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In the early 1990s loyalty was shown to be one of the fundamental drivers of company profitability. It is no less applicable to the new e-commerce businesses. In the first of a two-part article the authors review the basic aspects of the loyalty effect. The second part will examine how e-loyalty is helping businesses at the cutting edge of e-commerce to succeed.
Loyalty versus chaos
Chaos seems to have got a leg up in its battle against 'order' and today's marketplace is reeling. The advantages of market share, cost position and service quality no longer guarantee success. General Motors, instead of reaping the spoils of market share leadership, is struggling to reverse its downward spiral. A low cost manufacturer like Caterpillar suddenly finds itself at a cost disadvantage in key markets. And a service quality 'Blue Chip' like Delta Airlines is downgraded to junk bond status. Companies such as Wang and IBM are profiled as case studies of 'Excellence' one day, then as management turnarounds the next.
The Baldrige Award is trumpeted on the front pages of US newspapers as the competitive saviour in the crusade to reassert America's 'Quality' leader-- ship. Then, a Baldrige winner files for bankruptcy and the award is hidden back on the fifth page of the Wall Street Journal. One day, market share and experience are the essential strategic assets; now, they are irrelevant compared to time, the new competitive frontier. Forget about 'Total Quality,' now all you have to do is re-engineer all your core business processes.
Business thinkers careen from guardrail to guardrail. One professor claims that strong leader-- ship is really the key; another concludes that empowered, learning organisations will triumph. Is it truly chaos? Is success really so complicated, transitory and fragile? Or is the business world rational? We just don't yet understand some of the natural forces which govern it.
From an evolutionary perspective, management science is still in its infancy. Today's large corporations are relatively recent descendants of the industrial revolution. Unlike well-evolved institutions which transcend the lifespan of their individual members, the average Fortune 500 company expires in 40 years. Most are outlived by the majority of their employees. The study of this struggle for survival is relatively immature since business...