Download - Porter’s Competitiveness Model
PORTER’S COMPETITIVENESS MODEL
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IMPACT OF THE INTERNET COMPETITIVENESS
On the Bargaining Power of Suppliers On the Bargaining Power of Buyers On the Barriers to Entry On the Threat of Substitute Products On the Rivalry among existing competitors
ON THE BARGAINING POWER OF SUPPLIERS
Increase number of suppliers available Provide a direct channel to reach end
customers Give all companies (big & small, far & close)
equal access to suppliers thereby reducing product differentiation, service & cost
Increase the number of potential customers for suppliers as barriers are reduced
ON THE BARGAINING POWER OF BUYERS
Reduces switching costs for consumers Increases the number of companies that can
deliver product or service More transparency of information about products,
prices & service Reduces the number of steps in the supply chain
thereby allowing customers to reach OEMs directly Increases the number of potential customers
ON THE BARRIERS TO ENTRY
Reduces the need for a sales force Reduces or even eliminates the need for a
physical presence Provides easier access to production & distribution
channels Reduces the amount of capital required to start a
new business
ON THE THREAT OF SUBSTITUTE PRODUCTS
Create new approaches for providing the same service or products
Help create add on products & services Fosters an innovation-oriented culture Increases the efficiency of established companies More info on other products
ON THE RIVALRY AMONG EXISTING COMPETITORS
Reduces differences among competitors Migrates competition towards price Widens the geographic reach thereby adding
competitors to the company’s space
THE INTERNET & ECONOMY
Reduces Inflation Redistribution of wealth from rich to poor & from
developed countries to developing countries Reduces the cost of capital Fosters & quickens the pace of innovation
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TO SUMMARIZE LAST LECTURETHE AIM OF IT Strategy involves creating a niche or focus …
something you are good at.. Something that differentiates you.. Provide value added product or service to a select customer base.
Focus IT initiatives on the strategic goals of the organization
Use IT to increase profits by either: Growing the business (increasing revenue)
especially for high margin companies Expanding the profit margins (reducing costs
relative to revenue) particularly for those companies with low margin businesses
BUSINESS MODELS&WEB STRATEGIES
BUSINESS MODELS
Advertising Merchant / Retailer Manufacturer Brokerage Infomediary Affiliate Subscription Utility Financial Community 11
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ADVERTISING MODEL
Generalized Portal: Yahoo, Google, AOL, Facebook
Success depends on volume (eg. # of eyeballs!!)
Free Model: BlueMountain offer customers something for free to increase volumes
Bargain Discounter: Buy.com Sell at or below cost to attract shoppers
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MERCHANT MODEL (ONLINE RETAILING)
Virtual Merchant: Amazon, OnSale sell list price or auction. Make money on margins
Catalog Merchant: Grainger mail order to Web order
Surf and Turf: Gap, Wal*Mart Channel conflicts or opportunities??
On-line music: iTunes
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MANUFACTURER
Dell, Cisco
Compress the distribution channel by eliminating the middle man
enhance customer service faster response time more efficient supply chain better customer knowledge Personalized products
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BROKERAGEMARKET MAKERS
Buy/Sell fulfillment: eTrade and CarsDirect Charge buyer or seller a transaction fee
Market Exchange: ScrapSite Charge the seller a transaction fee based in value of sale
Business Trading: GE product designs., buyers and supplier guides, job listings
Virtual Mall: Yahoo! Stores Setup, Monthly Listing and/or transaction fees
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BROKERAGE (CONTINUED)
Metamediary: Travelocity setup and transaction fee for processing transactions, tracking
orders, billing and collection Auction: ebay
fee scaled with the value of transaction Reverse Auction: Priceline,
fee based on the spread between bid and ask price Classified: South BendTribune
listing fee charged regardless of outcome of transaction Professional services: Monster, Guru
Listing fees Search Agents: MySimon, RoboShopper
referral charge 16
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INFOMEDIARIES
Consumer Info: Doubleclick Sell customer info to merchants (offer consumers freebees)
Merchant Info: Gomez Sell website performance info to internet merchants
Recommender System: ePinions Monitor user habits and give feedback to merchants
Search Engine Optimization: iHelpYou, ReinventBusiness
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AFFILIATE (REAL ESTATE MODEL)
Godiva chocolates at Amazon, Pay for performance model whereby a merchant is
paid by another for the referrals they generate - variations include pay-per-click and banner exchange
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SUBSCRIPTION MODEL Provide content of product:
Wall Street Journal, Consumer Reports, The Street.com, Forrester Research
Consumers pay to access the site]
On-demand software: Salesforce Music on-line: Napster 2.0 VOIP: Vonage, Comcast Virus Protection:McAfee
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UTILITY
Metered usage - pay as you go approach Skype Microsoft Office Live
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FINANCIAL
Make money by providing financial services Banking online: ING Direct New financial model: PayPal Virtual societies: Second life
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COMMUNITY
Voluntary Contributor support the site through voluntary contributions..must establish
user loyalty Experts: Experts Social Networks: YouTube, Facebook, MySpace Encyclopedia: Wikipedia Games: Second Life
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AMAZON USED TECHNOLOGY TO CREATE A COMPLETELY NEW RETAILING MODEL
A DEMAND-DRIVEN RETAILING MODEL
A pull rather than a push system of retailing
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Warehouse/DC
OrdersReceived
Acct. DB
ProcessPayments
Bank
Orders byRetail Outlets
Customers
CustomerOrders
Old Book Retailing Model
Retail Stores
Market to Customers
ProcessBackorders
Publishers
Customers
BookSelection
Authors
Magazine Renews
Exam copies
Book
Reviews
Flyers
Orders
Invoice
Payment
Pay Info.
