction of new budget carriers such as Jet Blue in USA, Tiger Airways in Asia and Virgin Blue in Australia and also has directly impacted on creating travel industry related jobs.

For the travel industry operators, the online services have opened up new avenues to dispose their rapidly ‘perishable’ inventory such as airline seats & hotel rooms. Online business models such as Hotel Club (www.hotelclub.com) and Last Minute (www.lastminute.com) provide worldwide hotel room booking services at discounted rates. Zuji (www.zuji.com) and Web Jet (www.webjet.com.au) offer international airfares, hotel rooms, cruises and car hire bookings all from a single web site.

I think it is also worth considering the impact that has had on the travel agents. Before the introduction of online booking services, all travel agents serviced domestic routes. Full service airline tickets are still sold by travel agents; however ‘no frills’ type tickets are usually not sold. Travel agents use IT systems developed by companies such as SITA (www.sita.aero) which connects to 'back end' booking systems of major full service airlines, allowing agents comprehensive access that is not available to consumers. However, with budget carriers, Travel Agents are not provided with such mechanism, rather use the standard interface available to consumers, making it unviable to sell tickets on budget carriers.

However, noticeably many travel agents are taking advantage of low fares and bundle them with exclusive accommodation offers, site seeing and other tourism related activities and continue to attract consumers.

There has been another major noticeable impact on customer services with introduction of Budget carriers selling their seats direct to consumers without middlemen. However ‘consumers beware’ policy applies with most ‘cheap’ fares. Airlines tend to slug consumers with significant charges (and sometimes forefeiting fares paid) when changes are required, such as route changes, change of flights or cancellations.

Airlines that sell tickets direct to consumer also enjoy better financial gain since consumers pay the airline prior to travel. Traditional booking systems involving travel agents may take up to 45 days for funds transaction.




4. Has Priceline’s business model changed since 2007? And if so how? Who are its strongest competitors? Is it profitable or operating at a loss?

Priceline’s business model has changed since 2007.

Emphasis has been focused on full service offering in the USA, growth through acquisitions in Europe and Asia while maintaining ‘lean’ operating costs including human resources.

Priceline recognised the decrease in growth in USA in 2007, and commenced building its brand in Europe. A growing European customer base allowed Priceline to lift guidance for 2007 and announce a tripled fourth-quarter profit. The strong quarter was heavily driven by Booking.com, Priceline's European business. The site's travel bookings increased of 101% from the previous year to $319.1 million. (Farrell, 2007)

In Asia, Priceline acquired Bangkok- and Singapore-based Agoda Company, an online travel company specializing in hotel discount bookings throughout Asia, in a transaction that includes an initial cash payment and a multi-year, performance-based earn-out. Priceline said it intends to retain Agoda's current management team, who will continue to manage Agoda's operations independently as part of priceline.com's international business. (Business Wire, 2007)

In the Asia Pacific region, Agoda offers hotel properties in Australia, China, Japan, India, Thailand, South Korea, Singapore, Indonesia, the Philippines, New Zealand and several other countries. In addition, Agoda offers hotels in Europe, the Americas, the Middle East and Africa. Agoda's services are offered in 12 languages. In addition to its transactional offerings, Agoda maintains a broad suite of content features, including customer hotel reviews, travel tips, journals and other user-generated content. (Business Wire, 2007)

Priceline’s strongest competitors are Expedia and Orbitz Worldwide, including Pricelines these three companies make the top three publically traded online travel agencies.

According to latest full context quarter ending 2008/2009, Expedia has recorded a gross profit margin of 83% while Orbitz Worldwide reported 80.7%. Operating income for Expedia has being in the ‘black’ for last four consecutive quarters while Orbitz Worldwide has reported a net loss in quarters 09/2008 and 03/2008. (Markets, 2008)

Based on currently available data, Expedia is currently operating on profitable grounds with operating income of $199 Mio while Orbitz Worldwide has reported a loss of $276 Mio.

Works Cited

Business Wire. (2007, November 9). Retrieved December 13, 2008, from Yahoo!: http://au.biz.yahoo.com/071108/43/1h9tf.html

Farrell, A. (2007, February 13). Priceline Capitalizes On European Wanderlust. Retrieved December 13, 2008, from Forbes.com: http://www.forbes.com/markets/2007/02/13/priceline-booking-travel-markets-equity-cx_af_0213markets06.html

Market Data Companies Reserarch. (2008, December 12). Retrieved December 13, 2008, from Financial Times: http://markets.ft.com/tearsheets/analysis.asp?s=US%3APCLN

Markets. (2008, December). Retrieved December 13, 2008, from Forbes.com: http://finapps.forbes.com/finapps/jsp/finance/compinfo/IncomeStatement.jsp?tkr=OWW&period=qtr