Gregory G. Dess
G. T. Lumpkin
Marilyn L. Taylor
Creating value through e-business
•
Why use of Internet technologies is more
important to achieving competitive advantage than the technologies themselves.
•
How Internet technologies are affecting
the five competitive forces.
•
How e-business capabilities are affecting
industry profitability
•
How firms are using Internet
technologies to add value and achieve unique advantages.
•
How Interne-enabled business models are
being used to improve strategic positioning.
•
How firms can improve their competitive
position by effectively deploying e-business strategies.
Internet Use Worldwide
Internet Users (in millions)
2007
Geographic Region 2002 (estimated)
North America 178,530 254,350
Western Europe 151,999 290,999
Eastern Europe/Russia 34,155 98,151
Asia-Pacific 237,922
615,571
South/Central America 39,146 110,893
Middle East/Africa 23,922
96,287
Total
Internet Users 665,674 1,466,251
How
the Internet is Affecting the Five Competitive Forces
•
Internet technologies lower barriers to
entry
•
Scale economies may be less important in
Internet context
•
New entrants can go to market with lower
capital costs
•
Businesses on the Internet may have
lower expenses such as office rent, printing, and postage
How
the Internet is Affecting the Five Competitive Forces
•
End users
•
Final customers in a distribution
channel
•
B2C Internet sales activity (business to
consumer)
•
Internet increases the power of these
buyers
n more
information
n Lower
switching costs
•
Such buyers likely to have more
bargaining power
•
Buyer channel intermediaries
•
Wholesalers, distributors, and retailers
•
Internet makes it easier for the
business to reach consumers directly
•
Internet may decrease the bargaining
power of buyer channel intermediaries
•
B2B—providing products or services to
other businesses
•
Advantages
•
Access to business customers at lower
cost
•
More downstream outlets
•
Creation of Web-based purchasing
arrangements
n Makes
purchasing easier
n Discourages
customers from switching
•
Can reach end users without
intermediaries
•
Disadvantages
•
Buyers can shop competitively and
negotiate prices easier
•
Inhibited ability to offer
differentiated products or unique services
•
Creating new functions
(reintermediation)
•
Threat of substitutes is increased
because the Internet creates new ways to accomplish the same tasks
•
Alternative way to participate in
conferences
•
Storing information on the Web
•
Online market surveys
•
Primary factor increasing substitution
is economic
•
Rivalry is likely to be more intense
•
More tools and means for competing
•
New firm technologies can be imitated
easily and quickly
•
Competitors in cyberspace are more
equally balanced and competitive
•
Informediaries increase importance of
pricing
How the Internet Influences Industry Structure
Threat of new substitutes
(+) by making an overall industry more efficient,
the internet can expand sales in that industry
(-) internet-based capabilities create new
substitution threats
(-) technology-based efficiencies can be captured,
lowering the impact of scale economies
(-) differences among competitors are difficult to
detect and to keep proprietary
Bargaining power of buyers
•
Bargaining power of channels
(+) eliminates powerful channels or improves
bargaining power over traditional channels
•
Bargaining power of end users
(-) shifts bargaining power to consumers
(-) reduces switching costs
Bargaining power of suppliers
(+-) procurement using the Internet may raise bargaining power over suppliers,
but it can also give suppliers access to more customers
(-) the Internet provides a channel for suppliers to
reach end users, reducing the power of intermediaries
(-) Internet procurement and digital markets tend to
reduce differentiating features
(-) reduced barriers to entry and the proliferation
of competitors downstream shifts power to suppliers
Threat of new entrants
•
(-) reduces barriers to entry such as need for a sales force, access
to channels, and physical assets
•
(-) Internet applications are difficult
to keep proprietary from new entrants
•
(-) a flood of new entrants has come
into may industries
Rivalry among existing competitors
•
(-) more priced-based competition intensifies
rivalry
•
(-) widens the geographic market,
increasing the number of competitors
How the Internet Adds Value
•
The process of gathering information and
identifying purchase options
•
Faster speed of information gathering
(buyers, suppliers)
•
Greater breadth of information that can
be accessed (buyers)
•
Decreased cost of search (buyers)
•
Easier to be found (suppliers)
•
The process of considering alternatives
and comparing the costs and benefits of various options
•
Facilitates comparative shopping
(buyers)
•
Provides product reviews (buyers)
•
Catalogues customer evaluations of
performance (buyers, suppliers)
•
The process of identifying problems or
needs and generating ideas and action plans to address those needs
•
Ability to handle unique problems
individually (buyers, suppliers)
•
Ability to provide immediate answers
(buyers, suppliers
•
Ability to deliver new products and
services (suppliers)
•
The process of completing the sale,
including negotiating and agreeing contractually, making payments, and taking
delivery
•
Lowering overall transaction cost
(buyers, suppliers)
•
Permitting more rapid sales (buyers,
suppliers)
•
More reliable transactions
How the Internet Adds Value
•
Internet content as a source of
competitive advantage
•
Customer feedback
n Buyers
trust what other buyers say more than a company’s promises
n Customer
testimonials
•
Expertise
n Internet
as a library
n Education
of consumers regarding options and implications of various choices
•
