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• Ch – 8• Discussion Final project• Learning Objectives

– Importance of Internet Technologies– How Internet Technologies are impacting Porters’ Five

Forces Model– How e-business capabilities are affecting industry

profitability – How firms are using Internet technologies to add value and

achieve unique advantages– How internet based business models are being used to

improve strategic positioning

LP- 8, Ch 8 dt 16-17 Nov15

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DISCUSSION FINAL PROJECT

• Globalization, Technology and Intellectual Capital are among the most important forces that are increasing the need for a strategic perspective and greater involvement throughout the organization.

• Choose an organization of your choice and then deliberate upon the aforementioned forces. At the same time undertake value-chain analysis and describe how the firm is following generic and / or corporate strategies with respect to its rivals / competitors.

• Make groups of max of 5 and must include a female.• Your suggested solution must be endorsed by the Org.• Draft to be submitted by 30 Nov 15.

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GENERAL GUIDELINES

• The chosen Org must be a listed company / firm and include: – Introduce CEO (Profile), BOD, RBV, Balanced

Scorecard attributes, Products / Services etc– Impact of and exploitation of factors like

Globalization, Technology and Intellectual Capital – External and internal analysis of the firm, Scenario

planning measures, formulation of BL /CL strategies

– Your recommendations to improve upon CA/CP, Market value / Book Value of the Firm

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Case Study – e business

• Agillion Inc• A software company created in 1999 in Texas as

Application Service Provider (ASP)• Its product was Customer Page costing only $29.95• By early 2001, it had Cisco, Office Depot, and IBM

as its strategic customers. • By early July 2001, The Internet Bubble busted and

Agillion also doomed with it. The collapse of the bubble took place during 1999–2001. Some companies, such as pets.com and Webvan failed completely. Others lost a large portion of their market capitalization but remained stable and profitable, e.g., Cisco, whose stock declined by 86%. Some later recovered and surpassed their dot-com-bubble peaks, e.g., eBay.com, Amazon.com whose stock went from 107 to 7 dollars per share, but a decade later exceeded 500

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Case Study – e business

• What went wrong:– Unnecessary, uncontrolled and unproductive (huge)

expenditures – Adopted a weak business model whereby it failed to

meet the demands of small businesses– Poor inventory control and sales force management – Equally poor marketing and sales strategy

• Ultimate end: With $100 in bank and $20m in debt, it filed for bankruptcy and eventually merged with another company. It failed to take advantage of emerging technology.

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IMPACT OF IT• Technological Jump -----

– Shift from analogue to digital – Beneficiaries are phone services, photo services, TV signals, and

even e-books– Speed --- DSL (Digital Subscriber Line)

• E-commerce is B2B • Healthcare and Education have benefited the most

• Question: • Have following Favorite Business Terms become icons of the past

-----?– Competitive advantages – Industry analysis– Long term customer relations

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BP’S EXPERIENCE of using E-commerce

• Finding crude: Payoff $250mn in one year • Buying Gear: $100mn in one year (4% of

$25Bn)• Getting Smarter: All employees have

personalized Web pages • Selling Stuff: Most of the service

stations are online (20% of the sales of $2.6Bn)

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INTERNET TODAY • 3 billion Internet users --- May 2015. • Mobile Internet penetration is forecast to reach 71% by 2019. • Usage per device is forecast to more than triple by 2019. • 192 countries have active 3G mobile networks, which cover almost

50% of the global population. • Smartphone sales are the majority of mobile handsets sold

worldwide; tablet sales will soon exceed total PC sales. • While there are at least five mobile platforms, Android has an 84%

share of smartphones, and 72% of tablets.• There are well over 1 million apps available, which have been

downloaded more than 100 billion times.• Time spent using apps exceeds time spent on mobile browsers,

and in the US, at least, exceeds time spent on desktop and mobile

WORLD INTERNET USAGE AND POPULATION STATISTICS ---- June 30, 2012

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World Regions Population( 2012 Est.)

