1. Internet Influences on the Marketing Environment
General characterization
Marketplace v. marketspace
Environment effects

2. How does the Internet change the marketing environment?
General effects
What does the marketplace look like?
How do companies organize themselves and their activities?
Specific effects
What activities can be carried out in the new environment?
How do the processes change?

3. What forces create change?
Technology
Hardware (infrastructure)
Software (things to do with hardware…)
People
In the aggregate
Acceptance of technology
Resistance to technology
In the specific
Interactions between consumers and marketers
Involvement of policy makers

4. Conceptualizing effects of change: population ecology
General framework to organize concepts and effects
Taken from biology
Adopted by business
Management: structure of firms
Marketing: modeling competition
Used by us
To characterize the Internet environment
To describe environment effects on marketing

5. A population ecology primer
Rule 1: things don’t exist in a vacuum
Importance of context
For existence
For growth
Importance of others in the context
Rule 2: “nice” guys finish last
Ecological imperative
Natural selection
Adaptation
Centrality of competition

6. Some useful jargon
Population ecology - systematic explanation of environmental factors that affect size and growth of a population
Translation: Internet as the ecosystem, industry as the population
Biotic potential - expected growth under optimal conditions
Example: Microsoft????????????
Environmental resistance - constraints to growth, checks to biotic potential
Example: Microsoft
Carrying capacity - point where resistance stops growth

7. From biology to business…
Marketing + technology = environment
viz., a virtual ecology
With different types of populations
DNS as classification system
Industries in .com domain as species populations
Environmental resistance = constraints to industry growth
E.g., available technologies
E.g., imposed regulations

8. Classifying constraints
Impediments to industry growth
Natural circumstances (density [in]dependence)
Limits to production (resources)
Supply-side (product components)
Demand-side (consumers)
Limits to implementation (technology)
Cultural conditions
Acceptance of technology
Imposition of regulation

9. Competition and the Internet ecology
Concepts from population ecology in marketing
Who succeeds, and how do they do it?
Nature of competition as function of…
Company characteristics
Industry characteristics
Product life cycle
Strategic activity
Application to the Internet ecology
Internet as product market
Internet as environment for product markets

10. Specialist Strategy in Action

11. Evolution and business ecosystems
Resource competition affects population structures
Competition => interaction => resource allocation => interbreeding => genetic variation
Industries also exhibit interbreeding
Mingled capabilities confer competitive advantage
“ “ blur industry boundaries
“ “ create business ecosystems
E.g., Time-Warner and AOL

12. Business Ecosystems

13. The Internet as a marketing environment
Characteristics
Virtual
From physical to digital
From marketplace to marketspace
Interactive
Person interactivity (via CME)
Machine interactivity
Constraints
Environmental (e.g., experiential limits)
Cultural (e.g., societal expectations)

14. Managing Experiential Constraints

15. Managing Cultural Constraints

16. Evolving Market Structures
The value chain notion
Set of activities undertaken to move a product from development to market
Each “link” is an opportunity to add value
Aka., “value-added” chain
Value chain structure can lead to competitive advantage
Example
McDonald’s in Russia (bought the farm…)

17. The Virtual Value ChainMa t r i x
Product
Design
Manufacture
Customer
Support
Product Distribution
Marketing
Sales
Structure information
(e.g., databases)
Collect information
Select information
Analyze information
Distribute information
Process opportunity
Product opportunities
Targeted
Advertising
Customizable
Products (e.g, Dell, RealPlayer)
Customer Relationship
Management
Tools
PHYSICAL VALUE CHAIN
VIRTUAL VALUE CHAIN

18. Adapting Structure to Add Value
Two basic mechanisms for moving materials through the value chain
Hierarchies (internal focus)
Movement controlled by managerial decisions
Related to vertical integration
High asset specificity, complex product description
Markets (external focus)
Movement via supply and demand
Low asset specificity, simpler product description

19. The Internet and Structure Shift
General effects of IT
Generally faster integration of value chain links
Enhanced communication between chain participants
Structure specific effects of IT
Changes to relative costs
Production costs
(Development and distribution)
High for hierarchy, low for market
Coordination costs
(Movement through chain links)
High for market, low for hierarchy

20. More About Internet Effects on Structure
Better communication leads to…
Simplified product descriptions
Decreased asset specificity (e.g., due to flexible manufacturing technologies)
Shifts in cost tradeoffs: one hypothesis
Lower production costs
==> hierarchies have less value
Lower coordination costs
==> markets have more value