1. GUEST SPEAKER
Thursday, March 6
Emilio Collar
IBM Global Services
Topic: “The E-Transformation at IBM”

2. Where are we now? - STRATEGIC IMPACT OF IT
- MANAGING IN THE MARKETSPACE
- IDENTIFYING OPPORTUNITIES/
CREATING VALUE
- EMERGING INTERNET MODELS
- BUSINESS TRANSFORMATION
- INTERNATIONAL ISSUES OF E-COMMERCE

3. What are auctions?
An auction is “a market institution with an explicit set of rules determining resource allocation and prices on the basis of bids from the market participants.”
McAfee & McMillan

4. Auction Characteristics
Auctions restrict the bargaining to a single dimension, price.
(Relatively easy for a software agent to manipulate).
Item for sale is displayed, and the bidders may usually inspect it to gather its specifications.
Items sold by auction are usually sold “as is,” (avoid need to trade off different variables).
The strategy resolved from the seller’s standpoint.

5. Auctions
Bids submitted in written form with no knowledge of bids of others. Winner pays the exact amount he bid.
First-price, sealed bid. When multiple items are being auctions.
Seller announces very high opening bid. Bid is lowered progressively until demand rises to match supply.
Dutch, or
descending-price.
Open.
Seller announces reserve price or low opening bid.
Bidding increases progressively until demand falls.
Winning bidder pays highest valuation. Bidder may re-assess evaluation during auction.
English, or
ascending-price.

7. Auction Characteristics of Onsale
English/first-price hybrid
Multi-item auction
Differential pricing
Simultaneous and sequential elements
No royalties

8. Differences from a retail mkt.
In traditional retail
Company sets a price and quantity varies
The greater the demand the better
Buying is a chore – part of transaction cost
Price is a black box
Retailers control margins
In Onsale’s case
Company sets a quantity, price varies
Huge demand can backfire
Winning is fun – buying experience is part of the company’s value proposition
Explicit price validation
Buyers control margins

9. Differences with AtCost model
In traditional retail
Company positions itself as a supplier partner
Company takes advantage of its ability to move products through the channel
Company hides information from buyers in order to extract higher margins
Company spends advertising dollars in order to move products
In Onsale’s case
Company positions itself as a buyer partner
Company takes advantage of its ability to move information through the channel
The company divulges information, and makes this part of its value proposition
Company sells products in order to move advertising

10. Follow-Up Sep 99 Revenue Jan-Sep $242.4M (up from $148.8M in1998)
People registered M
Nov Merged with Egghead.com (Egghead.com shareholders own
about 47%; Onsale founders own about 27%.
March 29, 2000
Rated#1 Online Consumer Electronics by Nielsen/NetRatings
PC Data Online, rated top web retailer of tech products in US
Rated#1 Ease-of-Use Buying Services by Gomez.com

11. THE ONSALE CASE STUDY WERE:
THE PRIMARY OBJECTIVES OF
THE ONSALE CASE STUDY WERE:
1. To explore the role of “informediaries” on the Internet. Onsale is
an “information broker” (facilitates information exchange not only
from supplier-to-customer, but also from customer-to-customer.
2. The AtCost model illustrate how OnSale is using information to change
the power dynamics between buyer and seller. (It is reversing the
traditional channel incentive structure, and make its value proposition).
3. The auction model illustrate new forms of electronic promotion and
and their role in marketing.
4. The case illustrate the fluidity of Internet business models, and the
extent to which the Internet is inverting traditional marketing logic.

12. Other Interesting References
“Cost Transparency: The Net’s Real Threat to Prices
and Brands” by Indrajit Sinha, HBR, March-April 2000.
“How to Fight a Price War” by AR. Rao, M.E. Bergen,
and S. Davis, HBR, March-April 2000.