1. Business Strategy in the Internet Age CEDIR Program Summer 2001
Professor Ramiro Montealegre
, BUS 443
Business Strategy
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. 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.

4. 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
- E-Business models
- The customer interface for e-Business
- Implementation of e-Businesses

5. CASES TO BE ANALIZED
- CNET
- DELL ONLINE
- WEBVAN: Groceries on the Internet
- STAPLES.COM

6. 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

7. AGENDA FOR TODAY 8:30 - 9:20 Overview of the course
Effects of IT on strategy and competition
9: :30 Break
9:30 -10:00 Group discussion
10:00- 11:00 Case CNET
11: :10 Break
11: :00 Framing e-business market opportunity

8. For Tomorrow
Please prepare: DELL ONLINE

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

10. 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

11. 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

12. 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?

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

14. 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.

15. 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

16. 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

17. 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?

18. 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

19. 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

20. Case Discussion: CNET CEDIR Program Summer 2001
Professor Ramiro Montealegre
Case Discussion: CNET

21. CNET Efforts to Change
- Strong financial performance, but embarked on change
- Systematic on their competitive position and strategy
- Collective effort--“get everyone on the same page”
- Attention to personnel transformation:
Updates more frequent that in print
Writing style
Link to retailers
Links to third party information sources

22. Follow-up - Jan 2000 Acquired mySimon for $700 Million
Became CNET Networks
- Mar Halsey Minor stepped down as CEO
Shelby Bonnie became the new CEO
- Jul 2000 Acquired ZDNET in a stock deal worth $1.6 B
Wall Street reaction was very positive
- Jan Fortune/CNET Technology Review special issue
TV on CNBC and Radio on CNET Radio
Top 10 Internet company
Web site in 25 countries and 16 languages

23. THE CNET CASE STUDY WERE:
THE PRIMARY OBJECTIVES OF
THE CNET CASE STUDY WERE:
TO EXPLORE THE ROAD MAP OF A COMPANY THAT BEGAN
PROVIDING VALUE-ADDED CONTENT AND CHANGED ITS
STRATEGY TO BECOME AN INFORMEDIARY (CONTEXT PROVIDER).
HOW THE COMPANY DETERMINED WHICH PRODUCT MARKET
AND CUSTOMERS TO SERVE, AND POSITIONED ITSELF RELATIVE
TO ITS COMPETITION
THE RISKS AND REWARDS FROM DIVERSIFYING INTO RELATED
LINES OF BUSINESS, LEVERAGING SKILLS AND RESOURCE
DEVELOPMENT
HOW TO CREATE INSTITUTIONAL MOMENTUM AROUND A
STRATEGIC PLANNING AND CHANGE MANAGEMENT PROCESS
IN A YOUNG COMPANY

24. Framing e-business market opportunity
CEDIR Program
Summer 2001
Professor Ramiro Montealegre
Framing e-business
market opportunity

25. 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

26. 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

27. 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

28. 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

29. 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

30. Options for Evolving an E-Business
Extend
Launch a new business
or add a new model
Enhance
Add functionality or improve product
/service that is currently offered
Extend
Enhance
Expand
Expand
Add products/services in existing line
or enter a new market
Exit
Exit
Drop a product/service
or exit a business