There are two opinions about the influence of the internet on
industries. Many have argued that the internet renders strategy
obsolete. Internet tends to weaken the industry profitability
without providing advantages The winner will be those that view the
internet as a complement to, not a cannibal of, traditional ways of
competing.
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Fundamental questions should be asked. Who will capture the
economic benefits that the internet creates? Will all the value end
up going to customers, or will companies be able to reap a share of
it? What will the internets impact on industry structure? Will it
expand or shrink the pool of profits? What will be its impact on
strategy? Will the internet bolster or erode the ability of
companies to gain sustainable advantages over their
competitors?
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How to deploy Internet. The key question is not whether to
deploy Internet technology. Internet technology provides better
opportunities for companies to establish distinctive strategic
positioning.
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Succeeded companies are the ones who use Internet as a
complement to traditional ways of competing. Losers whom will use
the Internet apart from their established operations. This is good
for established companies, which are often to meld Internet and
traditional approaches in ways that buttress existing
advantages.
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The only way to do so is by achieving a sustainable competitive
advantageby operating at a lower cost, by commanding a premium
price, or by doing both. If average profitability is under pressure
in many industries influenced by the Internet, it becomes all the
more important for individual companies to set themselves apart
from the packto be more profitable than the average performer.
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Cost and price advantages can be achieved in two ways. One is
operational effectiveness, doing the same things your competitors
do but doing them better. The other way to achieve advantage is
strategic positioning, doing things differently from competitors,
in a way that delivers a unique type of value to customers.
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Operational Effectiveness v Strategic Positioning High
Delivering greater value allows a company to charge higher average
unit prices; greater efficiency results in lower average unit
costs. None price value delivered Relative cost position Low
High
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A company can outperform rivals only if it can establish a
difference that it can preserve. It must deliver greater value to
customers or create comparable value at a lower cost, or do
both.
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Operational effectiveness ( doing the same things your
competitors do but doing them better) The Internet is arguably the
most powerful tool available today for enhancing operational
effectiveness. By easing and speeding the exchange of real-time
information, it enables improvements throughout the entire value
chain, across almost every company and industry. But improving
operational effectiveness isnt enough to provide competitive
advantage. Companies only gain advantages if they are able to
achieve and sustain higher levels of operational effectiveness than
competitors.
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Where is the problem? Once a company establishes a new best
practice, its rivals tend to copy it quickly. Best practice
competition eventually leads to competitive convergence, with many
companies doing the same things in the same ways. Customers end up
making decisions based on price, undermining industry
profitability.
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How the Internet influences Industry Structure Whether the
industry is new or old its structure attractiveness is determined
by five underlying forces of competition:
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la menace des produits de substitution l'intensit de la
concurrence intrasectorielle le pouvoir de ngociation des
fournisseurs le pouvoir de ngociation des clients la menace
d'entrants potentiels
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la menace des produits de substitution +LInternet peut largir
la taille du march. - La prolifration de lInternet peut crer des
nouveaux menaces de substituion.
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le pouvoir de ngociation des fournisseurs +/- Achats par
Internet tend augmenter le pouvoir de ngociation avec les
fournisseurs, mais elle peut aussi donner aux fournisseurs un accs
plus de clients. -L'Internet fournit un canal pour les fournisseurs
d'atteindre les utilisateurs finaux, et cela va rduire leffet de
levier des socits intervenantes. -Les marchs numriques ont tendance
donner toutes les entreprises un accs gal aux fournisseurs. - La
rduction des barrieres a lentre.
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le pouvoir de ngociation des clients + limine les canaux
puissants ou amliore le pouvoir de ngociation sur les canaux
traditionnels. - Rduit les cots de changement. Internet can provide
information about product and suppliers, thus bolstering buyer
bargaining power.
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la menace d'entrants potentiels - Rduction des barrires l'entre
comme la ncessit d'une force de vente, l'accs aux canaux, et les
biens matriels, tout ce que la technologie Internet limine ou rend
plus facile de faire rduit les barrires l'entre. -Un flot de
nouveaux arrivants est entr dans de nombreuses industries.
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l'intensit de la concurrence intrasectorielle - Rduire les
carts entre les concurrents. -migre vers la concurrence des prix. -
Elargir la surface du march et cela va causer l'augmentation du
nombre de concurrents. -Il diminue les cots variables par rapport
aux cots fixes et cela va se terminer par une pression de rduction
des prix.
