'LJL7D/ 0(',$ 0JPW Digital Strategies tisdag den 29 september 2009

Transcription

1 Digital Strategies

2 The beginning of the end Today - Internet & Strategy Tuesday 29th - Management and ethics Wednesday (30th) - Seminar presentations Next Wednesday (7th)- Seminar presentations Thursday (8th) - Project Management & Outsourcing Monday (12th) - Things we missed (if any) Thursday 15th - Last lecture, summing up & administratrivia

3 Today s lecture Partially based on Michael Porter s Strategy and the Internet, Harvard Business Review, Vol. 79., No. 3, March 2001 On Internet, Strategy and Marketing

4 What is the Internet? An industry? E-business strategy? New economy? Dot.com/Web2.0 revolution? Social institution?

5 In a Sense All of the Above

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7 In a Sense All of the Above

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12 In a Sense All of the Above

13 Internet, According to Porter An enabling technology A powerful set of tools that can be used wisely or unwisely Almost any industry, almost any strategy

14 Economic value and the internet Uses of the Internet (digital marketplaces, selling mobile phones, trading antiques) Internet technologies (search engines, website tools, real-time information)

15 Competitive forces

16 Internet and Industry Structure Some new industries (on-line auctions, digital marketplaces) Reconfigured old industries (distance learning, production distribution, oneto-one marketing, employment markets)

17 Competitive forces Intensity of rivalry among competitors barriers to entry threat of substitutes products or services bargaining power of suppliers bargaining power of buyers

18 Competitive forces Varies from industry to industry Each industry is affected by internet in different ways Industry and customer analysis still useful

19 Bargaining Power of Suppliers E-procurement increases power over suppliers Provides channel for supplier to reach end-users, increased competition Equalizes access to markets, may affect standardization of procurement, distribution Reduces barriers to entry for suppliers,

20 Bargaining Power of Suppliers

21 Bargaining Power of Suppliers E-procurement increases power over suppliers Provides channel for supplier to reach end-users, increased competition Equalizes access to markets, may affect standardization of procurement, distribution Reduces barriers to entry for suppliers,

22 Bargaining Power of Suppliers E-procurement increases power over suppliers Provides channel for supplier to reach end-users, increased competition Equalizes access to markets, may affect standardization of procurement, distribution Reduces barriers to entry for suppliers,

23 Bargaining Power of Buyers Potentially shifts power to end consumers Reduces switching costs

24 Bargaining Power of Buyers

25 Rivalry Reduces differences among competitors, shifts competitive strategy, more information about strategy, goods, and prices is available online Expands geographic market potential (increasing competition) Lowers variable cost relative to fixed cost, increasing price concerns

26 Rivalry

27 Barriers to entry Reduces barriers like salesforce, channel access, physical assets, and other components affected by the internet Internet applications are difficult to keep proprietary Increased number of new entrants

28 'LJL7D/ Barriers to entry 0(',$ 0JPW Reduces barriers like salesforce, channel access, physical assets, and other components affected by the internet Internet applications are difficult to keep proprietary Increased number of new entrants

29 Substitution Expanding market due to efficiency Internet makes possible novel threats (long distance telephones, market research, auctions, employment recruiting)

30 Substitution

31 Internet Competitive Advantage

32 Internet Competitive Advantage Operational effectiveness information exchange across value chain

33 Internet Competitive Advantage Operational effectiveness information exchange across value chain Open platform, common standards, beneficial information technology

34 Internet Competitive Advantage Operational effectiveness information exchange across value chain Open platform, common standards, beneficial information technology

35 Internet Competitive Advantage Operational effectiveness information exchange across value chain Open platform, common standards, beneficial information technology But - ease of imitation, ease of implementation, lower barriers

36 Internet Competitive Advantage Operational effectiveness information exchange across value chain Open platform, common standards, beneficial information technology But - ease of imitation, ease of implementation, lower barriers (Unclear relationships with quality)

37 Internet Strategic Positioning Distinction, Unique, Customer Value Focus Integrated value chain articulated, highlighted, known Core benefits Brilliant execution

38 Porter s Approach to Strategic Positioning The right goal superior long-term return on investment Generation of economic value Don ts: define goals in terms of volume, market share, perceived investor desire

39 Internet Complementarity Internet will not replace traditional business Existing businesses, including channels, have embraced net, replicating bricks and mortar structure Customer relationships Example : Music business

40 The Internet and the Value Chain Set of activities through which a product or service is created and delivered to the customer A framework for identifying all activities from hiring a salesforce to fabricating a material part--and analyzing how they affect costs and value for customers

41 Informational Value Every step of the value chain involves creating, processing, and communicating information Internet makes linking steps easier, and provides real time information to managers, suppliers, and customers.

