1. Competitive Strategies
Ramiro Montealegre
, BUS 443
INSTITUTO
de EMPRESA
Competitive Strategies
in the
Internet Age

2. BACKGROUND - How is your company using the Internet today
- IT and Internet knowledge
- How is your company using the Internet today
- Your role in your company Internet strategy
Expectations about this course

3. STUDENTS' BACKGROUND - NAME - DEGREE & MAJOR - WORKING EXPERIENCE
WHY REGISTERED FOR THE COURSE
EXPECTATION ABOUT THE COURSE

4. OBJECTIVES FOR THIS COURSE
- The emergence of a GLOBAL INFORMATION INFRASTRUCTURE &
ELECTRONIC COMMERCE
- HOW to think about e-Business, and HOW to rethink business strategy
- Present VIVID business examples to illustrate principles
- Issues in MANAGING DATA, INFORMATION & KNOWLEDGE
to EXPLOIT their potential for COMPETITIVE ADVANTAGE.
- ROLE & RESPONSIBILITY of top and middle MANAGEMENT in
e-Business DECISIONS.

5. TOPICS TO BE COVERED - Effects of IT on strategy and competition
- Framing e-Business market opportunities
- Managing in the physical and virtual worlds
- Exploiting the virtual value chain
- The customer interface for e-Business
Implementation of e-Businesses
Metrics for evaluating e-Businesses
International Issues of e-Business

6. TECH-WATCH: 2001 may mark the emergence
of the Chief Strategy Officer, or CSO.
The CSO's role is to ensure that an organization's e-business
solutions are competitive.
“An ideal CSO has a broad understanding of the marketplace
and understands both technology and business needs. It
could be someone who came up through the IT or marketing
ranks. Ideally, it takes a jack-of-all-trades and a master of all
of them to fill the job."
TechRepublic, January 10, 2001

7. CASES TO BE ANALIZED
- CNET
- DELL ONLINE
- AIR PRODUCTS
BOSTON.COM
AMAZON
PATAGON

8. THE "CASE METHOD" OF TEACHING
- BASED ON ACTUAL COMPANY SITUATIONS
- ILLUSTRATE ISSUES IN USING & IMPACT OF IT
- CRITICAL ELEMENTS FOR LEARNING:
PRIOR PREPARATION
ATTENDANCE
CAREFUL ANALYSIS
PARTICIPATION IN CLASS

9. CLASS EVALUATION
1. Participation (50 %)
a. Attendance and Contribution (30%)
Student Class Attendance Preparation Participation Engagement Flow-of-Ideas Quality
b. Case study write-up (20 %)
2. Team work (50 %)
a. Facilitation (30%)
b. Critique (20%)

10. Class Procedure for Facilitation/Critique Sessions
First Team: Facilitation (30 minutes)
Second Team: Critique (15 minutes)
Instructor: A third view of the topic

11. References The E-business (R)evolution. D. Amor. Prentice Hall 2000
Internet Business Models and Strategies. A. Afuah and C. Tucci.
Irwin/McGraw-Hill 2000
Electronic Commerce: A Managerial Perspective. E. Turban,
J. Lee, D. King, and H. M. Chung. Prentice Hall 2000
Electronic Comerse. J. Rayport and B. Jaworski, B.
McGraw-Hill 2001

12. For Tomorrow
Please prepare: CNET 2000

13. on strategy and competition
CEDIR Program
Summer 2001
Professor Ramiro Montealegre
Effects of IT
on strategy and competition

14. What is e-Business Technology-mediated exchanges between parties
(individuals, organizations, or both) as well as the
electronically based intra- or interoganizational
activities that facilitate such exchanges.
Rayport and Jaworski, 2000

15. How is e-Business Different from Traditional Commerce
- Core strategic decisions are technology-based
- A real-time competitive responsiveness
- The store is always open
- A technology-based customer interface
- The customer controls the interaction
- knowledge of customer behavior
- Network economics

16. What if YOU are in charge of a new e-Business initiative
- Which customer groups should I serve?
- How do I provide a compelling “value proposition”
- How do I communicate with customers?
- What is the content, “look-and-feel,” community,
and degree of personalization?
- How should I structure my organization?
- What are my potential partners?
- How will this business provide value to shareholders
- What metrics should I use to judge progress?

17. Where to Play: Online / Offline
McDonnald’s
Customer
Interface
Fulfillment
Systems
Yahoo!
Bn.com
Egghead
Amazon.com
Source: Rayport & Jaworski 2000

18. What Is Strategy
Operational Effectiveness: Necessary but Not sufficient.
Companies should establish a difference that it can preserve.
Essence of strategy = choosing different activities than rivals.
Strategic positions base on needs, access,or product/services variety.
Trade-offs are essential to strategy.
Fit locks out imitators: need to copy the complete system.
Strategic position should have a horizon of a decade or more.
General manger role: defining company’s position, making
trade-offs, and forging fit among activities.