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The great paradox of the Internet: Making information widely
available. Reducing the difficulty of purchasing, marketing and
distribution. Allow buyers and sellers to find and transact
business with one another more easily.
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Example: automobile retailing The Internet allows customers to
gather extensive information about products easily (detailed
specifications). Customers can also choose among many more options
from which to buy. Like Autoweb and AutoVantage Customers can
choose many options
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Autoweb.com
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The Future of Internet Competition Consider the intensity of
competition, for example. Many dot-coms are going out of business,
which would seem to indicate that consolidation will take place and
rivalry will be reduced. many established companies are now more
familiar with Internet technology and are rapidly deploying on-line
applications. As customers becoming more familiar with technology,
their loyalty to their initial suppliers will also decline, they
will realize that the cost of switching is low.
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A similar shift will affect advertising-based strategies. Even
now, advertisers are becoming more discriminating and the rate of
growth of Web advertising is slowing.
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Digital Marketplace The most important determinant of a
marketplaces prot potential is the intrinsic power of the buyers
and sellers in the particular product area. If either side is
concentrated or possesses differentiated products, it will gain
bargaining power over the marketplace and capture most of the value
generated.
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Suppliers and customers can begin to deal directly online
without the need for an intermediary. And new technologies will
undoubtedly make it easier for parties to search for and exchange
goods and information with one another.
Zoran Slavkovic Successful companies in the future will be
those which develop and deploy Internet technologies for better
performance of traditional activities, for their reshape, but also
for performing new activities that until now were not possible and
that should strengthen the personality and identity of the
organization. Zoran Slavkovic is an economist.
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Les six principes de positionnement stratgique Premirement, il
doit commencer par un objectif spcifique. Deuximement, la stratgie
d'une entreprise doit permettre de donner une proposition de
valeur, ou un ensemble de prestations diffrentes que celles des
concurrents. Troisimement, la stratgie doit se traduire par une
chane de valeur distinctive. En quatrime lieu, des stratgies
robustes impliquent des compromis. Cinquimement, La stratgie dfinie
la manire dont tous les lments de lentreprise sapplique ensemble.
Enfin, la stratgie implique la continuit de la direction
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Premirement, il doit commencer par un objectif spcifique. Une
valeur conomique est cre lorsque les clients sont prts payer un
prix pour un produit ou un service qui dpasse le cot de
production.
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Deuximement, la stratgie d'une entreprise doit permettre de
donner une proposition de valeur. elle dfinit un mode de
concurrence qui offre une valeur unique dans un ensemble
particulier d'utilisations ou pour un ensemble particulier de
clients.
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Troisimement, la stratgie doit se traduire par une chane de
valeur distinctive. Pour crer un avantage concurrentiel durable,
une entreprise doit exercer des activits diffrentes de celles des
rivaux ou exercer des activits similaires de diffrentes faons. Une
entreprise doit configurer la manire dont elle mne la fabrication,
la logistique, la prestation des services, marketing, gestion des
ressources humaines, et ainsi de suite diffremment de leurs rivaux
et adapte sa proposition de valeur unique.
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En quatrime lieu, des stratgies robustes impliquent des
compromis. Une entreprise doit abandonner ou de renoncer certaines
caractristiques des produits, services ou activits afin d'tre
unique aux autres. Le produit et la chane de valeur, sont ce qui
rend une socit vraiment distinctif. Trying to be all things to all
customers almost guarantees that a company will lack any
advantage.
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Cinquimement, La stratgie dfinie la manire dont tous les lments
de lentreprise sapplique ensemble. la conception des produits d'une
entreprise, par exemple, devrait renforcer son approche du
processus de fabrication. Lajustement augmente non seulement un
avantage concurrentiel, mais permet galement une stratgie plus
difficile imiter. Il est facile de copier un produit ou une
activit, mais il est difficile dappliquer tout un systme de
concurrence. Without fit, discrete improvements in manufacturing,
marketing, or distribution are quickly matched.
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Enfin, la stratgie implique la continuit de la direction. Sans
continuit de la direction, il est difficile aux entreprises de
dvelopper les comptences uniques et les actifs ou de construire une
solide rputation avec les client.
