Digital Business Strategy: Leveraging Internet and E-Business Capabilities

1
Digital Business Strategy Leveraging Internet
and E-Business Capabilities

• Learning Objectives
• Understand how digital and internet technologies
  are impacting the competitive environment
• Understand how these technologies add value
• Identify the common types of internet business
  models
• Understand how these technologies affect the use
  of generic strategies
• Describe these technologies from a VRIO
  perspective

2
Digital and Internet TechnologiesChanging the
Competitive Landscape

• there is little doubt that the internet
  technologies are changing the face of
  competition
• Porters Five-forces perspective
• More and better information increases buyer
  power
• Additional competitors increases rivalry
• Limit capital costs lowers barriers to entry
• Improves access to distribution channels entry
• Facilitates disintermediation changes supplier
  power
• Mass-customization raises threat of substitutes
• Lowering switching costs lowers barriers to
  entry
• Heightens channel conflict increases buyer power

3
How Digital and Internet Technologies Add Value

• value is added only when a practical application
  lowers costs or improves functioning to the
  customer. Value tends to be noticed in the
  following areas

Activity Impact
Search activities Lowers search costs, shortens time to complete search
Evaluation Easier to find and compare alternatives
Problem Solving Facilitates mass-customization
Transaction activities Eases sale activities in payment, shipping method, delivery time
4
Common Types of Internet Business Models

• a method and set of assumptions that explains
  how a firm creates value and earns profits

Type of Business Model Corporate Examples
Commission-based Schwab, eBay
Advertising-based Yahoo
Markup-based Amazon
Production-based Dell, Travelocity
Referral-based WeddingChannel.com
Subscription-based AOL, NY Times
Fee-for-service-based ASPs
5
How Digital and Internet TechnologiesImpact
Generic Strategies

• Cost-leadership
• More opportunity to manage costs, lower
  transaction costs, disintermediation
• But, processes are easily imitated
• Differentiation
• Mass-customization, many opportunities to
  differentiate other parts of the value chain
• But, processes are easily imitated
• Focus
• Seems to offer the best opportunities
• The VRIO Perspective?