19. Alternative Views of Strategy
Past Decade Today
- One ideal competitive position - Unique competitive position
- Benchmarking and achieving best - Activities tailored to strategy
practices
- Aggressive outsourcing and - Clear trade-offs
partnering
- Advantages rest on a few key - Advantage arrives from fit across
success factors, resources, competencies activities
- Flexibility and rapid responses - Operational effectiveness a given

20. Five Forces Determine Industry Profitability
New Entrants
Threat of
New Entrants
Industry
Competitors
Rivalry Among
Existing Firms
Bargaining Power
of Suppliers
Suppliers
Buyers
Bargaining Power
of Buyers
Threat of
Substitute Products
or Services
Substitutes

21. Opening Questions 1. What business are we really in?
2. Who are our biggest competitors? What new competitors
will this technology make possible in the future?
Who else does, or can, provide the same product/service?
3. Can we Integrate our clients operations with our own?
4. Can we lock competitors out through use of technology?
5. Has our operating environment been changed by deregulation
of our industry?
6 Has our environment change due to deregulation of a
related industry?
7. Can we get there first? Should we attempt to make this move?

22. Risks of IT Success
1. Change basis of competition to a company’s disadvantage
2. Lower entry barriers
3. Bring on litigation or regulation
4. Increase customers’ or suppliers’ power to the detriment
of innovator
5. Bad timing
6. Indefensible and fail to produce lasting advantages
7. Threat to large, established competitor
8. Inadequate understanding of industry dynamics
9. Cultural lag and perceived transfer of power

23. Low Low Strategic impact of existing systems
Factory Strategic
Support Turnaround
High
Strategic impact
of existing systems
Low
Low
High
Strategic impact of applications
development portfolio

24. Framework for Market Opportunity
Seed Opportunity in Existing/New Value Systems
Uncover Opportunity Nucleus
Identify Target Segment(s)
Resource-Based Opportunity for Advantage
Assess Opportunity Attractiveness
Make “Go/No Go” Assessment
Source: Rayport & Jaworski, 2000

25. Generic “Value Types” Trapped Value - More efficient markets
- More efficient value
systems
- Ease of Access
- Disrupt pricing power
New-to-the World Value
- Customize offerings
- Extend reach and access
- Build community
- Collaboration of multiple
people across locations/time
- New functionality/experience

26. Segmentation Type Examples - Variables
Geographics Country, region, city
Demographics Age, gender, income
Firmographics # of employees,
company size
Behavioral loyalty, prior purchases
Occasion Routine occasion,
(Situational) special occasion
Psychographics Personality, lifestyle
Benefits Convenience, economy,
quality

27. TECH-WATCH: 2001 may mark the emergence
of the Chief Strategy Officer, or CSO.
The CSO's role is to ensure that an organization's e-business
solutions are competitive.
“An ideal CSO has a broad understanding of the marketplace
and understands both technology and business needs. It
could be someone who came up through the IT or marketing
ranks. Ideally, it takes a jack-of-all-trades and a master of all
of them to fill the job."
TechRepublic, January 10, 2001

28. Priceline.com Segmentation
Purpose
Flexible
Personal
Business
who
In advance Flexible Last Minute Other
Going
home
Student
Retirees
Vacation
Retirees
Family
with
child
Other
Low-mid
income/
frequent
flyer
Mid-high
Vacation
All
Other
Trips
Getaways
Business
Trips
Last Minute
Vacation
Vacation
Nonfamily Trips
Groups
Group Trips

29. CASE STUDY TEACHING
OBJECTIVES
- To complement your analytical and problem-solving skills:
learning to ask the "right" questions.
- To gain exposure to a VERY demanding form of pedagogy:
"In a case study teaching, the instructor is a planner, host, moderator, devil's
advocate, fellow-student, and a judge." [Prof. R. Christensen a leading case
study professor at the Harvard Business School].
- To be prepared:
1) Read and digest the facts of the case study
2) Identify key issues, and look for data to support your analysis.
3) Use your working team to test and refine the analysis of the case.
4) Plan the approach for addressing the case's issues.
5) Plan the strategy for class participation.
6) Get engaged emotional and intellectually.

30. CASE STUDY CRITIQUE
OBJECTIVES:
- To present a complementing analysis to the one discussed in class.
- To debrief students in 15 minutes:
1) Most important issues/lessons learned from case study and class discussion.
2) Present key issues not discussed during facilitation.
3) Expand on a specific management or technology issue identified in the case study.
FOR CLASS MEMBERS
- To provide an opportunity to learn from different perspectives and teaching dynamics.
- To help in creating (renewing) the sense of fun and excitement.
- To strengthen the class philosophy of high involvement in the learning process.

31. The History of Encyclopedia Britannica
- Founded in Scotland in 1768, but the world’s most prestigious
and comprehensive encyclopedia since 1941.
- Its content was revised every 4/5 years.
an all-time peak of about $650 million.
With generous margins, and a compelling and stable brand.
- CD-ROM came from nowhere, and then the Internet,
sales decreased over 80%.
- Since 1995, investment bankers tried to find a buyer.
In 1996, Jacob Safra paid less than half of the firm’s book value.

32. Dilemma of Institutions Going Online
They have been penalized
for not doing enough fast enough,
as well as for doing too much too quickly.