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Impact of Converging Industries on Corporate Strategy

Impact of Converging Industries on Corporate Strategy Robert B Lamb Stern School of Business The Convergence of the Internet, Telecom, Cable, Satellite, Computer, Entertainment and Information Industries Robert B. Lamb Stern School of Business Contents Today’s Digital Revolution

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Impact of Converging Industries on Corporate Strategy

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  1. Impact of Converging Industrieson Corporate Strategy Robert B Lamb Stern School of Business

  2. The Convergence of the Internet, Telecom, Cable, Satellite, Computer, Entertainment and Information Industries Robert B. Lamb Stern School of Business

  3. Contents • Today’s Digital Revolution • Drives the Convergence of Industries • Impacts Corporate Strategy by causing dynamic change in business environment: • to Networks of Strategic Alliances, • toPorter’s Five Forces of Competition, • tovalue of Core Competencies, Resources • to length of Sustainable Advantages, • Winner Take AllMkts, Virtuous/Vicious Cycle

  4. The Digital RevolutionDigital TransferDigital ManagementDigital Content:is the driving force of the convergence of industries

  5. Analyzing the Business Environment • Infrastructure & Distribution = Digital Transfer • Telecom Industry • Cable Industry • Satellite Industry • Internet • Enabling Technologies = Digital Management • Computer Industry (HW,SW,Svcs) • Internet Appliances • Internet Business to Business Management Links • Content Providers = Digital Content • Entertainment Industry • Information Industry • Internet Content

  6. Infrastructure & Distribution • Telecom Industry • Regional Bell Operating Companies • AT&T, British Telecom, Japan Telecom • Sprint, Worldcom filed for bankruptcy • Qualcomm – Palm; Motorola - Microsoft • Qwest [U.S. West] • Frontier[Global Crossings] • Northern Telecom, France Telecom • Deutsche Telecom, Olivetti-IT, Telmex • Vodaphone-AirTouch-Mannesman-Jtel • AOL TW Cable IP Telephony Launch 2004

  7. Infrastructure & Distribution • Cable Industry • ATT Broadband-(Telecommunications, Inc.- MediaOne) (acquired & then spin-off) • Time Warner Cable • Comcast+ ATT Broadband • Charter Communications • Cox Cable • Cablevision • Adelphia (under criminal investigation)

  8. Infrastructure & Distribution • Satellite Industry • News Corp. (DirecTV) - BSkyB, StarTV • EchoStar • Loral Space & Comm. Ltd. • Motorola, [Iridium-bankrupt] • Lockheed Martin • Teledesic - $9billion, 840 satellites • Craig McCaw & Bill Gates

  9. Enabling Technologies/Format • Computer Industry • Hardware (For Countless Industries from Fin Services, Health to Retail) • Dell, IBM, HP - Compaq, Apple • Intel, Motorola • Sun Microsystems, Silicon Graphics • Sony, Sharp, NEC, Toshiba • 3Com, Cisco Systems, Panasonic • Palm, Visor, General Instruments

  10. Enabling Technologies/Format • Computer Industry • Software (for countless industries from jets yield maximization, financial derivatives, drugs, architecture, to mapping oil fields) • Microsoft MSN, MS-NBC, WebTV • IBM , Oracle, SAP, I2, Ariba • Sun Microsystems (Java, Jini) • Computer Associates Int’l • Computer Sciences Corp. • Open Source - Linux and Apache • AOL - CompuServe - Netscape

  11. Enabling Technologies/Format • Computer Industry • Services(For Countless Industries) • Electronic Data Services (EDS) • IBM + PriceWaterhouse Coopers • GE Computer Services • Computer Sciences/Continum • Accenture (Formerly Anderson) • D &T, E & Y, Booze Allen,

  12. Content Providers • Entertainment Industry • AOL-Time Warner/ Turner • Disney- ABC, • GE-NBC-Vivendi Universal • Viacom - Paramount - CBS • News Corp. – Fox TV-20Th Century Fox • Sony/Columbia/ SONY/BMG Music? • MCA / Polygram • EMI/Warner Music? • VS. PIRATES: KAZAA, GNUTELLA

  13. Content Providers • Information Industry • Bloomberg +++ • Reuters, • Thomson Financial • Dow Jones • Google • Microsoft Network (MSN)+++ • Yahoo • America On Line / Compuserve ++ • Lexus – Nexus, Lycos

