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LP- 8, Ch 8

dt 16-17 Nov15

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
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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.

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The collapse of the bubble took place during 19992001. Some


companies,
such
aspets.comandWebvanfailed
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.comwhose stock went from 107 to
4
7 dollars per share, but a decade later exceeded 500

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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BPS 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

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WORLD INTERNET USAGE AND POPULATION


Penetrati
STATISTICS
Internet---- June 30, 2012
Growt Users
Population
( 2012 Est.)

Users
Dec. 31,
2000

Internet
on
h
%
Users
(%
2000of
Latest Data Populatio
2012 Table
n)

Africa

1,073,380,925

4,514,400

167,335,676

15.6 %

Asia

3,922,066,987 114,304,000

1,076,681,0
59

27.5 %

841.9
44.8 %
%

105,096,093 518,512,109

63.5 %

393.4
21.5 %
%

World Regions

3,606.7
7.0 %
%

Europe

816,372,817

Middle East

223,608,203

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 / Austral
ia
WORLD TOTAL

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35,815,913
7,012,519,84
1

3,284,800

7,620,480

90,000,455

24,279,579
360,985,492

40.2 %

67.8 %

2,639.9
3.7 %
%

218.6
%

1.0 %

2,405,510
566.4
34.3 %
,175
%

Internet Users in Pakistan


1990 ---- less than 0.5 M
2013 ---- Exceeding 11M

20 M +

1.5 M

India--- 3rd largest


52M in 2008
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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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IMPACT ON FIVE COMPETITIVE FORCES


2.

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The bargaining power of Buyers


Enhances Buyers power by providing
more information to consumers on
internet. Book publishing / sale is the
most usual example.
End users 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
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can be purchased, the lower the

IMPACT ON FIVE COMPETITIVE FORCES


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.

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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 re14
intermediators in certain cases

IMPACT ON FIVE COMPETITIVE FORCES


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

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IMPACT ON FIVE COMPETITIVE FORCES

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.

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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 companys
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 MODELS


Exhibit 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 ----12/20/15

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.

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