Entertainment programming
n Streaming
media
n Interactive
programming and other applications
Internet Business Models
•
Features and content
•
Commissions charged
•
Brokerage or intermediary services
•
Adds value by providing
n Expertise
n access
to a wide network of alternatives
•
Sources of competitive advantage
•
Search
•
Evaluation
•
Problem solving
•
Transaction
•
Features and content
•
Web content paid for by advertisers
•
Adds value by providing free or low-cost
content
n Customer
feedback
n Expertise
n Entertainment
•
Audiences range from very broad to
highly specialized
•
Sources of competitive advantage
•
Search
•
evaluation
•
Features and content
•
Reselling marked-up merchandise
•
Adds value through
n Selection
n Distribution
efficiencies
n Leveraging
brand image and reputation
•
May use entertainment programming to
enhance sales
•
Sources of competitive advantage
•
Search
•
Transaction
•
Features and content
•
Selling manufactured goods and custom
services
•
Adds value by
n Increasing
production efficiencies
n Capturing
customer preferences
n Improving
customer service
•
Sources of competitive advantage
•
Search
•
Problem solving
•
Features and content
•
Fees charged for referring customers
•
Adds value by
n Enhancing
a firm’s product or service offerings
n Tracking
referrals electronically
n Generating
demographic data
•
Expertise and customer feedback often
included with referral information
•
Sources of competitive advantage
•
Search
•
Problem solving
•
Transaction
•
Features and content
•
Fees charged for unlimited use of
service or content
•
Adds value by
n Leveraging
strong brand name
n Providing
high quality information to specialized markets
n Providing
access to essential services
•
May consist entirely of entertainment
programming
•
Sources of competitive advantage
•
Evaluation
•
Problem solving
•
Features and content
•
Fees charged for metered services
•
Adds value by providing
n Service
efficiencies
n Expertise
n Practical
outsourcing solutions
•
Sources of competitive advantage
•
Problem solving
•
Transaction
Overall Cost Leadership Strategy and the Internet
•
Internet can decrease costs throughout a
firm’s value chain in both primary and support activities
•
Minimizing rework
n Direct
access to progress reports
n Ability
for customers to periodically check work in progress
•
Minimizing sales-force expenses
n Online
bidding
n Online
order processing
•
Reducing costs of procurement and paper
n Online
purchase orders makes many transactions paperless
•
Internet can decrease costs throughout a
firm’s value chain in both primary and support activities
•
Reducing costs and speeding the process
of new-product development
n Collaborative
design efforts (internet links designers, materials suppliers, and
manufacturers)
•
Reducing costs of hiring and training
employees
n Online
testing
n Online
evaluation
n Online
training
Differentiation Strategy and the Internet
•
Internet can create new ways of
differentiating by enabling mass customization and increasing customer control
over the process
•
Shortening response times and
accelerating organization learning
•
Internet-based knowledge management
systems
•
Linking all parts of the organization
•
Personalizing online access so customers
can access
•
Prior orders
•
Current order status
•
Process requests for future orders
•
Internet can create new ways of
differentiating by enabling mass customization and increasing customer control
over the process
•
Enhancing marketing efforts
•
Quick online response to service
requests
•
Rapid feedback to customer surveys and
product promotions
•
Empowered sales force and updated
R&D efforts
•
Online access to real-time sales and
service information
•
Access to detailed status reports and
purchasing histories
•
Automated procurement and payment
systems
Focus Strategy and the Internet
•
Internet permits focusers to access
markets less expensively (low cost) and provides more services and features
(differentiation)
•
Focusing sales efforts on specific
customers
•
Permission marketing techniques
•
Creating community for customers with
common interests
•
Chat rooms
•
Discussion boards
•
Member functions
•
Internet permits focusers to access
markets less expensively (low cost) and provides more services and features
(differentiation)
•
Providing advertisers with access to
viewers with specialized interests
•
Niche portals
•
Minimizing firm infrastructure requirements
•
Virtual organizing
•
Online “officing”
•
Highlighting specialized buyers and
drawing attention to smaller suppliers
•
Procurement technologies (matching
buyers and sellers)
Potential Internet-Related Pitfalls
•
Low-cost leaders
•
Ease of imitation by competitors
•
Ease of comparison shopping by consumers
•
Temptation to place too much emphasis on
one business activity and ignore others
•
Differentiators
•
Sustainability of internet gains may
deteriorate if differentiating features are unwanted by customers
•
Overpriced products and services
•
Focus
•
Misreading scope and interests of target
markets
Leveraging Internet Capabilities
•
Providing new ways to add value
•
Shifting power of the five forces
•
Requiring modifications in generic strategies
•
Altering competitive climate in many
industries
•
New means of generating synergies
•
Enhancing revenue among elements of a
diverse firm
•
Linking sources of supply more
efficiently
•
Streamlining distribution
•
Dealing with suppliers more efficiently
•
Conducting business without time and
expense of physical travel
•
Increasing level of access to local
cultures and market conditions
•
Addressing both cost reduction and local
adaptation issues
•
Facilitating collaboration between
remote locations
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