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How information gives you competitive advantages By Michael
Porter and Victor Millar
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Technology impact on competition Three ways IT changes the game
It changes industry structure and therefore the rules of
competition It creates competitive advantage by giving companies
new ways to outperform their rivals It spawns whole new
businesses
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The Internet and Competitive Advantage Operational
Effectiveness: The Internet is arguably the most powerful tool
available today for enhancing operational effectiveness. The nature
of Internet applications makes it more difficult to sustain
operational advantages than ever.
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Technology and the Value Chain Every value activity has both a
physical and an information-processing component IS component
encompasses the steps required to capture, manipulate and channel
the data necessary to perform the activity
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Transforming the Value Chain IT is advancing faster than
technologies for physical processing. IT is generating more data
about activities and products, information that was not available
before. There is a higher information content in products. IT
enhances the ability to exploit linkages between activities both
inside and outside the company. IT allows companies to coordinate
activities in widely dispersed geographic locations. Often there is
too much information, but IT can store and help analyze the flood
of information.
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Value Chain
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The Internet and the Value Chain Multiple activities are being
linked together through many tools as : CRM (Customer Relationship
Management ) SCM ( Supply Chain Management ) ERP ( Enterprise
Resource Planning )
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CRM is a widely-implemented strategy for managing a company's
interactions with customers Supply Chain Management (SCM) is the
management of a network of interconnected businesses involved in
the ultimate provision of product and service packages required by
end customers An Enterprise Resource Planning (ERP) system is an
integrated computer-based application used to manage internal and
external resources
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Through analysis of the value chain and looking at how
electronic communications can be used to speed up the process,
manufacturers have been able to significantly reduce time to market
from conception of a new product idea through to launch on the
market. (Chaffey, 2002).
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The impact of IT (Information Technology) on value chain
Information technology is changing the way companies operate
(Porter and Millar, 1985). Rayport and Sviokla (1995) state that
every business today competes in two worlds, in a physical world of
resources that managers can see and touch and in a virtual world
made of information. Executives have to pay attention how their
companies create value in both the physical and the virtual world.
(Rayport and Sviokla, 1995).
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The special advantage of the Internet is the ability to link
one activity with others and make real time data created in one
activity widely available, both within the company and with outside
suppliers, channels, and customers.
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Virtual Value Chain
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Information in Value Chain
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Impact of Internet technology on Value Chain
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Overall Frame
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Example Why do you (Procter & Gamble) have all those
salesmen, making me have a bunch of buyers? Why not just connect
your computers to our computers? Sam Walton to the CEO of P&G,
November 1987 Talk by Bob Herbold Retired COO Microsoft, ex CIO
Proctor & Gamble on October 28, 2004 about his new book The
Fiefdom Syndrome
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The Internet as Complement It has been widely assumed that the
Internet is cannibalistic, that it will replace all conventional
ways of doing business and overturn all traditional advantages. for
example, online music distribution may reduce the need for
CD-manufacturing assets. In many cases, the Internet complements,
rather than cannibalizes, companies traditional activities and ways
of competing.
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Ex: Walgreens, the most successful pharmacy chain in the United
States. Walgreens introduced a Web site that provides customers
with extensive information and allows them to order prescriptions
on-line. Far from cannibalizing the companys stores, the Web site
has underscored their value. Fully 90% of customers who place
orders over the Web prefer to pick up their prescriptions at a
nearby store rather than have them shipped to their homes.
Walgreens has found that its extensive network of stores remains a
potent advantage, even as some ordering shifts to the
Internet.
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Limits of the Internet Customers cannot physically examine,
touch, and test products or get hands-on help in using or repairing
them. The ability to learn about suppliers and customers (beyond
their mere purchasing habits) is limited by the lack of
face-to-face contact. Extra logistical costs are required to
assemble, pack, and move small shipments. Attracting new customers
is difficult given the sheer magnitude of the available information
and buying options.
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Conclusion Porter explains that to be defensible, moreover, the
value chain must be highly integrated. When a companys activities
fit together as a self- reinforcing system, any competitor wishing
to imitate strategy must replicate the whole system rather than
copy just one or two discrete product features or ways of
performing particular activities.
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Conclusion Porter (2001) repeats that the basic tool for
understanding the influence of information technology on companies
is the value chain. A firm, as a collection of activities, is a
collection of technologies. Technology is embodied in every value
activity in a firm, and technological change can affect competition
through its impact on virtually any activity.