The internet tends to intensify competition How the Internet and the Web change Business: Strategy, Structure, and Process In general , the internet is an open standards system available to all players (Seller/buyer) this fact inherently makes it easy for new competitors to enter the marketspace and offer substitute products or channels of delivery . The internet tends to intensify competition Information becomes available to everyone for example It shift power to buyers who can quickly discover the lowest-cost provider on the web Copyright © 2010 Pearson Education, Inc.

On the other hand the internet presents many new opportunities for creating value branding products and charging premium prices, enlarging an already powerful offline physical business such as wal-mart or Sears Internet Change the Following INDUSTRY STRUCTURE INDUSTRY VALUE CHAINS FIRM VALUE CHAINS FIRM VALUE WEBS BUSINESS STRATEGY

Industry Structure Industry structure refers to - the nature of the players in an industry and their relative bargaining power. When you consider a business model and its potential long-term profitability, you should always perform an industry structural analysis. An industry structural analysis is an effort to understand and describe . E-commerce changes industry structure by changing (FIVE FORCES): the nature of competition in an industry the nature of substitute products, the barriers to entry, bargaining power of supplier bargaining power of buyers

E-Commerce can affect the structure of industries in very different ways. (Each industry is different ) Recorded Music Industry (www.bittorrent.com) Books publishing related industry (www.pearsonhighered.com) Travel Industry (new middleman – checkin.pk, priceline.com) As in travel industry Airlines companies does not strengthen their Travel Agents regardless they start their own online business. (Elimination of middleman – PIA, Airblue ) In other industries -> automobile , chemical e-commerce make strong existing players (Manufacturer strengthen their traditional distributors). - For that E-commerce technology has not change Competitive forces, bargaining power of suppliers/buyers, barriers to entry , threat of substitute products .

Internet has increased price competition It has been relatively easy for existing firms to adopt e-commerce to achieve competitive advantage. Internet & E-Commerce change Scope of competition from local / regional to national /global. Competitor have access to global price information. The internet force firms to compete by lowering prices (lowering profits) On other hand, E-commerce make possible for some firms to differentiate their product/services. Amazon-onclick purchasing Amazon -> one click purchasing, Dell personalization / customization, Ebay easy to use interface and so much. E-commerce enabled businesses to create new strategies for differentiation and branding so that they can retain higher prices(As Dell, Amazon, REI)/ charge premium prices (As yahoo Financial services).

Customers and suppliers have little power – Pepsi has many millions of individual consumers, and thousands of retail distributors none of whom has much influence over the business (Pepsi Co.) There is high brand awareness & loyalty = less consumer desire for substitutes Suppliers of aircraft & equipment are powerful – can charge high margins Customers have lots of substitute options – e.g. rail, car High barriers to entry – how do you enter a market dominated by Coca-Cola and Pepsi? Low barriers to entry – lots of new middleman in Airline Business

Value chain A value chain is a set of activities that a firm operating in a specific industry / firm performs in order to deliver a valuable product or service for the market. Industry-Level   Firm-Level

Industry Value Chains Set of activities performed by suppliers, manufacturers, transporters, distributors, and retailers that transform raw inputs into final products and services Internet reduces cost of information and other transactional costs Leads to greater operational efficiencies, lowering cost, prices, adding value for customers Copyright © 2010 Pearson Education, Inc.

Industry Value Chains Lowering cost/rising price by b2b exchange as manufacturer with their supplier Customer in turn can use the web to search for the best quality, fastest delivery, and lowest prices, there by lowering their transaction costs/ prices

Dell.inc developed a highly efficient supply SCM to reduce its cost, Example: Dell.inc Bypass traditional retail distribution channels by selling directly to consumers over the web. Dell.inc developed a highly efficient supply SCM to reduce its cost, And Equally efficient customer relationship management. Dell compete efficiently with alternative industries Copyright © 2010 Pearson Education, Inc.

Firm Value Chains Activities that a Single firm engages in to create final products from raw inputs Each step adds value Effect of Internet: Using internet communication efficiently Increases operational (Internal activities->production) efficiency Enables product differentiation (Amazon one click purchasing) Enables precise coordination of steps in chain Copyright © 2010 Pearson Education, Inc.

Firm Value Chains Amazon uses the internet/web to provide consumers with a much larger inventory of books to choose from, at lower cost than traditional stores. It also provide many services – professionals /consumers review – (Customization-Change the look of web pages as desired) / (personalization - Customer buying history)(onClick purchasing ->differentiation)

Firm Value Webs Networked business ecosystem Uses Internet technology to coordinate the value chains of business partners Within an industry (a firm) Within a group of firms Coordinates a firm’s suppliers with its own production needs using an Internet-based supply chain management system Copyright © 2010 Pearson Education, Inc.

Internet-Enabled Firm Value Web LEGACY SYSTEM

Business Strategy Plan for achieving superior long-term returns on the capital invested in a business firm The four generic business strategies for achieving a profitable business are Differentiation Cost Scope Focus

Differentiation Differentiation involves setting your firm or product apart from the competition by establishing some unique property or consumption experience that your competitors do not have. Copyright © 2010 Pearson Education, Inc.

Cost A firm that adopts a cost strategy must have a unique set of business processes, a unique resource, or a low cost supplier. It is essential that other firms in the marketplace do not have access to, or cannot duplicate, this since it will allow them to charge a lower price while still making a profit. Copyright © 2010 Pearson Education, Inc.

Scope A scope strategy sets out to compete in all markets around the globe, rather than just locally or regionally. Copyright © 2010 Pearson Education, Inc.

Focus A focus strategy on the other hand, is a plan to compete within a narrow market segment or product segment. Specialization strategists seek to become the premier provider in a small market segment or niche. Copyright © 2010 Pearson Education, Inc.