Sothebys com_Group1.pptx
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Transcript of Sothebys com_Group1.pptx
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Group 1
Abhishek Singh(PGP/16/003)Anshuman Tigga(PGP/16/005)
Sudhanshu Shukla(PGP/16/052)Babita Pegu(PGP/16/136)
Harsh Bajpai(PGP/16/197)
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Sothebys - Introduction
Consignors SothebysBuyers
PropertyProperty
Hammerprice +buyers
premium
Hammerprice commissio
n/expenses
255 years in fine arts auction business
Reputation for selling important painting, jewels and antiques at record-
breaking prices
In 1985 sold Van Goghs Landscape with Rising Sun for $9.9 million
NY based and has major presence in 98 other cities
Others Divisions include Sothebys Financial Services, Sothebys Trusts and
Estates Services, Sothebys International Reality Group, Sothebys Appraisal
Services, Sothebys Insurance Brokerage Services, and Sothebys Restoration
Services
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ValueProposition
High-end auctioningof premier andvaluable items
Market orAudience
B2C & B2B, premier artsand antique items
Revenue ModelPremiums from bothconsignors and buyers.
Some percentage ofhammer price
CompetitiveEnvironmentMajor competition from
Christie
Value ChainLive and online fine artsauction which connects
consignor with buyers
RepresentationLive auction in a hall,
online auction throughits site and partner
amazon
OrganizationalStructure
Specialist, technical &operational executives
ManagementAn enriching experience
of 255 years in the finearts auction business
Business Model
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Live Auction ProcessSeller contacts Sothebys specialist
Authentication check
Market Value evaluation
Shipped to headquarters
Catalogue is made
Phone to Prospective buyers
Buyers could leave bidsLive auction
Buyer Pays immediately
Art transport department arranges shipping
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Online Auction ProcessFormation of network of dealers of fine arts , antiques
Dealers to sell only on either of Sothebys sites
Dealers make catalogues
Material Handling costs borne by dealers
Dealers paid no sellers premium
Auction lasts for two weeks on sites
All lots kept in warehoused leased spaces
Each lot was catalogued and managers decided on which site to sell
Pick up list was generated
Outsourced shipper was responsible for packing and shipping
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Challenges in migrating to new ways doing the
business
Transparency & fairness in online auction process(increments in bidprice)
The approximate cost per interaction is US $10, indicating that customer-support costs increased considerably as a result of the Internet strategy.
Change in business model &value proposition
Technology constraints- limitations of customers hardware & software
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Physical Lots for virtual Auction-Drawbacks &
limitations
For live auctions lots were not photographed & Sothebys chargessellers for the photography services while in virtual auction every
item is digitally photographed at no charge to the seller.
Materials handling costs increase for these lots consigned toSothebys and sold on the website.
Managers and observers agree that logistics requirements (costs andoperational complexity) for the auctions themselves and for shippingpurchased lots increase as a result of taking auctions online
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Dealer (Associate) lotsan improved strategy for
virtual auctions
Sothebys would act as information managers and a branded outlet rather thanphysically handling goods.
When Associates sell on the website, Sothebys.com never touches their goodsand thus incurs virtually no variable costs. The Associates are responsible forinventorying, cataloguing, provision of shipping estimates, packaging, andshipping. Material handling costs are borne by Associates
By creating the Associates network, Sothebys.com has transformed itself from afirm with extremely low scalability occupying the far right of the scalabilitycontinuum, to a business that is information-intensive, occupying a position onthe far left of the continuum.
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High Low
Information Commodities withStandard Handlingissues(Books)
Unique & Awkward(Paintings, antiques)
Unique withStandard Handlingissues (AirlineTickets)
Scalability Continuum
Sothebys.com illustrates both extremes of the scalability continuum, a framework that
shows what effect the need for non-information elements of service, such as customer
support and logistics, has on the economics of a firm engaged in e-commerce.
Sothebys.com is an organization that suffers from the diseconomies of scale caused bythe logistical and customer-support requirements of auctioning goods it provides online,
and benefits from the economies of scale generated by auctioning goods associates
provide online.
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Profiling E-operations
Profiling method draws on the product profiling procedure
developed by Terry Hill for use in operations strategyanalysis
Profiling provides a quick, visual means of capturing key
operational differences between traditional and e-commerce methods and decide whether E-commerce modelis scalable or not.
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Profiling E-operations
Self-sourcing-Degree to which an organization can encourageits customers to do some of the work of providing a
product/service for themselves
Utilizing the Internet to sell items that would sell for less thanUS$ 10,000 does not help Sothebys since these items are nothigh margin items and the costs of the employees that evaluate,catalog and handle items is very high due to their unique skills.
In contrast, by developing an alternative model whereinAssociates auction off items on a virtual basis, Sothebysswitches much of this work to its Associates, who in effect
become its customers.
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Profiling E-operations
Using Associates as sales agents also greatly improves shipping
aspects and accountability/legality issues
Using Associates to virtually sell items but physically handle
them, the difficulty and responsibility for handling these bulky
and fragile items becomes their responsibility
Facilities costs can be greatly reduced for some businesses
when business is conducted online because of the ability to
reduce or remove physical interfaces with customers
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Profiling E-operations
Job specialization: Businesses can greater differentiate andspecialize their workforce because of the dis-intermediationeffect of not requiring real-time, face-to-face interaction with
customers
Scheduling becomes easier because employees can be matchedwith aggregated demand rather than dealing with widefluctuations in demand at individual locations
Inventory can be centralized at few distribution centers ratherthan holding inventory at numerous distinct locations
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FacilitiesCost
Self Sourcing
Accountability/Legality
Job Specialization GeneralPurpose
Scheduling
Inventory
InformationIntensity
Shipping
Communication Barriers
High
High
Low
Low
Bulky/Fragil
e Products
Virtual
Products
Low High
Decentralized
Centralized
SteadyDemand FluctuatingDemand
Specialized
Low High
Visible/High Cost
Virtual/Low Cost
Traditional methodsSuperior
E-Commercemethods Superior
Scalability Low High
Sothebys Preliminary E commerce model
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FacilitiesCost
Self Sourcing
Accountability/Legality
Job Specialization GeneralPurpose
Scheduling
Inventory
InformationIntensity
Shipping
Communication Barriers
High
High
Low
Low
Bulky/Fragil
e Products
Virtual
Products
Low High
Decentralized
Centralized
SteadyDemand FluctuatingDemand
Specialized
Low High
Visible/High Cost
Virtual/Low Cost
Traditional methodsSuperior
E-Commercemethods Superior
Scalability Low High
Sothebys Associates Virtual Auction model
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Scalability success factorsOrganizations with information-intensive services will benefit from takingthem to the web completely; while businesses delivering services with highcustomer support and logistics needs may see their costs rise when they put
them online.
Sothebys has found a way to create a new value proposition that, whilerelated to its traditional offering, is inherently more information-intensive.
Sothebys should consider its capabilities before taking the business tointernet. The capabilities should be such that they serve as capabilities inonline business.(Sothebys capability Specialists)
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References E-services: operating strategya case study and a
method for analyzing operational benefits: Kenneth K.Boyer a, Roger Hallowell, Aleda V. Roth
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Thank You