  14. Content Providers Entertainment Industry • Strategic Alliances & Acquisitions • AOL-Time Warner-Turner- EMI/Warner • Viacom-Paramount-CBS • Disney (many alliances) • GE-NBC-Vivendi/Universal/ USA Networks • News Corp + Direct TV • Bertelsmann Europe TV, • SONY/BMG Music? -EMI/Warner Music? • MCA- Polygram

  15. Threat of New Entrants Bargaining Power of Suppliers Bargaining Power of Buyers Rivalry Among Existing Competitors Threat of Substitute Products or Services Porter’s Five Forces Model(Telecom, Cable, Satellite) Su97 Sp04 High High Low Mix Med High High High High High

  16. Convergence (Internet Media) • Industry Attractiveness-Business Strength Matrix Industry Attractiveness High Medium Low AOL & TW 2000 High TW 2003 Business Strength Medium AOL 2003 Low

  17. Telecom Industry • Technological convergence undermines usefulness of many strategy tools • Industry Attractiveness-Business Strength Matrix Industry Attractiveness • WorldCom Bankruptcy • Mannesman • BellAt-GTE • NTelecom • BT, FT, DT • Japan Tel 1998 High Medium Low 2002 MCI 2004 AT&T World Com High RBOCs Vodaphon AT&T Business Strength Medium WorldCom 2002 Low

  18. Industry Attractiveness High Medium Low Bloomberg Thompson High Google Reuters Business Strength Medium Low Content ProvidersInformation Industry • Industry Attractiveness-Business Strength Matrix • Microsoft ++ • Yahoo ++ • Lexus-Nexus AOL TW CNN Telerate X

  19. The Convergence - Horizontal Entertainment & Information - Viacom-Paramount - Disney/ABC, - Time Warner Turner - GE-NBC, Universal/MCA - Bloomberg - Yahoo/Thomson - Microsoft Network - Microsoft - Oracle, Cisco - Sun Microsystems - AOL/Netscape - News Corp. - - -Time Warner Cable - Cox Cable, - Comcast - Sony/Columbia - CBS-Westinghouse - Matsushita/Universal - News Corp-Direct TV. - Reuters, Dow Jones - AOL/CompuServe - Miscellaneous - General Instruments - Intel, HP, Dell, Apple - Palm, Silicon Graphics - HP Compaq +DEC - Direct TV - - AT&T, Broadband - FT, DT - Bell Atlantic, GTE Computer (Hardware & Software) Telecom, Cable, Satellite

  20. The Convergence - Vertical Entertainment & Information - Viacom-Paramount - Disney/ABC, - Microsoft Network - GE-NBC, Universal - Bloomberg, Thomson - Yahoo, Google - - - AOL TW Telephony - Microsoft - Oracle, Cisco - Sun Microsystems - Palm - News Corp., - Time Warner Cable - Comcast AT&T Broadban - Cox Cable, - Sony/Columbia - CBS-Westinghouse - Matsushita - News Corp. - Reuters, Dow Jones - America On Line - Miscellaneous - General Instruments - Intel, Dell - Silicon Graphics - HP- Compaq-DEC - Direct TV - Motorola - FT, DT, BTelecom, JT - Bell Atlantic, GTE Computer (Hardware & Software) Telecom, Cable, Satellite

  21. Merger Portfolio Mgmt. Restructuring Transferring Skills Sharing Activities ...per Porter Alliance or Network Sharing knowledge as a competitive tactic per Hamel, Doz, Prahalad Corporate Strategy:Merger, Alliance, Network or Build from within? Build From Within ...

  22. The Convergence • Business Based • Technology Based • Resource Based • Intellectual Property • Establish an alliance ? • Form a merger ?

  23. Vertical & Horizontal Convergence Entertainment & Information - Viacom-Paramount - Disney/ABC, - Time Warner Turner - GE-NBC, Vivendi-Univer - Bloomberg - Yahoo, Thomson - Microsoft Network - Microsoft - Oracle - Sun Microsystems - AOL-Netscape - News Corp. - Time Warner Cable - Cox Cable, - Comcast - - Sony/Columbia - CBS-Westinghouse - News Corp. - Reuters, Dow Jones - Google - America On Line - Miscellaneous - General Instruments - Intel, HP, Dell - Silicon Graphics - Compaq-DEC - Direct TV, Sprint, - ATT Broadband, BTelecom - GTE, Vodaphone AirTouch - Bell Atlantic, FT, DT Computer (Hardware & Software) Telecom, Cable, Satellite

  24. The Convergence “These big players are ‘octopuses all with their hands in each other’s pockets. Where one industry starts and the other stops will be hard to decide.’ ” John Malone CEO & Chairman TCI, Inc.

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