There are two opinions about the influence of the

internet on industries.

Many have argued that Internet tends to

the internet renders weaken the industry
strategy obsolete. profitability without
providing advantages

The winner will be those that view the internet as a complement

to, not a cannibal of, traditional ways of competing.
Fundamental questions should be
asked.
Who will capture the economic benefits that the
internet creates?
Will all the value end up going to customers, or will
companies be able to reap a share of it?
What will the internets impact on industry structure?
Will it expand or shrink the pool of profits?
What will be its impact on strategy?
Will the internet bolster or erode the ability of
companies to gain sustainable advantages over their
competitors?
How to deploy Internet.
The key question is not whether to deploy Internet
technology.
Internet technology provides better opportunities for companies to establish
distinctive strategic positioning .
 Succeeded companies are the ones who use Internet as
a complement to traditional ways of competing.
Losers whom will use the Internet apart from their
established operations.

This is good for established

companies, which are often to
meld Internet and traditional
approaches in ways that buttress
existing advantages.
 If average profitability is under pressure in many
industries influenced by the Internet, it becomes all
the more important for individual companies to set
themselves apart from the packto be more profitable
than the average performer.

The only way to do so is by achieving a sustainable competitive

advantageby operating at a lower cost, by commanding a
premium price, or by doing both.
Cost and price advantages can be
achieved in two ways.

One is operational effectiveness, doing the same things your

competitors do but doing them better.

The other way to achieve advantage is strategic positioning, doing

things differently from competitors, in a way that delivers a
unique type of value to customers.
Operational Effectiveness v Strategic Positioning
High
Delivering greater value
allows a company to
None price value delivered

charge higher average unit

prices; greater efficiency
results in lower average
unit costs.

Low
High Relative cost position Low
A company can outperform rivals only if
it can establish a difference that it can
preserve.

It must deliver greater value to customers or create comparable value

at a lower cost, or do both.
Operational effectiveness ( doing the same things
your competitors do but doing them better)
The Internet is arguably the most powerful tool
available today for enhancing operational
effectiveness.

By easing and speeding the exchange of real-time information,

it enables improvements throughout the entire value chain,
across almost every company and industry.

But improving operational effectiveness isnt enough to

provide competitive advantage.

Companies only gain advantages if they are able to achieve

and sustain higher levels of operational effectiveness than
competitors.
Where is the problem?
Once a company establishes a new best practice, its
rivals tend to copy it quickly. Best practice competition
eventually leads to competitive convergence, with
many companies doing the same things in the same
ways.

Customers end up making decisions based on price, undermining

industry profitability.
How the Internet influences
Industry Structure
Whether the industry is new or old its structure attractiveness is
determined by five underlying forces of competition:
 la menace des produits de
substitution

le pouvoir de le pouvoir de
l'intensit de la
ngociation des concurrence ngociation des
fournisseurs clients
intrasectorielle

la menace d'entrants potentiels

la menace des produits de
substitution

+LInternet peut largir

la taille du march.

- La prolifration de
lInternet peut crer des
nouveaux menaces de
substituion.
 +/- Achats par Internet tend augmenter le
le pouvoir de pouvoir de ngociation avec les fournisseurs,
ngociation des mais elle peut aussi donner aux fournisseurs
fournisseurs un accs plus de clients.

-L'Internet fournit un canal pour les

fournisseurs d'atteindre les utilisateurs finaux,
et cela va rduire leffet de levier des socits
intervenantes.

-Les marchs numriques ont tendance

donner toutes les entreprises un accs gal aux
fournisseurs .

- La rduction des barrieres a lentre .

+ limine les canaux puissants ou amliore le
pouvoir de ngociation sur les canaux le pouvoir de
traditionnels. ngociation des
clients
- Rduit les cots de changement.

Internet can provide information about product and

suppliers, thus bolstering buyer bargaining power.
- Rduction des barrires l'entre comme la
ncessit d'une force de vente, l'accs aux canaux, et
les biens matriels, tout ce que la technologie
Internet limine ou rend plus facile de faire rduit
les barrires l'entre.

-Un flot de nouveaux arrivants est entr dans de

nombreuses industries.

la menace d'entrants potentiels

 l'intensit de la
concurrence
intrasectorielle

- Rduire les carts entre les concurrents.

-migre vers la concurrence des prix.

- Elargir la surface du march et cela va causer l'augmentation du nombre

de concurrents.

