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Teaching courses about Internet Businesses: The capstone approach

Teaching courses about Internet Businesses: The capstone approach. Internet Business Models and Strategies: Text and Cases Allan Afuah Christopher L. Tucci Published by McGraw-Hill / Irwin http://www.mhhe.com/afuahtucci2e/. Capstone Approach to Strategy.

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Teaching courses about Internet Businesses: The capstone approach

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  1. Teaching courses about Internet Businesses: The capstone approach Internet Business Models and Strategies: Text and Cases Allan Afuah Christopher L. Tucci Published by McGraw-Hill / Irwin http://www.mhhe.com/afuahtucci2e/

  2. Capstone Approach to Strategy • Takes the General Manager’s point of view • General Manager’s primary responsibility is the performance of the firm • Performance often means profitability • Primary goal is to gain and maintain a competitive advantage • Having a competitive advantage means earning a higher rate of return than rivals

  3. Determinants of performance Business Model • Components and linkages • Dynamics Change • Properties • Underpinnings Performance Environment • Competitive • Macro

  4. Internet performance Internet Business Model • Components and linkages • Dynamics Internet • Properties • Underpinnings Performance Environment • Competitive • Macro

  5. Internet Business Models and Strategies Business Model • Chapter 4: Components of a business model • Chapter 5: Dynamics of business models • Chapter 6: A taxonomy of business models • Chapter 7: Value configurations and the Internet • Chapter 8: Valuing and financing Internet start-ups • Chapter 9: Appraisal of business models Chapter 1: Introduction and overview Internet • Chapter 2: Overview of Internet technology and value network • Chapter 3: Competitive landscape-transforming properties of the Internet Performance • Chapter 10: Competitive and macro environments Chapter 11: The general manager and the Internet Chapter 12: Sample analysis of an Internet business model case Environment 2

  6. Figure 2.1: Internet components User’s computer POP Homes & small organizations User’s computer Router (digital switch) backbone Individuals Wireless gateway User’s computer User’s computer Gateway (LAN server) Server (web / file) Other mobile devices Cell phones PDAs Enterprises

  7. Internet Value Network (continued) Large organization POP Home users LAN ATM switch High Speed backbone line Home users Home users OSPs (e.g., AOL) Access to proprietary content and the Web ISPs Access to the Web POP POP

  8. Chapter 2: Value network profit sites with representative companies I. Users 1. E-commerce (Dell, Amazon) 2. Content aggregators (AOL, Yahoo) 3. Market makers (Priceline, eBay) 4. Brokers-agents (Schwab, E*Trade) 5. Service providers (EDS, EMC) II. Communications service providers 6. Backbone (MCI Worldcom, AT&T) 7. ISPs/OSPs (AOL, MSN) III. Suppliers 9. Content creators (Disney, Time-Warner) 10. SW suppliers (Microsoft, Oracle) 11. HW suppliers (IBM, HP) Homes and organizations 8. Last Mile (Verizon, SBC)

  9. Chapter 3: What are those properties of the Internet that potentially have an impact on inter- and intra-firm activities? Properties of the Internet • Mediating technology • Universality • Network externalities • Distribution channel • Time moderator • Information asymmetry shrinker • Infinite virtual capacity • Low cost common standard • Creative destroyer • Transaction cost reducer 5-Cs Coordination Commerce Community Content Communication Business Model Performance Environment

  10. Chapter 3 Commerce C2C C2B Consumer Priceline.com eBay From Business VerticalNet Amazon.com B2C B2B Business Consumer To

  11. Chapter 4 Successful Business Model • High Customer Value • Complementary Scope • Control over Pricing • Defensible Sources of Revenue • Consistent Connected Activities • Unique, Inimitable Capabilities • Excellent Implementation • Sustainability for the Future • Low cost • Correct profit site

  12. Chapter 4 Customer value Implementation Activities Pricing Scope Capabilities Revenue sources Cost Sustainability Profit site

  13. Chapter 4 Critical Business Model Questions

  14. Critical questions for a business model (continued) Chapter 4

  15. Chapter 4 Critical questions for a business model (continued with components emphasized in the second edition)

  16. Chapter 5 Generic sustainability strategiesand complementary assets Complementary assets Freely available or unimportant Tightly held and important I II • Team-up Joint venture Strategic alliance Acquisition • Run • Run High Imitability • Block • Team-up Joint venture Strategic alliance Acquisition IV III Low • Block

  17. Chapter 5. Mapping of capabilities into product-market positions

  18. Chapter 5. Disruptive technological change

  19. Chapter 5 Impact of a technological change on co-opetitors

  20. Chapter 5 Dynamics of the Internet • Determine strengths and weaknesses of business model • Build business model Defend competitive advantage Locate profit site MATURE or STABLE Sales GROWTH or TRANSITIONAL EMERGING or FLUID Time • Build capabilities • Build network • Invest in infrastructure • Win customers • Build brand name • Team-up/Run • Where in the internet value network do you want to be? Internet actions:

