competitive advantage in the digital economy0
TRANSCRIPT
8/3/2019 Competitive Advantage in the Digital Economy0
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Competitive Advantage in thedigital economy
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The internet is emerging as acritical backbone of commerce.
The potential functionality of theweb is broad and varied
Content
Customer service
Seamless service
Developing „communities‟
The internet is an enabling
technology
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The value of eCommerce
Improvements in efficiency
In the B2C market cost reduction is dramatic:
Business cost of atypical banking
transaction
Business cost of atravel reservation
Business cost of abrokerage transaction
Branch: $1.07 Travel
Agent
$10.00
Full-service
Broker$150.00
ATM: $0.27
Discountbroker $69.00
Internet $0.01 Online $2.00
Onlinebroker $10.00
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The value of eCommerce
B2B segment – opportunities toreduce costs and increase profits. Immediate return on investment –
reduced cycles times and channel costs Significant new revenue sources –
ability to expand quickly into newmarkets – overseas - niche
Preferred vendor status, achievedthrough ease of interaction & B2Bprocess integration
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Transforming the value chain
eEconomy is redefining valuecreation across the spectrum.
The Enterprise: value creationbegins at this level
Strategy: an e-enlightened strategy
Technology: Internet enabled
Process: virtualised or “e” processes.
People: an “e” enabled workforce
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Value creation
The extended enterprise:
Value creation also extends outside of the enterprise to relationships withcustomers and suppliers
The extended enterprise will find newopportunities in:
Product/service innovation
More powerful & efficient channels
Customer relationships
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Industry, markets, economictransformation
As extended enterprises cooperateand collaborate, the traditionalboundaries are blurring.
eCommerce is reshaping allindustries and markets – the entireeconomy.
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What does this mean fororganisations?
Organisations need to look beyondtheir traditional boundaries.
Need to consider collaborationwithin and across industries.
Move from a single company/singleindustry mindset to multi-company
collaboration across industries
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Competitive Advantage
Establishing a profitable andsustainable position against theforces that determine industrycompetition.
Has become more difficult tosustain an advantage for an
extended period.
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Porter’s Competitive Forces model
and strategies
Well known model for analysingcompetitiveness.
Used to develop strategies forcompanies to increase theircompetitive edge.
Demonstrates how I.T. can enhance
the competitiveness of corporations.
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Porter’s Five Forces
The structural attractiveness of anindustry is determined by thesefive underlying forces of competition.
Analysing the forces illuminates anindustry‟s fundamental
attractiveness. The strength of the five forces will
differ between industries.
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Porters Five Forces
http://video.google.com/videosearch?hl=en&rlz=1W1SNYK_en&q=porters+competitive+forces+model&um=1&ie=UTF-8&ei=xZvHSbW_J-TGjAfw9oiGCw&sa=X&oi=video_result_group&resnum=4&ct=title#
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Threat of Substitute products
By making the overall industrymore efficient, the internet canexpand the size of the market.
Negative: it also creates newsubstitutes
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Bargaining power of channels &
end users
Eliminates powerful channels orimproves bargaining power overtraditional channels.
Shifts bargaining power to endconsumers.
Reduces switching costs.
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Barriers to entry
Reduces barriers to entry such asthe need for sales force, access tochannels, and physical assets – anything that internet technologyeliminates or makes easier to doreduces barriers to entry.
Internet applications are difficult tokeep proprietary from new entrants.
A flood of new entrants has come
into many industries.
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Bargaining power of suppliers
Procurement over the internet tendsto raise the bargaining power oversuppliers – but it can also givesuppliers access to more customers.
The internet provides a channel forsuppliers to reach end users
reducing the leverage of interveningusers.
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Rivalry among existing competitors
Reduces differences amongcompetitors as offerings are difficultto keep proprietary.
Migrates competition to price.
Increases the numbers of competitors by widening the
geographic market.
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Strategies to sustain a position
against these forces
Cost Leadership – online retailing
Lowest cost
Difficult to sustain – price wars
Budget Travel, Ryanair Differentiation
Be unique
Quality – Rosenbluth International, a travel agent
http://www.rvacations.com/ Focus
Narrow scope segment and achieve either costleadership or differentiation – opportunity forcustomisation
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Additional strategies
Growth: acquire market share, web basedselling can support this
Alliances: Work with business partners –
synergy and opportunities for growth.Particularly popular in ecommerceventures.
Innovation: New products & services and
new ways to produce them: involve thecustomer (Web 2.0 – participation) alsoreverse electronic auctions.
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Additional strategies
Improve internal efficiencies
Reduce costs and improve quality.Web-based systems improve
administrative efficiency twenty tothirty fold.
Customer oriented approaches &
CRM Make the customer happy – Web-based
systems are particularly effective – personalised, one-to-one relationships.
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Strategies
These strategies are usuallyinterrelated e.g. Innovations areachieved through alliances, orthrough getting closer to thecustomer.