42 Information Technology Generations Automation of discrete transactions, order entry and accounting Automation of Human Resource Management, Sales Force operations, Product Design

43 Internet and Information Technology Cross-activity integration linking sales and orders, product design and manufacturing specifications. Customer relationship management (CRM); Supply chain management (SCM) and Enterprise resource planning (ERP) as multiple activity examples

44 Current Stage of Information Technology Integration of value chain and entire value system (industry-wide) suppliers, channels, customers. Information markets Product development (beginning)

45 Internet Applications in the Value Chain

46 Internet Applications in the Value Chain Firm Infrastructure Web based financial and enterprise resource planning systems On-line investor relations

47 Internet Value Chain Human Resource Management Personnel and benefits administration Web-based training Internet communications Electronic time and expense reporting, payment

48 Internet Value Chain

49 Internet Value Chain Technology development Collaborative product design Knowledge directories, tacit knowledge, information resources Real time access by R & D to on-line sales, service, and traffic

50 Internet Value Chain Procurement Internet enhanced planning Linking purchase, inventory, and forecasting with suppliers Automated billing, paying Direct procurement via digital marketplaces, agents, auctions, etc.

51 Internet and SCM Inbound Logistics Real-time integrated scheduling, shipping, warehouse management, planning, Real-time inventory data

52 Internet and SCM

53 Internet and SCM Operations Integrated information exchange, scheduling, decision making for plants, contract assemblers, and components suppliers Real-time available-to-promise and capable-to-promise information to sales force, and channels

54 Internet and SCM Outbound logistics Real-time order transaction by end consumer, sales person, or channel partner Automated customer agreements, ordering information, billing Customer access to order information, customer profile

55 Marketing and sales Marketing and Sales On-line channels, including marketplaces, partners, homesite Dynamic pricing On-line product configuration, specification Customer feedback, profiling,

56 Marketing and sales

57 After-sales After-Sales Service On-line support, access, information, chat rooms, Customer self-service Customer account information, parts information, work-order information, 24 hour access

58 Strategy and Web Creating benefits that customers will pay for (how novel!) Widen value chain, expand beyond internet (content,promotions, products, events, physical locations?) Co-branding Niche markets

59 Web success Distinctive strategy, rationale for web presence Customer value through direct charges Distinctive ways to perform physical functions (assembly, delivery, information exchange) Deep industry knowledge to establish proprietary skills, information, and relationships

60 ebay example What started as a curiosity has become highly successful, and provides a model for the entire economy auction pricing

61 ebay Founded 1996 Online trading community 2 million auctions per day, 10 million members, spend over 3 hours a month Explosive growth New competition - Yahoo!, Amazon.com, Tradera (bought by ebay in 2006), Blocket, Koll.se

62 ebay

63 ebay: Growth strategy First-mover advantage Critical mass Network externalities TRUST Expanding products and services (Kodak, Mailboxes, ebay Stores etc) Regional auctions, Global expansion

64 ebay and Internet Auctions Customers and suppliers are fragmented, widely distributed, have little power Few substitutes (classified ads, flea markets, bricks and mortar auctions, stores)

65 ebay Owning the market Industry structure not fixed, shaped by dominant player and competitors Dynamic pricing model influence Providing a service unites buyers and sellers. No distribution, no warehouse, few physical assets.

66 ebay Trust (both buyer and seller open to fraud) Regulation, Legal environment Expanding market (new products, high ticket items, Sotheby s, Skype, etc.)

67 Buy.com : counterexample Competition based largely on price Outsourced order fulfillment, distribution Focused on brand recognition only not value Little competitive advantage in the mind of the consumer

68 First mover issues Establish advantage by building strong brands Switching costs as barrier Creation of strong networks, united via the internet

69 First mover fallacies Switching costs may be lower customization, web wallets (Internet currency), database marketing and management, content consolidation tools

70 First mover fallacies Network effects (products may become more valuable as customers use them software, , chat rooms) Often aren t proprietary, limited to one company (America Online an exception) Expensive to build, maintain

71 Internet Brands Lack physical presence Lack direct human contact Modest loyalty Low barriers to entry Best brands congruent with traditional brands Exceptions: Amazon, Yahoo!, ebay

72 Partnering problems Internet technology has made partnering widespread Complements (product bundling like hardware and software) interact with competitive advantage, and affect profitability in complex ways Partnering tends to create homogeneity

73 Partnering problems Microsoft operating system as example increased rivalry, barriers to entry, decreased profitability (for competitors, suppliers)

74 Outsourcing Partnering solution greatly expanded by internet Can reduce competitive advantage through homogenization, price competition, lower barriers to entry Can reduce control over core business

75 Web wondering Increased competition, decreased first mover advantage leveling of playing field Customer loyalty? Porter says low, others say high, reduced consumer sovereignty Advertising lower rates, less euphoria, more clutter

76 Web wonders Technology video, speed, access, searching, broadband Digital marketplaces, corporate and consumer Standardization Customer relationships, information feedback, market research