Strengths of the new business model of Me-online

1) Order Driven approach Instead of keeping high level inventories, Implementation of Me-Online allowed order driven Business; this
helped in taking care of irregular demands
Procurement-inspection & examination-distribution of products can be done immediately with close monitoring
of product orders
2) Low Operation Cost Reduced distance between the manufacturing units and the customers through IT; reduced uncertainties of
logistics
Low level of inventories and accelerated circulation of products resulted in saving of millions of dollars
This resulted in ease in expansion i.e., up to 200 sites by 05
3) New Business Model Large syndicate with enterprise in the upper and lower Supply/Distribution chain
Strong Consumer base
While expanding, streamlining the logistics with the IT processing
New revenue streams- discounts, membership charges
Closer cooperation between upper and lower chain entities

SHMECs Traditional Business Model

Maintained a large inventory of products with different specifications
to offer a wide range to customers
Sales staff had the authority to offer credit while striking a sale with
customers
This offered huge benefits to the customers as they could negotiate
with the sales staff and acquire the products on credit
The model focused on building relationships with its customers
Although in offering these values SHMEC was incurring huge losses
but it was continuing to do so to maintain the relationships with its
customers

Disadvantages of SHMECs traditional

business model
Big risk of inventory with huge losses Due to greater supply of
equipment than demand, the company had an inventory loss of
around of Rmb 100 million
Lack of effectiveness and high bad debts sales staff grabted
unlimited credit which created a loss close to Rmb 100 million
Poor information dissemination due to monopoly of business staff,
information flow was slow and delayed the companys response to
customers and suppliers
Slow response to market the company could not keep pace with
rapid changes in the market

Sustainability of ME-online
SHMEC had a large and established customer base
They had a stable syndicate with enterprises in the upper and the lower
chain
SHMEC paid attention to the continuous expansion of its franchise. In
second phase, they were looking at developing appropriate human
resources
Also, by chain business, the company could realize extension at a low cost,
establish distribution networks rapidly and operate at a larger scale
The model was built on the principles of differentiation and core
competency which are difficult to replicate