Cost leadership may increase
customer satisfaction and lead togrowth.
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Defending against the Five Forces
Intranets: internal efficiencies
Extranets: a private network that securelyshares part of an organization's information
or operations with suppliers, vendors,partners, customers or other businesses.
Shrink processing and order time as wellas costs – increase profitability and the
desire for suppliers to work together – reduce bargaining power of suppliers.
Provide customers with freesoftware & other computer services:
Reduce customers bargaining power
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Defending against the Five Forces
Frequent flyer/buyer programs inairlines, hotels, restaurants etc.
Increase loyalty – switching costs
Intense competition from Rivals – use web to get closer to thecustomer
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Value Chain Analysis
Part of the larger stream of activities, whichPorter calls a value system.
Analyse internal operations to increase
efficiency, effectiveness andcompetitiveness.
Identify how IT can provide support – addvalue
Can be used for an individual company oran industry.
Value systems seek to span multiplegroups and organisations to create benefits
for BOTH intermediaries and end-customers
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Porter’s (2001) Value Chain
IT can
create or enhance product features:customisation
Increase switching costs: increaseloyalty
Contribute to internal efficiency
Organisational efficiency – businesspartnerships creating synergy andinnovation.
Can create new business models –
reverse auctions, „fee for service‟ instead of traditional commissions
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Tourism Supply Chain
Management
Ref: Xinyan Zhang, Haiyan Song,George Q. Huang (2009)
Available on webcourses
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Supply Chain Management &
Tourism
Highly competitive environment hasforced tourism firms to look for ways toenhance their competitive advantage.
Considerable growth in theimplementation of new informationtechnologies and the development of
new commercial formats such aseTourism.
Also - effective tourism supply chainmanagement (TSCM).
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TSCM
Can be referred to as a set of approachesutilized to efficiently manage the operationsof the tourism supply chain (TSC) within a
specific tourism destination to meet theneeds of tourists from the targeted sourcemarket(s) and accomplish the businessobjectives of different enterprises withinthe TSC.
The TSCM philosophy requires movingaway from arms-length relationshipstoward coordination across organizationsthroughout a TSC.
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TSCM
Tourism – an amalgamation of products and services.
Often viewed as value added chains of different service components that formservice networks.
Therefore, identifying ways to manage
these networks is vital, especially fortourism firms that are keen tomaintain a competitive advantage overtheir equally efficient rivals
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TSCM
Moving away from just looking atpromotional and marketingactivities – distribution side.
To focusing on the supply side -supply networks involving inter-firmrelationships and product
development. Collaboration, co-operation and co-
opetition
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Why focus on the Supply Chain?
Extent of competitiveness has seen a moveaway from focusing on the individualorganisation.
To focusing on the network of enterprisesthat are engaged in different functions,ranging from the supply of raw materialsthrough the production and delivery of endproducts to target customers.
Can also focus on the destination
http://www.amadeus.com/us/x194133.html
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Defining the supply chain
A simple three stage approach
strategic,
tactical, and
operational
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Strategic level
decisions concerning long-termissues such as:
Demand planning,
strategic alliances,http://www.britishairways.com/travel/airline-alliances/public/en_gb
new product development,
outsourcing,
supplier selection,
pricing, and
network configuration decisions.
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Tactical Level
Involves medium-term decisionssuch as:
inventory control,
production/distribution coordination
material handling, and
equipment selection.
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Operational Level
Concerns weekly or daily eventssuch as:
vehicle scheduling,
routing,
workforce allocation, and
process planning.
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Typical tourism value chain
A traditional tourism value chainconsists of broadly four components:
1. the tourism supplier,
2. tour operator,
3. travel agent and
4. customer,
which are in a single linked chain.
IT has influenced this – opportunitiesto shorten the chain
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Tourism Supply Chain
Tourism supply chains involve manycomponents - not justaccommodation, transport andexcursions, but also bars andrestaurants, handicrafts, foodproduction, waste disposal, and the
infrastructure that supports tourismin destinations.
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COLLABORATIV
OPERATIVRELATIONSH
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TSCM
Supply chains operate throughbusiness-to-business relationships,and supply chain managementdelivers
sustainability,
performance improvements alongside
financial performance,by working to improve the businessoperations of each supplier in the supplychain.
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TSCM
These all form a part of the holidayproduct that is expected by tourists
Just as no tour operator wouldprovide 1-star transport to takecustomers to a 5-star holiday hotel,the sustainability of a holiday, like
quality, depends on theperformance of all the links in thetourism supply chain.
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E-value chain
Define service direction
Define value elements (essentialcomponents)
Opportunities for value creation -synergies
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Internal e-value supply chain
Define concept for web sitedevelopment
Design web-based tourist decisionmaking process
Design e-travel data flow withinweb site and organization
Information management with webdatabase system.
