question 1. Why did ECD get such a competitive advantage from the MaxService system?

2 3 5 Book pages 144-146 Case 2: Electrical Component Distributors "Information Systems are at the heart of our success," said John Smith, chairman and chief executive officer of Electrical Components Distributors (ECD) in early 1985, describing the importance of infor-mation systems to the company. ECD had 1984 sales of $1.5 billion and net earnings of $100 million. Virtually all of the electrical device manufacturers in the United States bought at least some of their supplies from ECD's list of over 100,000 products. Most of these manufacturers entered their orders through ECD's online purchasing system, Max Service. However, by the late 1990s, ECD had fallen on hard times. Its proprietary Max Service system had changed from competitive advantage to a competitive "albatross around their necks." Company Background and Strategy ECD faced competition from other component distributors and from hundreds of local and regional distributors. ECD recognizing the high level of rivalry in the field also recognized that many of its products were commodities that could be provided by other companies. It was easy to enter the mar-ket but there weren't many substitute products. Buyers thus had power to set the price. If they didn't like the price ECD provided, they could go to one of their competitors. For many of the generic products such as solder and wire, there were many competitors and ECD could competitively shop for those but for the specialty goods, ECD was constrained to work with few or one company for those. ECD therefore chose to be a differentiation competitor across the marketplace for electrical components. ECD differentiated itself on high levels of service such as product availability and quick shipping, nationwide coverage, wide range of products, and the local presence provided by its large field sales force. The company's employees tended to be relatively young and well-educated. ECD's culture was characterized by promotion from within a willingness to take risks, and a strong emphasis on ethical behavior. The Role of the MaxService Order Entry System Traditionally, ECD's products had been sold by its field salespeople, who worked from their homes and called directly on their customer. Until the mid-1970s, orders were generally taken in person by the salesperson, who would then mail the orders to company headquarters. The paperwork could be formidable: a large manufacturer could easily stock 20,000 items and generate 40,000 purchase orders per year at an estimated cost of $25 each. The price of each item was negotiated by the customer and the sales representative, making billing a complex process, Max Service, which went into pilot use in December of 1974, promised to be a revolution in the industry. Customers could build and edit order files on an IBM 3270 terminal. This terminal