CASE 1

Electronic Commerce in Hong Kong:

Gold Peak Industries (Holdings) Limited

A. Present Stage

Company Background

Gold Peak Group is an Asian multinational group which owns a diversified portfolio of industrial investment via its major industrial investment vehicle, the Singapore-listed GP Industries Limited. Its Technology and Strategic Division is engaged in the development of new product technologies and business-to-business e-commerce. The parent company, Gold Peak Industries (Holdings) Limited, was established in 1964 and listed in Hong Kong in 1984. The Group's three major member companies, GP Industries Limited (formerly known as GPE Industries Limited), GP Batteries International Limited and Clipsal Industries (Holdings) Limited, were listed in Singapore in 1995, 1991 and 1992 respectively.

Gold Peak Group has manufacturing, research and development, marketing and distribution operations in more than ten countries around the world. The Group, together with all of its divisions, had a turnover amounting to HK$ 4.5 billion and total assets exceeding HK$ 7 billion in 1999/2000. There are now 13,000 people working at the Group's various divisions.

The Group has formed two new subsidiaries, GP Technologies Limited and GP eBiz Limited, under its Technology and Strategic Division. While GP Technologies will invest in the development of new product technologies, GP eBiz will act as the main vehicle for the Group's e-commerce investments.

Sales and Marketing

Gold Peak Group and the three listed member companies have each established their own web site, namely www.goldpeak. com, www.gp-industries.com, www.gpbatteries.com.sg and www.clipsal.com.sg. The companies are all IT advocates and have extensively exploited the latest IT in their business operations. However, each has its own IT strategy matching its specific business needs and uniqueness of products and services.

Take GPE, a subsidiary of GP Industries, as an example. It had its first finance and accounting system running on IBM minicomputer system in 1982. Five years later, GPE began to develop the manufacturing resources planning (MRP) system that was implemented company-wide in 1989. A subsequent upgrade of the system turned it into an integrated manufacturing system in 1992, which handles transactions from receiving orders to shipment and finance. In relation to e-commerce development, GPE has developed a B2B business model via www.gpe-hkg.com in 1998 to complement its traditional business operation and provide round-the-clock services to global customers.

A dedicated B2B platform, www.gpe-hkg.com allows authorized customers to access the manufacturing system of GPE. The information available to customers includes sales, account summary, production status and shipment, and general information like company profile and product catalogue. In addition, communication with the company's personnel and product quality management is also made possible through this web-based channel. Most of the customers have no difficulty in using the web site. However, some customers who have their own web based e-commerce systems expressed that they would rather have GPE login their web sites and directly input the transaction data into their systems, thereby saving the time on re-keying the data. Currently, GPE is investigating a system for computer to computer data exchange based on EDI (Electronic Data Interchange).

Initially, www.gpe-hkg.com was used to conduct business transactions with the subsidiary company in the United Kingdom. New users are added to the system on a systematic basis. Currently, about 20% of the customers are using the system on a trial basis. The value-added information and round-the- clock services provided at the web site, such as account summary and shipment tracking, is expected to attract more customers. Another incentive to use the site comes from the "trouble-free" transaction process, in which all procedures are carried out via the system, making it unnecessary to issue purchasing documents and follow-up telephone calls. Anticipated to grow significantly in 2001, the user base of the system will further expand when it is made available to distributors in China upon the completion of a pilot run.

In May 2000, Gold Peak Group formed EEi-X.com under GP eBiz as an online exchange platform for the electronics and electrical industries. The site was then merged one month later with SUNeVision Holdings Limited's AsianE2E.com, another B2B electronics e-marketplace. As another e-business model of Gold Peak Group, AsianE2E.com provides end-to-end services from search, negotiation, payment, inspection to delivery from anywhere in the world. Members of the exchange platform include manufacturers, suppliers and purchasers in the industries, covering the complete supply chain, from raw materials, components, parts, finished products to equipment.

