chapter eight the internet and e-commerce: creating value through e-business strategies
TRANSCRIPT
Chapter Eight
The Internet and E-Commerce:
Creating Value through E-Business Strategies
CHAPTER 8McGraw-Hill/Irwin Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights
reserved.
STRATEGIC MANAGEMENT Gregory G. Dess and G. T. Lumpkin
After studying this chapter, you should have a good understanding of:
• 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 can improve their competitive position vis-à-vis the five forces by effectively deploying e-business strategies.
• Why e-business technologies are changing the way firms use overall low cost, differentiation, and focus strategies.
• The pitfalls in each competitive strategy that may endanger a firms attempts to deploy Internet technologies or implement e-business strategies.
Learning Objectives
TRANSPARENCY-69
CHAPTER 8McGraw-Hill/Irwin Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights
reserved.
STRATEGIC MANAGEMENT Gregory G. Dess and G. T. Lumpkin
Exhibit 8.1 Growth in Internet Activity
Data: Forrester Research Inc.
TRANSPARENCY-70
25
125
50
0
(a)Number of U.S. Citizens Online
150
100
75
‘95 ‘96 ‘97 ‘98 ‘99 ‘00
9% OF POPULATION 44% OF
POPULATION
MillionsData: Jupiter, Media Metrix Inc., Commerce Dept., Bureau of Labor Statistics
(b)B2B E-Commerce: Historical and Projected Growth
$4
3
2
1
0
Trillions of Dollars‘99 ‘00 ‘01 ‘02 ‘03
Estimated
25
CHAPTER 8McGraw-Hill/Irwin Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights
reserved.
STRATEGIC MANAGEMENT Gregory G. Dess and G. T. Lumpkin
E-Commerce Spending by Category
36.7Toys
36.7Fitness/sports equipment
40.7Video
65.8Flowers, gifts, and cards
77.1Home and garden
82.0Health/beauty
93.0Music
100.9Computer software
111.1Electronics
204.4 Books
253.0Computer hardware/peripherals
335.4Auction
367.7Clothing/apparel
$1,032.4Travel services
Estimated Online Monthly Revenue(millions of $)
Category
E-Commerce Spending March 2001
Source: Nielsen/Net Ratings & Harris Interactive
Exhibit 8.2TRANSPARENCY-71
CHAPTER 8McGraw-Hill/Irwin Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights
reserved.
STRATEGIC MANAGEMENT Gregory G. Dess and G. T. Lumpkin
Internet Use Worldwide
GeographicRegion
PC Users(in millions)
Per 1,000People
North America
Western Europe
Asia-Pacific
South/Central America
Eastern Europe
Middle East & Africa
148.7
86.6
57.6
10.8
9.5
7.5
479.1
217.5
16.5
21.1
32.7
7.2
Source: Adapted from Computer Industry Almanac in Business Week
Projected number of regular Internet users by year end 2000
Exhibit 8.3TRANSPARENCY-72
CHAPTER 8McGraw-Hill/Irwin Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights
reserved.
STRATEGIC MANAGEMENT Gregory G. Dess and G. T. Lumpkin
Disintermediation and ReintermediationExhibit 8.4
TRADITIONAL INTERMEDIATION
ManufacturerManufacturer RetailerRetailer ConsumersConsumers
REINTERMEDIATION
ManufacturerManufacturer ElectronicIntermediaries
ElectronicIntermediaries ConsumersConsumers
ManufacturerManufacturer ConsumersConsumers
WholesalerWholesaler
TRANSPARENCY-73
ManufacturerManufacturer RetailerRetailer ConsumersConsumersWholesalerWholesaler
DISINTERMEDIATION PROCESS
CHAPTER 8McGraw-Hill/Irwin Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights
reserved.
STRATEGIC MANAGEMENT Gregory G. Dess and G. T. Lumpkin
How the Internet Influences Industry Structure
Source: Adapted from: Porter, M.E. 2001. Strategy and the Internet. Harvard Business Review, March: 63-78.
(+) By making an overall industry more efficient, the Internet can expand sales in that industry.
(-) Internet-based capabilities create new substitution threats.
Threat of substitutes
(+/-) 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.
(-) More price-based competition intensifies rivalry.
(-) Widens the geographic market, increasing the number of competitors.
(+) Eliminates powerful channels or improves bargaining power over traditional channels.
(-) Shifts bargaining power to consumers.
(-) Reduces switching costs.
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 many industries.
Bargaining power of suppliers
Rivalry among existing competitors
Buyers
Bargaining power of end users
Bargaining power of channels
(-) Technology-based efficiencies can be captured, lowering the impact of scale economies.(-) Differences among competitors are difficult to detect and to keep proprietary.
Exhibit 8.5
TRANSPARENCY-74