Due to poor financial performance, EasyInternetCafe has decided divert from large cafes to a franchise model with smaller cafe sizes. Its main goal is also to focus on its core competencies such as the yield management model. In order to do so, it will be outsourcing its non-core competence activities which include logistics. Ingram Micro has been chosen as the logistics provider as they offer more full service activities while remaining at a lower cost than its competitors. By including Ingram Micro in corporate decisions and meetings, EIC can keep Ingram Micro accountable and stay updated with issues as they arise (just as they would if they owned the logistics arm of the Company). By having the capital freed from investing in hardware and stores, EIC is able to invest more in creating value through their management of franchisees and their yield management model.
EasyInternetCafe (EIC) was launched in 1999 under the umbrella of the EasyGroup. Their mission is to provide customers with internet access at low costs and to capitalize on the tech boom. Despite the excellent support and recognition from the public, EIC is experiencing adversity of keeping their business profitable after the “dot-com” bubble burst.
Their business plan of owning many large cafes that could house 250-500 PC terminals at each cafe is not working. They have decided to restructure their business by downsizing the cafes. They propose to do this by using the franchise business model. These franchised stores will be smaller and house 20-30 PC terminals and only need staff for basic maintenance. EIC believes that by being less involved with the operations of the stores, they can focus on their core competence and outsource all non-core activities. Their core competence is their yield management model associated with the “Easy” brand. EIC’s goal was to open 10 stores per week over the next 2-3 years. In order to achieve this, a…