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CASE 9-2: Stockholder Jimmy Lai Chee-Ying is a Chinese entrepreneur who wanted to take on two commercial giants in Hong Kong. He started a new business called AdMart, which used the Internet as well as telephones and fax to take orders for grocery products. The orders were to be filled in eight warehouses located throughout the city and delivered in one of 220 vans to customers’ homes. The giants he was challenging were two supermarket chains that controlled over 60 percent of the grocery business in Hong Kong. Lai believed his business could be successful for two reasons. He offered a very limited selection of products. He carefully studied customer needs and sold only the products they bought frequently and in larger quantities, such as soda pop, juice, canned goods, and baby diapers. He also selected products that he could offer for prices as much as 40 percent lower than those of the big supermarkets. He also sold computers. Why? Every home needs a computer, and if consumers own a computer, they are more likely to purchase over the Internet. Some business experts said he couldn’t succeed. They thought that people wouldn’t be willing to buy most of their groceries in a store and then order a few online. Others felt the larger stores would cut their prices and drive Lai out of business. But Jimmy Lai looked at it differently. All customers like to save money, and they like the convenience of home delivery. Lai thought that as he became more successful online, he could add more products. He felt that because the two chains were so large, they would hardly notice the trade lost to his new e-business.

 THINK CRITICALLY 1. Do you believe it was a good idea for Jimmy Lai Chee-Ying to start a new business that competes with two very large businesses that control most of the grocery market in Hong Kong? Justify your answer. 2. Discuss the advantages and disadvantages of Lai’s strategy of selling a very limited number of popular products. What do you think of his idea of selling computers? 3. Why is the new e-business able to sell products at much lower prices than the larger chains can? Do you believe the large businesses will drop their prices on the products Lai sells? Why or why not? 4. Identify another new Internet business that is competing with much larger traditional businesses. What is the business doing to encourage customers to switch from the larger business to the new e-business? 5. Use the Internet to research AdMart in Hong Kong. Report on the status of the AdMart venture. Identify what went right and what went wrong. Explain how this example could help other e-commerce entrepreneurs.


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