MD253/MK252Electronic Commerce

March 22, 2006Strategy & the Internet

Topics Covered

• E-Commerce & The Five Forces of Industry Competitiveness

• Operational Effectiveness & Strategic Positioning

• Resources for Competitive Advantage– Characteristics– Examples of key resources– The Value Chain

• Strategy & the Internet – a critical look

ICA: Industry & Competitive Analysis

(Porter’s Five Forces)

Industry Competitors

Potential New Entrants

Substitute products or services

Power of Suppliers

Power of Buyers

Critical Concepts in Understanding Competitive Advantage

• Operational Effectiveness – performing the same tasks better than your rivals.

• Strategic Positioning – performing different tasks than your rivals, or performing the same tasks in a different way.

How Do We Know if Assets Yield Sustainable Advantage?

• Rareness– Is the asset in limited supply or difficult to acquire?

• Value– Does the asset yield value to the firm/customers?

• Imperfectly Imitable– Is the asset impossible to imitate?

• Non-Substitutable– Is the asset without comparable substitutes?

87% Decline in

InternationalDS-3

Pricing in two years

Source: BandXChange

Key Resources for Competitive Advantage

– Imitation-resistant Value Chain Organization– Brand– Scale Economies– Alliances (with complementary firms & competitors)– Network Effects– Data and Switching Costs– Distribution Channels– Differentiation – product or service– Patents?

Value Chain

Inbound Operations Outbound Marketing Servicelogistics logistics & Sales

Infrastructure: general mgmt, planning, finance, ISHRM: recruiting, hiring, training, and developmentTech. Development: R&DProcurement