Class 10

In this session, analyze the business model of Webvan in some detail.  Read the case "Webvan: The New and Improved Milkman" and prepare the study questions below.  Work on this assignment in your study group and hand in your answers to questions 2-4 (only) as a Word file with your qualitative analysis and an excel file containing your model and sensitivity analyses.

1. What value discipline(s) characterize(s) Webvan? Compare to the traditional supermarket offering and to Peapod in the mid-nineties.  
2. Based on the data in the case, analyze the viability and profitability of Webvan's business. First take the perspective of Webvan's operations manager in the San Francisco Bay Area. Assume that Webvan's systems, business processes and customers already exist and the company operates in the San Francisco Bay area as described in the case. Build a spreadsheet that summarizes the operations of the San Francisco Bay Area (Oakland) DC over a single quarter.  Use the performance characteristics in Exhibit 4 and apply numbers of orders etc. from the fourth quarter of 2000, as described in the case.  Assume that the software needed to operate the system already exists and all customers have already been acquired.  Exercise your spreadsheet model to identify the key drivers of profitability for Webvan. 
3. Based on your spreadsheet model, what are the key drivers of profitability for Webvan at the DC level? 
4. Based on your analysis, what specific steps could Webvan take to increase the profitability of its San Francisco Bay Area operations? Be as specific as you can. 
5. So far, you have taken the perspective of the San Francisco Bay Area operations manager. Now take the perspective of Webvan's CEO. How does that change your answer?