The E-Commerce Wars: Open Market, Inc. Case Study
Situation
Open Market Inc., founded in 1994 by David Gifford and Shikhar Ghosh, was a company that planned on developing an online shopping mall where shoppers would pay a membership fee for access to the “mall”. The merchants who were members would buy Open Market software and pay a small fee for every online transaction. After the first fiscal year, the total sales of all the merchants were very low in comparison to projections. Open Market then decided to focus on producing custom developed e-commerce applications which cost between $250,000 to $1,000,000 dollars. In 1995, Gary Eichorn joined Open Market Inc. as the new President and CEO. After Eichorn joined, Open Market began broadening their target market and product lines in order to attract more merchants. In 1996, Open Market introduced Transact at a price of $250,000 and was receiving favorable reviews. Soon after, Merchant Solution was another product that was created for smaller merchants and was priced at $20,000, although this was a good idea, the product did not sell and was discontinued. Open Market came to the realization that they must either acquire companies that have had success with small merchant store fronts or they have to develop a new system that was more cost-effective for these merchants. From here, Open Market began integrating their two strategies in order to acquire the smaller companies, integrate them with Open Market’s software, and to partner with a company who could handle mass distribution for the Folio line.
Problem Statement
Although Open Market was experienced strong growth, especially in the second quarter of 1999, they were running low on their cash reserves. They needed to figure out how to use products, acquisitions, alliances, and partnerships to increase merchant market share and create a growth plan. There is also a lack of clear strategic focus, on one end you have complex, developed systems for large merchants, and on the other you have quick, easy, inexpensive
Open Market Inc., founded in 1994 by David Gifford and Shikhar Ghosh, was a company that planned on developing an online shopping mall where shoppers would pay a membership fee for access to the “mall”. The merchants who were members would buy Open Market software and pay a small fee for every online transaction. After the first fiscal year, the total sales of all the merchants were very low in comparison to projections. Open Market then decided to focus on producing custom developed e-commerce applications which cost between $250,000 to $1,000,000 dollars. In 1995, Gary Eichorn joined Open Market Inc. as the new President and CEO. After Eichorn joined, Open Market began broadening their target market and product lines in order to attract more merchants. In 1996, Open Market introduced Transact at a price of $250,000 and was receiving favorable reviews. Soon after, Merchant Solution was another product that was created for smaller merchants and was priced at $20,000, although this was a good idea, the product did not sell and was discontinued. Open Market came to the realization that they must either acquire companies that have had success with small merchant store fronts or they have to develop a new system that was more cost-effective for these merchants. From here, Open Market began integrating their two strategies in order to acquire the smaller companies, integrate them with Open Market’s software, and to partner with a company who could handle mass distribution for the Folio line.
Problem Statement
Although Open Market was experienced strong growth, especially in the second quarter of 1999, they were running low on their cash reserves. They needed to figure out how to use products, acquisitions, alliances, and partnerships to increase merchant market share and create a growth plan. There is also a lack of clear strategic focus, on one end you have complex, developed systems for large merchants, and on the other you have quick, easy, inexpensive