-Il diminue les cots variables par rapport aux cots fixes et cela va se
terminer par une pression de rduction des prix.
The great paradox of the Internet:
Making information widely available.
Reducing the difficulty of purchasing, marketing and
distribution.
Allow buyers and sellers to find and transact business
with one another more easily.
Example: automobile retailing
The Internet allows customers to gather extensive
information about products easily (detailed
specifications).
Customers can also choose among many more options
from which to buy.

Like Autoweb and AutoVantage

Customers can choose many options
Autoweb.com
The Future of Internet Competition
Consider the intensity of competition,
for example. Many dot-coms are going out of business,
which would seem to indicate that consolidation will take
place and rivalry will be reduced.
many established companies are now more familiar with
Internet technology and are rapidly deploying on-line
applications.

As customers becoming more familiar with technology, their

loyalty to their initial suppliers will also decline, they will
realize that the cost of switching is low.
 A similar shift will affect advertising-based strategies.
Even now, advertisers are becoming more discriminating
and the rate of growth of Web advertising is slowing.
Digital Marketplace
The most important determinant of a marketplaces
prot potential is the intrinsic power of the buyers and
sellers in the particular product area.
If either side is concentrated or possesses
differentiated products, it will gain bargaining power
over the marketplace and capture most of the value
generated.
 Suppliers and customers can begin to deal directly online
without the need for an intermediary. And new
technologies will undoubtedly make it easier for parties to
search for and exchange goods and information with one
another.
Expand E-commerce Competitive
advantage options matrix
Zoran Slavkovic
Zoran Slavkovic is an economist.

Successful companies in the future will be those which

develop and deploy Internet technologies for better
performance of traditional activities, for their reshape,
but also for performing new activities that until now
were not possible and that should strengthen the
personality and identity of the organization.
Les six principes de
positionnement stratgique
Premirement, il doit commencer par un objectif spcifique.
Deuximement, la stratgie d'une entreprise doit permettre de donner
une proposition de valeur, ou un ensemble de prestations diffrentes
que celles des concurrents.
Troisimement, la stratgie doit se traduire par une chane de valeur
distinctive.
En quatrime lieu, des stratgies robustes impliquent des compromis.
Cinquimement, La stratgie dfinie la manire dont tous les lments
de lentreprise sapplique ensemble.
Enfin, la stratgie implique la continuit de la direction
 Premirement, il doit commencer par un
objectif spcifique.
Une valeur conomique est cre lorsque les clients
sont prts payer un prix pour un produit ou un
service qui dpasse le cot de production.
 Deuximement, la stratgie d'une entreprise doit
permettre de donner une proposition de valeur
. elle dfinit un mode de concurrence qui offre une valeur
unique dans un ensemble particulier d'utilisations ou pour
un ensemble particulier de clients.
 Troisimement, la stratgie doit se traduire par
une chane de valeur distinctive.
Pour crer un avantage concurrentiel durable, une
entreprise doit exercer des activits diffrentes de
celles des rivaux ou exercer des activits similaires de
diffrentes faons.
Une entreprise doit configurer la manire dont elle
mne la fabrication, la logistique, la prestation des
services, marketing, gestion des ressources humaines,
et ainsi de suite diffremment de leurs rivaux et
adapte sa proposition de valeur unique.
En quatrime lieu, des stratgies robustes
impliquent des compromis.
Une entreprise doit abandonner ou de renoncer certaines
caractristiques des produits, services ou activits afin
d'tre unique aux autres.
Le produit et la chane de valeur, sont ce qui rend une
socit vraiment distinctif.

Trying to be all things to all customers

almost guarantees that a company will lack
any advantage.
Cinquimement, La stratgie dfinie la manire dont
tous les lments de lentreprise sapplique ensemble.
la conception des produits d'une entreprise, par exemple,
devrait renforcer son approche du processus de fabrication.
Lajustement augmente non seulement un avantage
concurrentiel, mais permet galement une stratgie plus
difficile imiter.
Il est facile de copier un produit ou une activit, mais il est
difficile dappliquer tout un systme de concurrence.

