Egghead Software

Situational Analysis

Overview

Egghead Software is in its twenty-first year of existence, beginning as a retailer for computer software products. Realizing the booming growth of e-commerce, it moved its business to the internet, transforming to Egghead.com in 1998. Egghead.com's focus is on selling refurbished computer hardware and software, as well as new products to small and medium sized businesses. Egghead's competitive advantage is the choice it allows for consumers to purchase computer products at a flat price, or in an online auction. In 1999, Egghead.com realized over $5 000 000 (U.S.) in year-end sales. The current issue that Egghead management is facing is how to deal with customer backlash, and continue to build consumer confidence after a security breach.

SWOT Analysis

Egghead.com has the following strengths that will help Joanna Hartzell to face this security problem:

‚ Brand recognition is a strength of Egghead.com as a strong name will attract more customers.

‚ A wide range of original products and services. This is a strength since a unique product creates brand loyalty, and makes it more difficult for competitors to create their own version.

‚ Low prices and leading technology are strengths of Egghead.com because they practically eliminate competition by creating high quality products and services and offering them at a very reasonable price.

Also, Egghead.com had the following weaknesses that can make the situation more difficult for the company:

‚ Their large customer base is a weakness of Egghead.com since the large number of customers is exceeding the company's capacity. Egghead.com is unable to provide the protection needed for their customer's personal information.

‚ A deficient security system is another weakness of Egghead.com because they did not take the necessary measures to defend their customers against hackers. The e-business sector only existed with a basic internet proxy server firewall, which is not sufficient when dealing with a large number of customers and visitors from this web site.

‚ The system of payment of Egghead.com is a weakness of the company because the only form of payment for Egghead customers is credit cards. This is very risky to use due to the fact that hackers target credit card numbers to commit on-line frauds.

Apart from the internal situation of Egghead.com, the business can take advantage of the following opportunities:

‚ The creation of physical locations rather than internet websites for selling Egghead's products and services is an opportunity for the business because Egghead.com has previous experience in physical location-based business. The addition of physical stores can tap into a greater market, as well as reduce the costs of shipping and warehousing.

‚ Forming a partnership with banks or financial institutions. This is an opportunity for Egghead.com to create a new form of payment, such as chequeing or Paypal, for internet purchases, which will be safer and more efficient to use rather than credit cards.

‚ Associating with businesses specialized in security software is an opportunity for Egghead.com as it will have the opportunity to develop a new software that will satisfy the protection needs of other e-business. Also, it will expand its target market and contribute to the future expansion of the company.

Even though Egghead.com has many opportunities, there are some foreseeable threats:

‚ Malicious hackers are a threat for Egghead.com since they are persons who use programming skills to gain illegal access to a computer network or file, with the intent of stealing financial information from the company or its clients to commit fraud or other criminal activities.

‚ The increasing competition from other companies is a threat for Egghead.com. Now new customers will be hesitant to use the internet to buy its products due to this security problem. Rival companies will jump in to gain more clients and to annex a larger share of the market.

‚ The limitation of the internet. This is a threat for Egghead.com since many small or middle businesses in third world countries do not have the resources or do not use the internet for daily operations and, thus, reduces the potential customer base for the future.

Problem Identification

The critical decision that Egghead is presented with is in how to deal with customer backlash, and re-establish trust and a sense of security among Egghead customers. The most significant cause of the problem faced is arrogance on Egghead's part. They believed that their site would not fall victim to the attack of a hacker. Another cause of the problem at hand is competitive pricing wars. Egghead did not want to increase expenses on security in order to price-compete with competitors. Lastly, over-growth of the company may have caused this breach of security. The company became too large to be able to deal with security effectively. The problem at focus is crucial to Egghead because they may loose a large portion of their customer base if this situation is not dealt with correctly, possibly leading to substantial financial losses. This problem requires a response within twenty four hours because the public must know what happened, and what is being done to remedy the situation, in order to maintain consumer confidence.

Alternative Identification

Currently, Egghead.com is deciding how it should present its situation to the media and to best regain customer confidence. Various alternatives exist that could be a viable solution to the complex problem.

1. Install a new method of payment that does not require internet applications such as mailing cheques. This will allow those customers that are weary of internet transactions to still do business with Egghead.

2. Since the Egghead logo is well known throughout the internet, creating a new logo for the internet operations will hopefully encourage customers to forget the old logo that was associated with a large business mistake and see the new logo as a new beginning.

3. Put a larger concentration of resources back into stores. Since 74% of customers are weary of financial internet transactions, Egghead may lose many of their customers. Opening more stores will allow Egghead to continue business without any loss to client base.

4. Taking advance security measures such as hiring a team of expert