  21. Chapter 6 Business Model du jour • Advertising • Auction • E-hub • Intermediary • Subscriber • Disintermediation • Coffee Shop • Picks & Shovels • Tens of others

  22. Chapter 6. Summary of business model taxonomy

  23. Chapter 6. The basis of business models Profit Site (from Chapter 2) Revenue models — ads — subscription — commission — fee-for-service — production — markup — referral business model classification Commerce model — B2C — B2B — P2P (C2C) Pricing models — fixed — one-to-one — auction — rev. auction — barter

  24. Chapter 7 Value chain Firm infrastructure activities Support activities Research, development and design Human resource management Dealer support and customer service Purchasing, inventory holding, materials handling Mfg Marketing & Sales Outbound logistics Primary activities Purchasing Vendor relations Inbound logistics Inventory holding Materials handling Integration Raw materials Capacity Location Parts production Assembly Prices Advertising Promotion Sales force Packaging Brand Channels Inventory Warehousing Transport Warranty Speed Captive/ independent

  25. Chapter 7 Value chain Firm infrastructure Human resource management Support activities Technology development Procurement Inbound logistics Outbound logistics Marketing & Sales Operations Service Primary activities Procurement R&D Operations Marketing Distribution Service Purchasing Vendor relations Inbound logistics Inventory holding Materials handling Source Sophistication Patents Product tech. Process tech. Product design Integration Raw materials Capacity Location Procurement Parts production Assembly Prices Advertising Promotion Sales force Packaging Brand Channels Integration Inventory Warehousing Transport Warranty Speed Captive/ independent

  26. Chapter 7 Value shop Problem Finding • Collect patient history • Patient examination • Diagnostic tests • Maintain patient data Problem Solving • Generate treatment plans • Evaluate treatment plans Choice • Choice of treatment plan Control/Evaluation • Monitor patient history • Maintain patient data Execution • Treatment Value shop of a general practitioner

  27. Chapter 7 Activities of the Value Network Network promotion/ Contract management • sell services • evaluate membership • contract • monitor and enforce Service provisioning • enable buying & selling • support buyers & sellers • ancillary services Primary Infrastructure operations • administration • operate IT systems • maintain "liquidity" • link with ancillaries Firm infrastructure Human resource management Technology development design new services reconfigure infrastructure expand network Procurement Secondary Adapted from Charles B. Stabell and Øystein D. Fjeldstad, "Configuring Value for Competitive Advantage: On Chains, Shops, and Networks," Strategic Management Journal 19 (1998), p. 430.

  28. Britannica Chapter 7 Customer Consumer Authors Publishers Wholesalers Retailers Microsoft Customer Consumer Author and Publisher The Internet offers: • Multimedia capabilities (motion) • Searching ability • Links to the rest of the world • Limitless capacity • Frequent and instantaneously available updates • Saves space and weight • Customers go to Microsoft • No printers, No door-to-door salespeople • More fun for kids • Available to anyone anywhere anytime • Customers can form communities

  29. Chapter 8: Valuing and financing a business model or startup Business model component attribute measures Profitability predictor measures Profitability measures Number of subscribers Network size Content Ease of use Management leadership Margins Market share Revenue share growth rate Profits (earnings) Cash flows

  30. Chapter 9 Appraising a business model

  31. Chapter 9 Appraising a Business Model

  32. Chapter 9 Appraising a Business Model (continued)

  33. Chapter 10: Competitive and macro environments Business Model Internet Performance Environment Competitive Five forces Industry drivers Macro

  34. Chapter 11 Incumbent vs New entrants: Advantages and disadvantages • Incumbent disadvantages • Dominant managerial logic • Competency trap • Fear of cannibalization • Channel conflict • Political power • Co-opetitor power • Emotional attachment • Customers can form communities • Incumbent advantages • Have complementary assets • Internet technology is easy to imitate • New Entrant disadvantages • May not have some complementary assets • New Entrant advantages • Less inertia • Equity capital • Attraction of talent

  35. Chapter 11 Appraisal of firm’s business model What are firm’s strengths and weaknesses? What are the sources of competitive advantage? Are the sources sustainable? Evaluate current performance Does firm have a sustainable competitive advantage? Business Model Change Performance Evolution of Internet Strategic change Macro changes Environment Competitive analysis Appraisal of competitors’ business models Porter’s 5-forces Likely actions and reactions of competitors Industry value drivers What are the major drivers of cost and differentiation? How has the Internet affected them? Macro environment Economic, social, demographic and political forces Opportunities and threats

  36. Chapter 12: Sample case analysis • Cases • Broadcast.com • Webvan: Reinventing the milkman • Reflect.com • VerticalNet • LiveREADS • Beyond Interactive • Hotmail: Free e-mail for sale • GMBuyPower.com • iVillage: Innovation in Women’s Websites • eBay, Inc. • Microsoft Xbox Online • Sun Microsystems: Jumping for Jarva • OSCAR • E*Trade • RIM Blackberry • Sprint PCS • Napster: The Giant Online Pirate Bazaar

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