Impact of the Internet on Business(2)

8/8/2019 Impact of the Internet on Business(2)

http://slidepdf.com/reader/full/impact-of-the-internet-on-business2 1/19

Strategies for the Internet ´The key question in not whether to

deploy Internet technology³companieshave no choice if they want to staycompetitive³but how to deploy it.µ

Michael Porter

Professor, Harvard Business School



BUSINESS ENVIRONMENT-

what has changed ?

GLOBALIZ ATION

INDUSTRI AL ECONOMIES

TRANSFORMATION OF

THE ENTERPRISE*



GLOBALIZATION

MANAGEMENT & CONTROL

COMPETITION IN WORLD MARK ETS GLOBAL WORK GROUPS

GLOBAL DELIVERY

S Y STEMS*



INDUSTRIAL ECONOMIES

KNOWLEDGE-BASED ECONOMIES

PRODUCTIVITY

NEW PRODUCTS & SER VICES KNOWLEDGE AS AN ASSET

TIME-BASED COMPETITION

SHORTER PRODUCT LIFE

TURBULENT EN VIRONMENT

LIMITED EMPLOY EE KNOWLEDGE BASE

*



EMERGENCE OF THE

DIGITAL FIRM DIGITALLY -ENABLED RELATIONSHIPS WITH

CUSTOMERS, SUPPLIERS, EMPLOY EES

CORE BUSINESS PROCESSES VI A DIGITAL NETWORK S

DIGITAL MANAGEMENT OF

K E Y ASSETS RAPID SENSING &

RESPONDING TO CHANGE

*



The Internet

A revolutionary driving force that:

adds an important new distribution channel

enables some value chain activities to beperformed better, and permits others to bebypassed entirely

alters the strength of competitive forcesand affects a companys competitivenesswhen compared with rivals

creates opportunities for entirely new

industries



Creates opportunities for

entirely new industries Suppliers of internet technology and services

include:

makers of specialised communications componentsand equipment

providers of Internet communications services

suppliers of computer components and hardware

developers of specialized software e-commerce enterprises:

business-to-business (B2B)

business-to-consumer (B2C)

media companies



Competition Among Internet Technologies

Competing technologies may:

have materially different advantages and disadvantages

be incompatible, preventing users of one from interfacing

with users of another, and costs of parallel systems may beprohibitive

Strategic options for technology rivals: invest aggressively in R&D to win technology race

form strategic alliances to build consensus for the favouredtechnological approach

acquire other companies with complementary technologicalexpertise

hedge the companys bets by investing resources in morethan one of the competing technologies



Impact on Value Chain EfficiencyCompanies can use the Internet and Internet

technologies to improve the efficiency andeffectiveness of particular value chain activities: a powerful tool for better supply chain management improving internal operations, e.g.:

just-in-time inventory gear production schedules and production

quantities to buyer orders more accurate monitoring of buyer preferences

and shifts in demand introducing collaborative data sharing with

distribution channel partners: online systems reduce transaction costs



Change Company Value

Systems Internet technologies allow some value system

activities to be bypassed entirely:

Some manufacturers can build-to-order and sell

direct

eliminating traditional wholesalers and brick-and-mortar retailers

Online systems facilitate build to order instead of

build for dealer inventory

The benefits of Internet technology are pervasive, spawning fundamental changes in the ways business is conducted internally

and with suppliers, wholesalers, retailers, and end-users.



Reshapes the

Competitive Environment The Impact on Competitive Rivalry:

use of the Internet widens a firms geographic

reach, increasing the size of the potentialmarket

rivalry however is often increased:

by freshly launched e-commerce initiatives of

existing rivals by entry of enterprising dot-com rivals with sell-

direct strategies

when an industry consists of online sellers, pure brick-and-mortar sellers, combination brick-and-

click sellers



Reshapes the

Competitive Environment The Impact on Barriers to Entry

entry barriers into e-commerce are often relatively

low: It can be easy for new dot-com companies to

gain entry into some businesses

It can be easy for many existing firms to expand

intonew geographic markets via online sales

W hen the Internet lowers an industry¶s barriers to entry,

the outcome is nearly always heightened competition and

stronger competitive pressures for industry participants



The Impact on Buyer Bargaining Power:

use of Internet allows buyers to gather extensiveinformation about competing products and brands

buyers can easily use the Internet to look for the best deal

buyer efforts to seek out the best deal spurscompetition among rival sellers to provide the best deal

the Internet makes it easier for buyers to join buyinggroups and pool their purchases to negotiate betterterms and conditions

Reshapes theCompetitive Environment Reshapes theCompetitive Environment

Overall impact of Internet is to increase buyer bargaining power

(or at least to make buyers wiser and more informed)



Impact on Supplier Bargaining Power and Supplier-SellerCollaboration:

companies can extend their geographic reach forthe best suppliers: sometimes via online marketplaces or e-markets

companies can collaborate closely with suppliers

across a range of areas: fostering long-term partnerships with key suppliers

Reshapes theCompetitive Environment Reshapes theCompetitive Environment

Impact on bargaining power is unclear - can enhance or diminish bargaining power depending on specific

circumstances - have to assess case-by-case



Other Strategy-Shaping Features

Internet is a force for globalising competition andexpanding the geographic area in which firms have amarket presence e.g. eBay auction site has customers world-wide

Internet and PC technologies are advancing at uncertainspeeds and in sometimes unexpected directions e.g Microsoft and Intel initially did not grasp the

importance and significance of the Internet. They had to

work hard to catch up. e.g. Iomegas Zip drives were once thought to be the

answer to storage problems but have now beensuperceded by high capacity, relatively cheap harddrives



Internet technologies tend to reduce variable andincremental costs, tilting the cost structure moretoward fixed costs:

some Internet-related businesses have a high fixed

cost/low variable cost structure causing early heavy losses until sales volumes

can build significantly

Internet results in much faster diffusion of new

technology and new ideas across the world: rapidly reducing any first mover advantages as

competitors are quickly able to replicate

Other Strategy-Shaping FeaturesOther Strategy-Shaping Features



Other Strategy-Shaping Features Widespread adoption of Internet technology puts

companies under pressure to move swiftly at internet speed in areas such as distribution

The Internet can be an economical means of

delivering customer service e.g. Dell can digitally read a customers computer,

pinpoint the problem, and send repairs over theinternet

Capital to finance new e-businesses is available forventures with solidly attractive business models, but has dried up for ventures with dubious prospects



Internet Technologyand Competitive Advantage

Gaining Competitive Advantage throughInternet technology is difficult:

All companies are rapidly gaining experience inthe use and application of Internet technology

mostly with use of generic, off-the-shelf softwarepackages which are readily available to rivals

most industry participants gravitate to towards

the same internet technology applications(achieving comparable operating benefits)

Achieving sustainable competitive advantagegenerally requires use of proprietary Internet

technology not readily available to rivals

Impact of the Internet on Business(2)

Documents

Transcript of Impact of the Internet on Business(2)