impact of the internet on business(2)
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8/8/2019 Impact of the Internet on Business(2)
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Strategies for the Internet ´The key question in not whether to
deploy Internet technology³companieshave no choice if they want to staycompetitive³but how to deploy it.µ
Michael Porter
Professor, Harvard Business School
8/8/2019 Impact of the Internet on Business(2)
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BUSINESS ENVIRONMENT-
what has changed ?
GLOBALIZ ATION
INDUSTRI AL ECONOMIES
TRANSFORMATION OF
THE ENTERPRISE*
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GLOBALIZATION
MANAGEMENT & CONTROL
COMPETITION IN WORLD MARK ETS GLOBAL WORK GROUPS
GLOBAL DELIVERY
S Y STEMS*
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INDUSTRIAL ECONOMIES
KNOWLEDGE-BASED ECONOMIES
PRODUCTIVITY
NEW PRODUCTS & SER VICES KNOWLEDGE AS AN ASSET
TIME-BASED COMPETITION
SHORTER PRODUCT LIFE
TURBULENT EN VIRONMENT
LIMITED EMPLOY EE KNOWLEDGE BASE
*
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8/8/2019 Impact of the Internet on Business(2)
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EMERGENCE OF THE
DIGITAL FIRM DIGITALLY -ENABLED RELATIONSHIPS WITH
CUSTOMERS, SUPPLIERS, EMPLOY EES
CORE BUSINESS PROCESSES VI A DIGITAL NETWORK S
DIGITAL MANAGEMENT OF
K E Y ASSETS RAPID SENSING &
RESPONDING TO CHANGE
*
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The Internet
A revolutionary driving force that:
adds an important new distribution channel
enables some value chain activities to beperformed better, and permits others to bebypassed entirely
alters the strength of competitive forcesand affects a companys competitivenesswhen compared with rivals
creates opportunities for entirely new
industries
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Creates opportunities for
entirely new industries Suppliers of internet technology and services
include:
makers of specialised communications componentsand equipment
providers of Internet communications services
suppliers of computer components and hardware
developers of specialized software e-commerce enterprises:
business-to-business (B2B)
business-to-consumer (B2C)
media companies
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Competition Among Internet Technologies
Competing technologies may:
have materially different advantages and disadvantages
be incompatible, preventing users of one from interfacing
with users of another, and costs of parallel systems may beprohibitive
Strategic options for technology rivals: invest aggressively in R&D to win technology race
form strategic alliances to build consensus for the favouredtechnological approach
acquire other companies with complementary technologicalexpertise
hedge the companys bets by investing resources in morethan one of the competing technologies
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Impact on Value Chain EfficiencyCompanies can use the Internet and Internet
technologies to improve the efficiency andeffectiveness of particular value chain activities: a powerful tool for better supply chain management improving internal operations, e.g.:
just-in-time inventory gear production schedules and production
quantities to buyer orders more accurate monitoring of buyer preferences
and shifts in demand introducing collaborative data sharing with
distribution channel partners: online systems reduce transaction costs
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Change Company Value
Systems Internet technologies allow some value system
activities to be bypassed entirely:
Some manufacturers can build-to-order and sell
direct
eliminating traditional wholesalers and brick-and-mortar retailers
Online systems facilitate build to order instead of
build for dealer inventory
The benefits of Internet technology are pervasive, spawning fundamental changes in the ways business is conducted internally
and with suppliers, wholesalers, retailers, and end-users.
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Reshapes the
Competitive Environment The Impact on Competitive Rivalry:
use of the Internet widens a firms geographic
reach, increasing the size of the potentialmarket
rivalry however is often increased:
by freshly launched e-commerce initiatives of
existing rivals by entry of enterprising dot-com rivals with sell-
direct strategies
when an industry consists of online sellers, pure brick-and-mortar sellers, combination brick-and-
click sellers
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Reshapes the
Competitive Environment The Impact on Barriers to Entry
entry barriers into e-commerce are often relatively
low: It can be easy for new dot-com companies to
gain entry into some businesses
It can be easy for many existing firms to expand
intonew geographic markets via online sales
W hen the Internet lowers an industry¶s barriers to entry,
the outcome is nearly always heightened competition and
stronger competitive pressures for industry participants
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The Impact on Buyer Bargaining Power:
use of Internet allows buyers to gather extensiveinformation about competing products and brands
buyers can easily use the Internet to look for the best deal
buyer efforts to seek out the best deal spurscompetition among rival sellers to provide the best deal
the Internet makes it easier for buyers to join buyinggroups and pool their purchases to negotiate betterterms and conditions
Reshapes theCompetitive Environment Reshapes theCompetitive Environment
Overall impact of Internet is to increase buyer bargaining power
(or at least to make buyers wiser and more informed)
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Impact on Supplier Bargaining Power and Supplier-SellerCollaboration:
companies can extend their geographic reach forthe best suppliers: sometimes via online marketplaces or e-markets
companies can collaborate closely with suppliers
across a range of areas: fostering long-term partnerships with key suppliers
Reshapes theCompetitive Environment Reshapes theCompetitive Environment
Impact on bargaining power is unclear - can enhance or diminish bargaining power depending on specific
circumstances - have to assess case-by-case
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Other Strategy-Shaping Features
Internet is a force for globalising competition andexpanding the geographic area in which firms have amarket presence e.g. eBay auction site has customers world-wide
Internet and PC technologies are advancing at uncertainspeeds and in sometimes unexpected directions e.g Microsoft and Intel initially did not grasp the
importance and significance of the Internet. They had to
work hard to catch up. e.g. Iomegas Zip drives were once thought to be the
answer to storage problems but have now beensuperceded by high capacity, relatively cheap harddrives
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Internet technologies tend to reduce variable andincremental costs, tilting the cost structure moretoward fixed costs:
some Internet-related businesses have a high fixed
cost/low variable cost structure causing early heavy losses until sales volumes
can build significantly
Internet results in much faster diffusion of new
technology and new ideas across the world: rapidly reducing any first mover advantages as
competitors are quickly able to replicate
Other Strategy-Shaping FeaturesOther Strategy-Shaping Features
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Other Strategy-Shaping Features Widespread adoption of Internet technology puts
companies under pressure to move swiftly at internet speed in areas such as distribution
The Internet can be an economical means of
delivering customer service e.g. Dell can digitally read a customers computer,
pinpoint the problem, and send repairs over theinternet
Capital to finance new e-businesses is available forventures with solidly attractive business models, but has dried up for ventures with dubious prospects
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Internet Technologyand Competitive Advantage
Gaining Competitive Advantage throughInternet technology is difficult:
All companies are rapidly gaining experience inthe use and application of Internet technology
mostly with use of generic, off-the-shelf softwarepackages which are readily available to rivals
most industry participants gravitate to towards
the same internet technology applications(achieving comparable operating benefits)
Achieving sustainable competitive advantagegenerally requires use of proprietary Internet
technology not readily available to rivals
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