As public concerns over the security of electronic transactions have not all been addressed, the B2C business model is not the current focus of GPE. It has nevertheless lined up with some auction and shopping portals to sell its products online. Though the business volume at these portals is very small compared with that generated by B2B transactions, the B2C model helps to promote the company and its brands. Successful cases can be found in the United States, where distributors such as HiFi.com (a distributor of electronic home entertainment products in Boston) produced online sales volume that represented a very significant portion of their company's total sales.

GPE employs the electronic platform for staff training. The subsidiary company in the United Kingdom has developed a bilingual (English/German) cyber training course for its sales representatives. Those who have attended the training and passed the online examination are registered and awarded a certificate and a souvenir. Providing quality training to its sales staff around the world is regarded very important as the Group seeks to grab a bigger share of the global market.

External and Internal Communication

In 1998, GPE began to carry out its "paperless office" policy vigorously. All transactions and documents including petty cash claims and leave applications are posted online and processed by computers. At the same time, the introduction of the Wide Area Network (WAN) has enabled the Hong Kong office, the subsidiary company in the United Kingdom and the plants in Mainland China to exchange information efficiently. For instance, management can access data from the manufacturing system stored at the Hong Kong office from China or the United Kingdom, and vice versa. The staff of GPE can access the company's Lotus Notes through the Internet. Besides, e-mail and video conferencing are also used for communication among group companies. System designs are standardized to allow remote login and inter-company information exchange.

Technology Deployment and Source of Technology

For the purpose of information security, GPE has made use of firewall, smart card technology and PKI (Public Key Infrastructure) applications. The security system incorporating 128-bit encryption is running on Linux. The web server is hosted in-house and is linked up by a 512K leased line.

GPE has developed its e-commerce system in-house. Systems and technologies already available were customized, as far as possible. Currently, the development team comprises 14 staff members based in Hong Kong plus some others located in its office in Shenzhen and other factories in China. Four staff members in Hong Kong supported by staff in China are dedicated to the development of e-commerce platform. There is also an in-house training team that trains staff on IT skills and e-business applications.

B. Experience Sharing

Problems Encountered

Shortage of manpower is the major obstacle GPE faces in developing e-business. Recruiting a programmer who is IT literate and at the same time knows the industry well is extremely difficult.

Another problem that the company noted is the lack of a robust infrastructure for finance and technology in Hong Kong, which explains why the territory lags far behind the United States and Europe in e-business adoption. The existing banking services in Hong Kong are not comprehensive enough to facilitate customers to conduct online trading. For instance, SWIFT transfer and wired bank access are not widely available in Hong Kong. Furthermore, the lack of a maximum liabilities for unauthorized credit card transactions also inhibits the development of local B2C businesses. The current maximum liabilities in the United States and United Kingdom are US$50 and GBP50 respectively.

Time and efforts had also been wasted when GPE developed the payment gateway. The e-commerce system was initially designed with e-payment feature. However, because some technical problems could not be resolved, the bank that initially participated in the development decided to scrap the online payment several months soon after development started.

Benefits

Apart from the increased efficiency and effectiveness in adopting the latest IT and e-commerce in business operations, GPE has benefited from a more sophisticated image portrayed as one providing quality, value-added and reliable services, competitive but yet not necessarily at the lowest price. Going online also helps the company foster long-term relationships with its business partners.

The e-commerce sites serve as an effective marketing tool. Through demonstrations, customers are introduced to the e-business initiatives of the company and the services available at its web sites.

C. Future Plans

The online platform, www.gpe-hkg.com in which GPE has invested more than HK$2 million, has been launched already to all existing customers and then to the distributors of audio products (Celestion and KEF speakers) around the world. In the meantime, translation of the site into Chinese is in progress, paving the way for extensive use by distributors in China.

GPE is not targeting to be the technology leader in the industry. Rather, it views IT and e-commerce as a tool and a facilitator for the company to gain competitive edge, to provide value-added services and to achieve the ultimate goal of securing more profits.

GPE does not have any specific plans for e-commerce. However, the exploitation of the latest technology in facilitating business operation is always one of its business strategies.

Your mission, if you accept, is to analyze this case and make appropriate recommendations in terms of technology, business strategies of Ecommerce, etc.