Refund Customer
Demand
Books
Flyers
Bank
ProcessPayments
Pay
Process Unsold Books
PublishersPayment
Invo
ice
ProcessBackorders
Customers
Refund
Retail Stores
Market to Customers
Flyers
Inventory Update
Customer Demand
Inventory Update
Books
Books
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New Book Retailing Model
ProcessOrdersCustomers Publishers
ProcessPayments
Orders Orders
Bank
Payment Details
Credit Card Information
Books
Customers
GenerateCustomerInterface
BooksUpdate
Pay Info.
Orders Books
OrderInfo.
Cust.Info.
BookInfo.
Payment
SUCCESS DRIVERS Change traditional payment scheme –
being paid first before having to pay suppliers
Reduce and potentially eliminate inventory at retail & distribution centers
Reduce the number of processes required & therefore the processing costs
Improve quality by matching demand & supply perfectly
Customize the store for each customer – personalized shopping experience
Increase the geographical reach of the store and time of operations
Increase product offerings26
AMAZON’S CREATIVE USE OF TECHNOLOGY TO ELIMINATE COMPETITORS World’s largest book store (started with over 1 million titles) Customization of shopping experience Purchase recommendations based on other customer
purchases – data mining Customer feedback and ratings of products Enhancing trust by using secure order processing and 100%
guarantees One-click purchasing Use of tabs Using e-mails to push products to customers Automate the order processing and fulfillment procedure to
insure that standardization of performance Commitment to use technology to enhance, simplify and
increase customer satisfaction & delight27
ALWAYS ON THE MOVE!
Expanding product line Becoming the largest mall in the world Consulting/Developing & Managing other
companies’ sites Auctions Search engine Cloud computing Crowdsourcing – Amazon Turks Kindle
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GOOGLE CHANGING THE FACE OF ADVERTISING
Google – Organize ALL information and make it universally accessible to everyone
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PAGERANK – LINK ANALYSIS ALGORITHM
PAGERANK is an algorithm that ranks pages based on the relationships between websites: number of links to the website from
other siteImportance of these links (measured
by how many links they draw from other sites).
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PAGERANK SIMPLIFIED
examine how many WebPages address the page
calculate the ranking of each one of those pages
use these ranking to weigh each connection
combine to come up with a single score
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ADWORDS: BIDDING FOR KEYWORDS AND PAY-PER-CLICK (PPC)Companies bid for search
keywordsThe companies are only charged
when a customer clicks on a company’s ad
The cost per click can be anywhere from a cent to a few dollars and this is determined by having advertisers bid for keywords
Rank ads based on those that are expected to generate the highest revenue to Google based on the interaction between bid price and the likelihood of purchase.
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ADSENSE
A way for other website to monetize their web contact by adding advertising to on other websites
Purpose is to serve ads based on web content, user geographical location or other relevant factors
Has been particularly an important way for websites with smaller web traffic to develop advertising sales programs
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COMPARED WITH TRADITIONAL (PRINT MEDIA, TV, YELLOW PAGES, COUPONS, FLYERS, BANNER ADS, ETC.) ADVERTISING, PAY-PER-CLICK
Ability to reach the right target audience Easy to measure success (Clicks can be
counted) Direct correlation between ads and purchases Performance-based ads --Pay for results Cost-effective (Avg. Customer Acquisition cost)
Search $8.50 Yellow Pages $20 Online ads $50 E-mails $60 Direct mail $70
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THREATS TO GOOGLE’S BUSINESS MODEL
Click Fraud: Potential for abuse by rival companies (have a virtual agents click continuously on an ad thereby raising the cost of doing business to a competitor
SEOs (Search Engine Optimization) : artificially raising page rank by advertisers
Rise of customized search engines (law, medicine, geographically based, etc.)
Better search algorithm Better advertising business model (Pay-for-
Action) Rise of social networks (new gateways to the
internet, competition for ad dollars) Rise of mobile computing (Apps new gateway to
the internet) competition of coupons for ad dollars) 36
GOOGLE’S NEW BUSINESSES Google new Operating system for
phones ..Android (new gateway to the internet)
Google Cloud … storing other companies apps & data
Google Docs … Software on demand .. Google Mail Google Search Appliance (GSA) … search
engine to other web companies Buying YouTube and other social
networking companies Google maps & other information services Google local advertising initiatives Google Mobile
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