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NEW BUSINESS MODEL & STRATEGY FOR INTERNET ECONOMY

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Business Model

A business model describes what a firm will do, and how, to build and capture wealth for stakeholders

Effective business models operationalize good strategies -turning position and fit into wealth

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Four Aspects of Business Models     Revenue Sources Cost Drivers Investment Size Critical Success Factors 3 .

Effective Business Models Require Hard Choices     About who matters  Owners. good life. rich family life. intellectual capital. workers. family. community About what kind of wealth matters  Financial capital. social capital. investors.. cash.ie. social impact About the strategy that will deliver the wealth that matters to the stakeholders that matter About the structure that supports strategy 4 . entrepreneurial impact...

scenarios.Good Execution is More Important than Good Strategy!  Seeing a position or approach is fundamentally creative  Immersion. future search.  Constructing a strategy involves careful analysis and planning Executing a strategy requires relentless discipline 5  .

Strategy for Internet Economy 6 .

SAP integrated IT solutions. but ‘clusters of companies collaborating around a particular technology’ Web – a new form of industrial structure Webs create powerful new ways to think about strategy. 7 . risk. technological uncertainty and innovation Examples –Microsoft/Intel.The Web (Cluster/Platform) Strategy     Webs – not the WWW. Novell PC networking system. Netscape. Sony playstation etc.

Economic Web    Two compulsory conditions: Technological Standard & Increasing Returns Tech standard – reduces risks allowing companies to make irreversible investment decisions in face of technological uncertainty Increasing Returns – create a mutual dependence that strengthens the web by drawing in more and more customers and producers 8 .

promote multiple suppliers for bottleneck components 9 . focus investments on areas most likely to succeed.Characteristics of the Web        Webs are not alliances – no formal relationships between participants Different from virtual organisations The Pursuit of economic self-interest drives behaviour Each company independent and prices. and sells products autonomously Webs are natural responses to risk and uncertainty in turbulent environment The safety net of the web allows a firm to focus exclusively on activities it can offer distinctive value Web reduces overall investment requirements. markets.

mold the environment in ways enhancing their ability to create values [define] Adapters – Deal with uncertainty by staying one step ahead of other players in responding to & anticipating environmental changes Profound implications for strategy and tactics (e. Microsoft versus Dell) 10 .Strategic Roles in Webs    Shapers – Focus on fluidity and opportunities to determine or influence outcomes.g.

Success Factors for Shapers  Ownership of a key platform technology – shapes broader architecture & long-term lock-in (IBM Versus Microsoft/Intel) Reliance on economic incentives to mobilise other web participants Active management of increasing returns dynamics to accelerate web growth   11 .

Success Factors for Adapters    Early participation in winning value webs – establish pre-emptive position in attractive market Aggressive competition for share within the value web – strengthen relationship with shapers for information Linking or diversifying position – linking strategy with key shapers or straddle several webs 12 .

webs to join/form & roles to play New performance measurement Product design satisfy customers but also appeal to providers of complimentary products & services Information systems – beyond the enterprise 13 .What is Distinctive about Web Strategy        New mindset required – new way of thinking about industry structure. relationships between companies and value creation Unbundling and out-sourcing of undifferentiated business activities (what about transformational outsourcing?) Maximising value for entire web by shapers – not just the company (market share vs size of pie) Strategic decision .

Metcalfe’s law: the usefulness of a network like the internet grows exponentially as the number of users grows. Competing in an internet age is more than just a matter of doing everything faster .Strategies for Internet Economy    Internet economy refers to conducting business thro markets whose infrastructure is based on the internet and www.

Special advantage of internet is linking one activity with others. . make real time data created in one activity widely available Internet provides EDI through relational databases and wireless communications. processing. So IT has a pervasive impact on the chain.Internet and the Value chain    Every activity in value chain involves the creation. communication of information.

The Value Chain A company is a chain of activities for transforming inputs into outputs that customers value – including the primary and support activities. .

Strategic guidelines for Internet Economy     Develop an E-Business strategy Hire and develop capable staff Build a knowledge system Focus on being a market leader in process innovation .

Continuity of direction  .Internet and Competitive Advantage Operational effectiveness  Strategic positioning Principles of strategic positioning: .Trade.Goal .Distinct value chain .Mutually reinforcing .Value proposition .offs .

Point to point service) Dell (direct marketing sales and service) .New Business Model     HP printer division (razor and blade strategy) Google (sponsored links) Southwest airlines (cost effective strategies.

c om Amazon Dell Ebay Yahoo! .Types of internet business model given by Wirtz 2000 Content Collection. substitution of personalized traditional contents transaction steps by the internet Mp3. compilation and supply of contents Commerce Initiation. commercial or communicatio nal connections in networks AOL Definition Exam Aim ple Online-supply of Completion consumer respectively oriented. negotiation or realization of business transactions Context Classification and systematization of information available on the internet Reduction of complexity/navigati on Connection Creation of the possibility of an information exchange in networks Creation of technological.com Financialtimes. selection.