Strategic Computing and Communications Technolgy

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Strategic Computing and Communications Technolgy

• Course web page
• http//www.sims.berkeley.edu/hal/Courses/StratTec
  h07
• Syllabus, schedule, lectures, reading
• http//courseweb.berkeley.edu for some special
  services
• Requirements
• Individuals
• Submit 4 news items 2 or 3 paragraph analysis
  of each over semester
• Participate in class discussions
• Group projects
• We appoint mixed groups
• Technology assessment in middle
• Policy debate at end

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Strategy Overview

• Hal R. Varian

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What is strategy?

• Definitions
• A course of action to achieve targets
• A plan or method employed in order to achieve a
  goal or objective
• In practice often a checklist of things to pay
  attention to and watch out for
• External and internal

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3 approaches to business strategy

• Education
• Michael Porter, Competitive Strategy
• Executive
• Jack Welch, Winning
• Economics
• Shapiro and Varian, Information Rules
• Brandenberger and Nalebuff, Co-opetition
• Jeff Rohlfs, Bandwagon Effects

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Michael Porters Five Forces
Porter, Michael E., Competitive Strategy, Free
Press, 1998
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Supplier power

• Importance of costs 
• Impact of inputs on your product cost or design
• Competitive environment
• Supplier concentration, bargaining power
• Presence of substitute inputs
• Importance of volume to supplier
• Switching costs of suppliers
• Threat of forward integration

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Barriers to entry

• Costs
• Absolute cost advantages
• Economies of scale
• Capital requirements
• Scarcity
• Access to distribution
• Proprietary learning curve
• Access to inputs (IP)
• Proprietary products
• Brand identity
• Other
• Customer switching costs
• Expected retaliation (I.e., capacity threat)
• Government policy

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Buyer power

• Competitive environment
• Buyer concentration
• Bargaining power
• Substitutes available
• Product differentiation
• Price sensitivity
• Buyers' switching costs
• Brand identity
• Buyer volume
• Threat of backward integration

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Threat of substitutes

• Customer switching costs
• Buyer inclination to substitute
• Price-performance trade-off of substitutes

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Internal rivalry

• Economic factors
• Industry concentration
• Fixed costs, scale requirements
• Exit barriers
• Intermittent overcapacity
• Industry growth
• Customer perceptions
• Product differences
• Switching costs
• Brand identity
• Diversity of rivals

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Critique of Porter

• Product of its times (1980s)
• Relatively stable environment
• Not a very clear taxonomy
• Competitors, actual and potential?
• Substitutes, internal or external?
• Not much emphasis on technology and innovation

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Jack Welch (CEO of GE)

• Winning, Harper Business 2005
• Three steps
• Find a smart, realistic, fast way to gain
  substantial competitive advantage
• Put the right people in the right place to drive
  this forward
• Seek out best practices, adapt them, and continue
  to improve them
• GE initiative Be No 1 or No 2 in each market
  and fix, sell, or close deal to be there.
• 5 Slides

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1. What playing field looks like

• Who are your competitors?
• What has what share globally and in each market?
• Is your business commodity or high value, long
  cycle or short, where on growth curve? What are
  drivers of profitability?
• What are strengths and weaknesses of each
  competitor? How good are its products? How much
  does each one spend on RD? How big is its sales
  force?
• Who are your customers and how do they buy?

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2. What the competition is doing?

• What has each competitor done in past year to
  change the playing field?
• Has anyone introduced game-changing new products,
  technologies, or new channel?
• Are there new entrants, and what have they been
  doing?

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3. What have you been doing?

• What have you done to change the playing field?
• Have you bought a company, introduced a new
  product, taken a competitors salesperson,
  licensed a new technology?
• Have you lost competitive advantages you once
  had a salesperson, special product, proprietary
  technology?

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4. Whats around the corner?

• What scares you the most in the year ahead? What
  could a competitor do to nail you?
• What new products or technologies could your
  competitor launch that might change the game?
• What mergers/acquisitions would knock you off
  your feet?

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5. What is your winning move?

• What can you do now to change the playing field?
  New acquisition, new product, new market?
• What can you do to make customers stick to you?

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Critique of Welch

• Very action oriented, not so analytic
• Good for CEO, not for industry analyst
• Strategy and tactics intermingled
• Doesnt emphasize specific industry forces
• Good meeting agenda, not necessarily something to
  study

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Brandenberger and Nalebuff
Value Net
Customers
Actual and potential companies and products
Company
Competitors
Complementors
Suppliers
Whats this?
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Co-opetition and complements

• Customers value entire system
• Hardwaresoftware, DVD playerdisks
• Sometimes you compete, sometimes you co-operate
• Think of Intel and Microsoft, IBM and Oracle
• Not a zero sum game!
• Complementors can be critical to your business,
  particularly in technology

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Shapiro and Varian

• Forces important for info tech industries
• Differentiation of products and prices
• Intellectual property
• Switching costs and lock-in
• Network effects
• Standards and interconnection
• Systems effects and complementors

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Example Apple Ipod story

• Price of songs (differentiation of prices)
• Competition (free songs)
• Systems effects (players content)
• Channel conflict (online offline)
• Standardization (interoperability)
• Entrants (mobile phones)