Internet UsersDec. 31, 2000

Internet UsersLatest Data

Penetration(%

Population)

Growth2000-2012

Users %of Table

Africa 1,073,380,925 4,514,400 167,335,676 15.6 % 3,606.7 % 7.0 %

Asia 3,922,066,987 114,304,000 1,076,681,059 27.5 % 841.9 % 44.8 %

Europe 816,372,817 105,096,093 518,512,109 63.5 % 393.4 % 21.5 %

Middle East 223,608,203 3,284,800 90,000,455 40.2 % 2,639.9 % 3.7 %

North America 348,280,154 108,096,800 273,785,413 78.6 % 153.3 % 11.4 %

Latin America / Caribbean

592,994,842 18,068,919 254,915,884 43.0 % 1,310.8 % 10.6 %

Oceania / Australia 35,815,913 7,620,480 24,279,579 67.8 % 218.6 % 1.0 %

WORLD TOTAL 7,012,519,841 360,985,492 2,405,510,175 34.3 %

566.4 %100.0

%

Internet Users in Pakistan

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20 M +

1.5 M

1990 ---- less than 0.5 M2013 ---- Exceeding 11M

India--- 3rd largest –52M in 2008

E-Commerce

• 1979 Invented by Michael Aldrich• 1981 Thomson Holidays in UK – France –

Tesco • 1994 Netscape ---- 1st on line bank • 1996 IndiaMart – B2B• 2012 US e-commerce online $226Bn

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Impact on Five Competitive Forces • The Threat of New Entrants

– New entrants are a bigger threat because internet based technologies have lower barriers to entry

• Reasons– Relatively inexpensive to make an entry – Creation of website is inexpensive – Business created on Internet saves traditional

expenses like travel, hotelling, rents, sales force salaries, printing and postage etc

– Easy access to distribution channels, manufacturers, wholesalers, etc

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2. The bargaining power of Buyers– Enhances Buyer’s power by providing more

information to consumers on internet. Book publishing / sale is the most usual example.

– End user’s switching costs are much lower. Loyalty with every new deal is the order of the day.

– Bargaining power of distribution channels’ buyers may decrease due internet

– The more outlets from which a product can be purchased, the lower the potential profitability for any single outlet.

IMPACT ON FIVE COMPETITIVE FORCES

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3. The bargaining power of Suppliers• The net effect of the internet on supplier power will

depend on the nature of competition in a given industry.

• Free markets save money by organizing auctions on internet • Internet inhibits the ability of suppliers to offer highly

differentiated or unique products • The growth of new Web-based business in general may create

more downstream outlets for suppliers to sell.• Suppliers will have greater power to the extent that they can reach

end users directly without intermediaries.• Internet is also creating possibilities for re-intermediators in

certain cases

IMPACT ON FIVE COMPETITIVE FORCES

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4. The threat of substitutes– The primary factor that leads to substitutes is

Economic. – Cyber storage initially free has now some cost – Market research is another example --- doing it

on net is almost free – Even test marketing survey is almost free now

IMPACT ON FIVE COMPETITIVE FORCES

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5. Competitive Rivalry – Only those competitors that can use the Web:

• To give them a distinct image, • Create unique product offerings, or • provide faster, smarter, cheaper services

– are likely to capture greater profitability with the new technology.

IMPACT ON FIVE COMPETITIVE FORCES

Refer to Exh 8.3 on page 264 to see how Internet influences Industry Structure

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HOW INTERNET ADDS VALUE

• Search Activities --- It refers to the process of gathering information and identifying purchase options.

• Evaluation Activities --- It refers to the process of considering alternatives and comparing the costs and benefits of various options.

• Problem-solving Activities --- It refers to the process of identifying problems or needs and generating ideas and action plans to address those needs; in other words, educating customers.

• Transaction Activities --- It refers to the process of completing the sale, including negotiating and agreeing contractually, making payments, and taking delivery.

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ADDITIONAL SOURCES OF COMPETITIVE ADVANTAGE

• Three types of content can improve the value propositions of a website –

1. Customer Feedback ---- Buyers’ often trust what other buyers say than a company’s promises

2. Expertise ----The internet has emerged as a powerful tool for learning. People use it as a library.

3. Entertainment Programming ---- More and more people are using internet as an entertainment media

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IMPACT OF INTERNET ON STRATEGIES

• Overall Cost Leadership --- – Managing costs and even changing cost structures – Lowering transaction costs – Ready made clothing industry in Pakistan

• Differentiation ---– Internet is making it possible mass customization. Dell

computer is one such example.• Focus ---

– Low cost and more differentiation --- Nike shoes allowing to have choice colors and signatures that can be seen on Internet prior production

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Internet based BUSINESS MODELSExhibit 8.5 page 271

• Commission Based ----- Providing services for a fee (Brokerage Houses)

• Advertising based ----- Using models to sell products

• Markup based ----- Buying and reselling at higher prices

• Production based ----- Adding value to products and reselling

• Referral based ----- Steering customers to another firm against fee or commission

• Subscription based ---- Providing high quality information

• Fee-for-service based ----- Practical out-sourcing

For details see exh 8.5 on page 271

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Thank you for investing your time with me. Read the given article and go to the library for further

reading.