Strategy #6

Global e-Business Organizational entities with strategic issues –Firms –Cities, states, countries –Individuals Four components of e-business readiness –A technological infrastructure –Access to information and communication services –Favorable government practices –Willingness of organizations to redesign business processes to take advantage of e-business capabilities

Building e-Business Infrastructure for National Competitive Advantage Porter’s model Knowledge based view Development economics and the threat of a digital divide

Porter’s Model of National Competitive Advantage Firm, strategy, structure, and rivalry Factor conditions Related and supporting industries Demand conditions

Knowledge Based Knowledge is the key resource for building competitive advantage Country competitiveness is based on long-term capabilities Pre-conditions –Human capital development –Entrepreneurial activity –Rigor of competition –Alliances for knowledge creation –National and international connectivity –Management culture

Importance for Emerging Economies Importance of e-business for emerging economies The digital divide and economic inequality Why developed countries should care about reducing economic inequality

The Four Tigers (Finland) Technology leader Independent telecommunication industry dating back 100 years Cell phones – Nokia 27% market share, global presence Industry – university alliance Management culture - highly participative, informal, responsive Coffee consumption and Internet nodes per capita

The Four Tigers (India) Software industry –Geographic clusters – Bangalore, Chenai, Heyderbad –TATA, Wipro, Satyam, Infosys, some are CMM-level 5 –Complementary offerings in IT enabled services –Export revenues 2002 $6.2B Education – IIT, IIM Multinational alliances and large base of Indian nationals living abroad English speaking

The Four Tigers (Ireland) IT 33% of Irish exports Government initiatives –Low taxes –Good labor relations –Young workforce Culture suited to entrepreneurial IT work

The Four Tigers (Singapore) Leveraged geographical location IT with specialization in logistics Technological backbone that links industry, government, education, and citizenry Investment in education

Becoming a Tiger

Positioning of Countries

Conclusion Importance of 5 dimensions: human capital formation, local and international connectivity, alliances for knowledge creation, management culture, government policy Visionary adaptation to take advantage of the country’s unique features Long term view

Networks Positive and negative feedback Positive feedback systems –Can result in winner take all market –S-curve shaped pattern of growth

Demand-side Economies of Scale Supply-side economies of scale based on production efficiencies Demand-side economies of scale –Based on popularity – customers value a product because it is widely used (positive network externalities) –Value of a network = n*(n-1)/2*β –Norm for information products

Likelihood of a Market Tipping Low Economies of Scale High Economies of Scale Low Demand for Variety Unlikely (PBX systems) High (spreadsheet software) High Demand for Variety Low (telephone handsets) Depends (gaming technology)

Evolution versus Revolution Trade-off between performance and compatibility Evolutionary strategies offer a migration path –Technical obstacles –Legal obstacles Revolutionary strategies offer compelling performance –10X improvement –Growing markets offer opportunities for revolutionary products –Revolutionary strategies are high risk

Openness versus Control Trade-off between your share and contribution to industry value –Reward = industry value added * your share Full openness means all are free to make products complying with the standard Proprietary control relies on patents, copyrights, and trade secrets In between are alliances where members have privileges

Generic Network Strategies ControlOpenness Compatibility Controlled migration (Turbo Tax) Open migration (Linux) Performance Performance play (Nintendo, Palm Pilot) Discontinuity (CD audio system, memory stick)