Without fit, discrete improvements in manufacturing,

marketing, or distribution are quickly matched.
Enfin, la stratgie implique la continuit de
la direction.
Sans continuit de la direction, il est difficile aux
entreprises de dvelopper les comptences uniques et les
actifs ou de construire une solide rputation avec les client.
How information gives you
competitive advantages

By Michael Porter and Victor Millar

Technology impact on competition
Three ways IT changes the game
It changes industry structure and therefore the rules of
competition
It creates competitive advantage by giving companies
new ways to outperform their rivals
It spawns whole new businesses
The Internet and Competitive Advantage

Operational Effectiveness: The Internet is arguably

the most powerful tool available today for enhancing
operational effectiveness.
The nature of Internet applications makes it more
difficult to sustain operational advantages than ever.
Technology and the Value Chain
Every value activity has both a physical and an
information-processing component
IS component encompasses the steps required to
capture, manipulate and channel the data necessary to
perform the activity
Transforming the Value Chain
IT is advancing faster than technologies for physical
processing.
IT is generating more data about activities and
products, information that was not available before.
There is a higher information content in products.
IT enhances the ability to exploit linkages between
activities both inside and outside the company.
IT allows companies to coordinate activities in widely
dispersed geographic locations.
Often there is too much information, but IT can store
and help analyze the flood of information.
Value Chain
The Internet and the Value Chain
Multiple activities are being linked together through
many tools as :
CRM (Customer Relationship Management )
SCM ( Supply Chain Management )
ERP ( Enterprise Resource Planning )
CRM is a widely-implemented strategy for
managing a company's interactions with
customers

Supply Chain Management (SCM) is the

management of a network of
interconnected businesses involved in the
ultimate provision of product and service
packages required by end customers

An Enterprise Resource Planning (ERP)

system is an integrated computer-based
application used to manage internal and
external resources
 Through analysis of the value chain and looking at
how electronic communications can be used to speed
up the process, manufacturers have been able to
significantly reduce time to market from conception of
a new product idea through to launch on the market.
(Chaffey, 2002).
The impact of IT (Information
Technology) on value chain
Information technology is changing the way
companies operate (Porter and Millar, 1985).
Rayport and Sviokla (1995) state that every business
today competes in two worlds, in a physical world of
resources that managers can see and touch and in a
virtual world made of information.
Executives have to pay attention how their companies
create value in both the physical and the virtual world.
(Rayport and Sviokla, 1995).
 The special advantage of the Internet is the ability to
link one activity with others and make real time data
created in one activity widely available, both within
the company and with outside suppliers, channels, and
customers.
Virtual Value Chain
Information in Value Chain
Impact of Internet technology on
Value Chain
Overall Frame
 Example
Why do you (Procter & Gamble) have all those salesmen,
making me have a bunch of buyers? Why not just
connect your computers to our computers?

Sam Walton to the CEO of

P&G, November 1987
Talk by Bob Herbold Retired COO Microsoft, ex CIO Proctor & Gamble on October 28,
2004 about his new book The Fiefdom Syndrome
The Internet as Complement
It has been widely assumed that the Internet is
cannibalistic, that it will replace all conventional ways
of doing business and overturn all traditional
advantages.
for example, online music distribution may reduce the
need for CD-manufacturing assets.
In many cases, the Internet complements, rather than
cannibalizes, companies traditional activities and
ways of competing.
Ex: Walgreens, the
most successful pharmacy chain in the United States.

Walgreens introduced a Web site that provides

customers with extensive information and allows them
to order prescriptions on-line.
Far from cannibalizing the companys stores, the Web
site has underscored their value. Fully 90% of
customers who place orders over the Web prefer to
pick up their prescriptions at a nearby store rather
than have them shipped to their homes.
Walgreens has found that its extensive network of
stores remains a potent advantage, even as some
ordering shifts to the Internet.
Limits of the Internet
Customers cannot physically examine, touch, and test
products or get hands-on help in using or repairing
them.
The ability to learn about suppliers and customers
(beyond their mere purchasing habits) is limited by
the lack of face-to-face contact.
Extra logistical costs are required to assemble, pack,
and move small shipments.
Attracting new customers is difficult given the sheer
magnitude of the available information and buying
options.
Conclusion
Porter explains that to be defensible, moreover, the
value chain must be highly integrated.
When a companys activities fit together as a self-
reinforcing system, any competitor wishing to imitate
strategy must replicate the whole system rather than
copy just one or two discrete product features or ways
of performing particular activities.
Conclusion
Porter (2001) repeats that the basic tool for
understanding the influence of information
technology on companies is the value chain. A firm, as
a collection of activities, is a collection of technologies.
Technology is embodied in every value activity in a
firm, and technological change can affect competition
through its impact on virtually any activity.