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MD253 - E-Commerce Module 4: E-Commerce, Strategy, and Sustainable Advantage Spring 2003

MD253 - E-Commerce Module 4: E-Commerce, Strategy, and Sustainable Advantage Spring 2003. ICA: Industry & Competitive Analysis (Porter’s Five Forces). Potential New Entrants. Power of Suppliers. Industry Competitors. Power of Buyers. Substitute products or services.

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MD253 - E-Commerce Module 4: E-Commerce, Strategy, and Sustainable Advantage Spring 2003

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  1. MD253 - E-CommerceModule 4:E-Commerce, Strategy, and Sustainable AdvantageSpring 2003

  2. ICA: Industry & Competitive Analysis(Porter’s Five Forces) Potential New Entrants Power of Suppliers Industry Competitors Power of Buyers Substitute products or services

  3. Operational Effectiveness vs. Strategic Positioning • Operational Effectiveness – performing the same tasks better than your rivals. • Strategic Positioning – performing different tasks than your rivals, or performing the same tasks in a different way.

  4. How Do We Know If An Asset Yields Sustainable Advantages? • Rareness • Is the asset in limited supply or difficult to acquire? • Value • Does the asset yield value to the firm/customers? • Imperfectly Imitable • Is the asset impossible to imitate? • Non-Substitutable • Is the asset without comparable substitutes?

  5. Dealing with Competitive Threats • Strengthen brands • lower search cost, proxy quality, inspire trust • Create economies of scale • Differentiate products / constant innovation • Create switching costs • pref. databases, communities, loyalty programs • Dominate or create distribution channels • Leverage alliances and partnerships

  6. Customer Acquisition Costs Avg. Costs ‘00: $11 - catalog; $31 - physical; $82 – online Avg. Costs ’02: online $14 (Shop.org)

  7. A Strong Brand Can Be Extended

  8. If you build it... • … will they come? Maybe, but they might not return. Visitors Branding & Value Delivery Time

  9. Turnover 2.6 times / year avg. book in store 20 weeks Inventory shelf & warehouse stock 30% returns little float / title Turnover 26 times / year avg. book in house 2 weeks Inventory all warehouse stock few returns avg. 32 days of float / title Book Business: Scale in theMarketplace vs. Marketspace

  10. Search Costs & Commodity Products • Time available = X • High search costs • (e.g. time to visit a firm = X/3) • customer can only visit 3 firms • Low search costs • (e.g. time to visit a firm = X/30) • customer can visit 30 firms

  11. Differentiation & Switching Costs • Differentiate the product or service via: • mass customization • preference databases & collaborative filtering • communities • Switching costs created via: • preference databases & collaborative filtering • frequent buyer / loyalty programs • communities of users • learning, compatibility, standards

  12. Distribution Channels • PC Makers (Compaq, Dell, IBM, Gateway, Apple) • Operating System (Microsoft, Apple) • Browsers (Microsoft, Netscape/AOL, Gemstar) • ISPs (AOL, AT&T, BabyBells, WebTV) • Portals (Yahoo, MSN, Lycos, AOL) • Focused Aggregators (Quicken.com, Auto-By-Tel) • Set-Top Boxes & Net Appliances (UltimateTV) • Applications (RealPlayer, Launch.com, AIM/ICQ)

  13. “Speed is God, Time is the Devil”

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