cs 453: business strategies and models fall 2007
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CS 453: Business Strategies and Models Fall 2007. Based on: Chap. 3 of Treese and Stewart text. Overview. Is use of the Internet a revolution in commerce? Where does the Internet add value? Four Internet business strategies Threats and Opportunities, SWOT analysis. - PowerPoint PPT PresentationTRANSCRIPT
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CS 453: Business Strategies and Models
Fall 2007
Based on: Chap. 3 of Treese and Stewart text
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Overview1. Is use of the Internet a revolution in
commerce?2. Where does the Internet add value?3. Four Internet business strategies4. Threats and Opportunities, SWOT analysis
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1. Revolutionary? Or not? Things have changed for businesses, certainly Enough so that we can call this a revolution? What do you think? Why, why not?
Evidence, logic on this please Groups of three or four
Reasons why, why not Present, then vote
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Your comments on this debate
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An analogy: railroads Differences from 1825 to 1890
Travel time reduced 4x Transportation cost of goods 5-15x less Routes independent of waterways Work-force dispersal, vacation habits Standardization: e.g. time
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Railroads and the Internet Comparison of Infrastructure Issues
New infrastructures needed Original purpose perhaps not commerce Standards required to make it happen Security issues Technical innovation required first Accelerates or enables a larger trend
Industrial revolution Information age
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Similar Factors Economies of scale Source of competitive advantage
RRs: e.g. regional advantages The net: many examples (we’ve talked
about) Inventory needs:
Changes how inventory and production are or are not co-located in time and place
Distribution: more variety, choice, availability New opportunities
New corporations New businesses in new areas
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Discussion again: Revolution or not?
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2. Where does the Internet Add Value? From a company’s perspective, the Internet must add
value somehow. Two high-level views of how:
Transform customer relationships Displace sources of value
(Change how value was added in the past)
Term used in business: value proposition The unique added value an organization offers
customers through their operations A statement summarizing the customer targets,
competitor targets and the core strategy for how one intends to differentiate one's product from the offerings of competitors.
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Customer Relationships Move from supplier-centered to customer-
centered Old view: one-to-many view
Supplier chooses hours; location Supplier delivers services Focus on supply chain
Now, customer-centered: one-to-one view Supplier always available; no physical store Services come to customer at their site
Customer servers herself Focus on customer needs
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Displacing Sources of Value Now, economies of scope as well as scale
More kinds of things as well as lots of them Mass production still important (a given) but
customization more important Customization is possible for more people
Distribution was an inconvenient afterthought Now software, service downloads central to
the value a business provides Global distribution now easier (for bits instead
of physical goods)
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3. Four Internet Business Strategies The preceding ideas let us characterize
Interent business strategies like this: Channel Master Customer Magnet Value Chain Pirate
Avast! Talk Like a Pirate Day is Sept. 19! Digital Distributor
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Channel Master Customer oriented but based around a
particular type of product Possibly traditional goods and services Build deep, strong relationships Marketing channels and other direct ties to
customers made to work with the Internet An example: Cisco
Hardware has been sold for decades Cisco uses the net at all four parts of the
“Commerce Value Chain”
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Customer Magnet Customer centered: draw a larger set of
customers Meet broadly shared needs, aggregate larger
number of services Must integrate multiple suppliers behind
one interface Become a destination of choice One example (of many): Yahoo
Search, shopping, news, financials, email, IM, groups,…
Similar: Amazon, AOL
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Value Chain Pirate Focus on displacing someone in the value
chain, grabbing their share of the value Perhaps by connecting suppliers to customers
in a new way Leapfrog or displace someone in the “old”
way May focus on customer issues (e.g. Attract
step in commerce value chain) One example: Autoweb
Importance on interacting with customers Traditional suppliers are used
Other pirates?
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Digital Distributor Focus on supply, products/services New or heavily altered traditional channels Build new commerce value chain for customers that
supplies products and services in a new way One example: Monster.com
Previously: employers handled hiring (mostly) Services for job-seekers (including some shift of
activities) Services for employers New tools: agents, resume screening, moving
assistance Touches all four steps in commerce value chain
Others with this strategy?
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4. Threats and Opportunities SWOT Analysis
Part of a business plan, or an evaluation Sets of questions to be answered
See pp. 30-31 in handout
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Threats and Opportunities Note that a threat to you is someone else’s opportunity
(and vice versa) Channel master:
In your product area, can they use the Net better? Customer magnet:
Can they outdraw you? Better or broader services?Better community? (Discuss in relation to Amazon.)
Value Chain Pirate Can you lose your position? Someone sells directly to
your customers using our suppliers? Digital Distributor
Can part of what you do somehow be merged into another company’s new aggregation?
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Disintermediation Removing the middle-man
Example: customer goes directly to producer
Has this happened in e-commerce? What do you think? Discuss.
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Reintermediation (Today’s word-of-the-day!) Did the internet eliminate the middle-man
between consumer and suppliers? Not really for various reasons
In fact, new kinds of middle-men Old chains of distribution disrupted and re-
assembled Aggregate services Provide broader services and product
together Products alone not enough
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Summary and Wrap-up Note that these model strategies aren’t
mutually exclusive Are they even complete? What doesn’t
really fit this? Note that you could base a business strategy
on these models