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External e-supply chain
Define e-travel alliances/networks
Define joint e-travel activities
Define commission/price Information sharing with web
database system
Networking based on secure system
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E-value - networks
Forming networks that coordinate much of their business through the virtual marketplace.
Interdependence between tourism firms within
a destination. Based on complementary product, e.g.,
activities, accommodation, transport and food,
Clients are referred from one organisation to
another to provide a comprehensive touristexperience
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Opodo, formed in November 2001,is an online airline collaborationcreated by Air France, Aer Lingus,
Alitalia, Austrian Airlines, BA,Lufthansa, Finnair, Iberia and KLM.
Orbitz, is a collaboration
between American, Continental,Delta, Northwest and Unitedairlines.
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Though the collaborators are directlycompeting against one another, byforming a multi-company alliance
they are able to maintain a greateronline presence in the face of otheronline opposition. They also have thebrand power that emanates from acollaborative marketing approach.
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lastminute.com in January 2002 establisheda joint venture with Kinki Nippon Tourist,Nippon Travel Agency and MitsubishiCorporation/MC Capital Fund to launch the
brand in Japan. Similarly, in March 2002 Travelocity forged
a collaboration with 17 Japanese airlines, tolaunch tabini.com in Japan.
A collaborative approach also allowed thereverse auction e-mediary, Priceline.com,to access the Hong Kong market.
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Chain effects
Easy approach and search forinformation
Cutomisation e-travel arrangement
Real - time quotation
Real - time confirmation
Real - time secure payment
Internal/External tracking/controlling
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eTravel Success factors
Speed (Real-time/Interactive)
Integration Customisation
Tracking capability
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E-Value
SMEs that exclude themselves fromthese linkages can end updisadvantaged as such inter-firm
connections often results in marketvisibility and strategic leverage.
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Benefits
Reduce competition andgenerate barriers to entry
New market opportunities
Increased speed of marketentry
More efficient distributionand transactionalprocesses
Technological synergies Shared risk
Resource sharing
Costs
Partner conflicts andcompromises
Lack of trust
Over-dependence onpartners
Cultural differences
Loss of a degree of independent control
Partner domination Industry inertia
Channel cannibalisation
Managing a diversity of partners
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Future Approaches
Networks of partners
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Virtual Clustering
There is increasing evidence that theperformance of existing enterprises issignificantly improved by clustering.
By networking and sharing knowledge,small firms are able to compete for andaccess specialised resources andinformation systems as well as internalisecompetencies and assets that typically areinternalised by large firms with economiesof scale
Clustering can provide competitiveadvantages and benefits to small firms that
would not be available without clustering
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Virtual Clustering
Clusters and networks are interdependent,whereby small business network structuresunderpin the growth and sustainability of
clusters. Horizontal Cluster: Same sector e.g. Hotels
Vertical cluster: supply chain members suchas suppliers, consumers and related services.
Diagonal: concentration of complementary orsymbiotic activities, whereby each firm addsvalue to the other (even though their productsmay be quite different), thus creating a valuechain.
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Virtual Clustering
Virtual clusters – geographiclocation is of no relevance.
Technology provides a base forcollaboration and co-operation
Opportunity for developingcompetitive advantage
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E-Value
Diagonal integration and value adding ismade possible through ICT-based
marketing and destination portals. e-marketplaces can perform a number
of functionalities, ranging fromprocurement to customer relations and
knowledge management, to supplychain and value chain management.
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Challenges
Embracing ICT and technology isstill a complex process for SMEs.
A technology-driven initiative mayleave some operators with no senseof belonging and no perceivedsense of value in (virtual) clustering
(Braun, 2004, 2002). Trust is critical
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Challenges
According to Porter‟s (2001) view of competitive advantage, the vitalityand competitiveness of destinations
is essentially linked to thecompetitiveness of individual firms.
Individual tourism SMEs often lack
the required skill base and do nothave a strategic grasp of whole-of-destination value creation
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Challenges
While connectivity has the potential toincrease regionally based tourism SMEs‟ visibility in the market place, small tourism
enterprises have been facing difficultiesembracing ICT and e-commerce.
The uptake of technology has not been apriority for many small tourism firms.
Micro and small tourism enterprisesgenerally consider themselves outside thetourism value chain, despite the fact thatmost of their customers are tourists
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eValue
New technologies have influenced the supplychain -the web is considered an important newdistribution channel,
Due to prevailing GDS make-up and the slowuptake of ICT, many small tourism operatorshave continued to rely on traditional supplychains for market exposure.
Considering that SME isolation from GDSeffectively deters their access to broader travelmarkets,
It is vital therefore that more effective andcomprehensive linkages are considered.
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References
Turban, E. et. al (2004) ElectronicCommerce a ManagerialPerspective, London, Prentice Hall.
Turban, E. (2002) InformationTechnology for Management, New
York, J. Wiley. The Imporatnce of Value Chains for
Tourism SME‟s (Braun,2005) – on