Strategy and the Strategy and the InternetInternet

by Michael E. PorterHarvard Business Review, Vol. 79, No. 3, March 2001

指導老師　林娟娟教授資碩專一　史元瑜 99756009資碩專一　林仲葦 99756014報告日期 2010/11/22

OutlineOutline

BackgroundMyth of InternetReturn to fundamentalsInternet and industry structureFuture of Internet CompetitionInternet and Competitive AdvantageAbsence of StrategyInternet as ComplementConclusion

BackgroundBackgroundDot-com bubble (1995-2000)Distorted Market Signals

Discount provided by enterpriseCuriosity , freshness and discount that

influenced consumersDistorted revenue from capital gains

instead of profitability from products and services

Myth of InternetMyth of InternetFirst mover

◦Switching costs◦Brand advantages

Proprietary makes winner-take-all

Partnering improves industry economics

Return to fundamentalsReturn to fundamentalsStrategy creates economic value,

not Internet technologyBasis of economic value : price and

costEconomic value of Internet

◦Uses of Internet◦Internet technologies

Factors determine profitability ◦Industry structure◦Sustainable competitive advantage

Internet and industry Internet and industry structure(1/8)structure(1/8)Impacts of Internet

◦Reduce cost of communicating, information gathering, transaction accomplishing

Internet and industry Internet and industry structure(2/8)structure(2/8)Five underlying forces of

competition◦Bargaining power of suppliers◦Threat of substitute products or

services◦Rivalry among existing competitors◦Barriers to entry◦Buyers

Bargaining power of channels Bargaining power of end users

Internet and industry Internet and industry structure(3/8)structure(3/8)

suppliers

substitutes

competitors

barriers

buyers

Internet and industry Internet and industry structure(4/8)structure(4/8)Bargaining power of suppliers

Advantage Raise bargaining power over suppliersDisadvantage Suppliers access to more customers Reducing the leverage of intervening

companies Gravitate procurement to standardized

products that reduce differentiation The proliferation of competitors

downstream shifts power to suppliers

Internet and industry Internet and industry structure(5/8)structure(5/8)Threat of substitute products or

services◦ Advantage

Expand the market size by making the overall industry more efficient

◦ Disadvantage Creates new substitution threats

Internet and industry Internet and industry structure(6/8)structure(6/8)Rivalry among existing competitors◦ Disadvantage

Reduces differences Migrates competition to price Increasing competitors Lowers variable cost relative to fixed cost

Internet and industry Internet and industry structure(7/8)structure(7/8)Barriers to entry◦ Disadvantage

Reduces barriers to entry Difficult to keep proprietary from new

entrants New entrants has come into many

industries

Internet and industry Internet and industry structure(8/8)structure(8/8)Buyers

◦Advantage (bargaining power of channels) Eliminates powerful channels

◦Disadvantage (bargaining power of end users) Shifts bargaining power to end

consumers Reduces switching costs

Future of Internet Future of Internet CompetitionCompetitionContinuously put pressure on

profitabilityStrengthen customers and

advertisers’ power because of low switching cost

Opportunities of profitability from Internet

Internet and Competitive Internet and Competitive AdvantageAdvantageSustainable competitive

advantage◦Lower cost ◦Premium price

Cost and price advantages◦Operational effectiveness◦Strategic positioning

Absence of StrategyAbsence of StrategyDrought of distinctive strategic

positioning Advantage of Internet with

traditional IT service

Internet as Internet as Complement(1/3)Complement(1/3)Internet complements

companies’ traditional activities and ways of competing

Critical corporate assets vs. noncompetitive activities

Examples: Wal-greens , W.W. Grainger

Internet as Internet as Complement(2/3)Complement(2/3)Virtual activities amplify

importance of physical activitiesReasons of complementarity

between Internet and traditional activities◦Internet in one activity places

demands on physical activities◦Using Internet in one activity can

have systemic consequences◦Restricts of Internet

Internet as Internet as Complement(3/3)Complement(3/3)Internet and value chainFirm infrastructure

Human resource managementTechnology departmentProcurement

Inbound logistics

Operations

Outbound logistics

Marketing and sales

After-sales services

Web-distributed supply chain management

Conclusion Conclusion Internet makes competitive

advantage more importantDot-coms must pursue distinctive

strategies rather than emulate established companies

“New economy” is more like an old economy access to a new technology

Thanks for your listening