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Impact of Converging Industries on Corporate Strategy Robert B Lamb Stern School of Business The Convergence of the Internet, Telecom, Cable, Satellite, Computer, Entertainment and Information Industries Robert B. Lamb Stern School of Business Contents Today’s Digital Revolution

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Impact of Converging Industrieson Corporate Strategy

Robert B Lamb

Stern School of Business


The Convergence of the Internet, Telecom, Cable, Satellite, Computer, Entertainment and Information Industries

Robert B. Lamb

Stern School of Business


Contents

  • Today’s Digital Revolution

  • Drives the Convergence of Industries

  • Impacts Corporate Strategy by causing dynamic change in business environment:

  • to Networks of Strategic Alliances,

  • toPorter’s Five Forces of Competition,

  • tovalue of Core Competencies, Resources

  • to length of Sustainable Advantages,

  • Winner Take AllMkts, Virtuous/Vicious Cycle


The Digital RevolutionDigital TransferDigital ManagementDigital Content:is the driving force of the convergence of industries


Analyzing the Business Environment

  • Infrastructure & Distribution = Digital Transfer

    • Telecom Industry

    • Cable Industry

    • Satellite Industry

    • Internet

  • Enabling Technologies = Digital Management

    • Computer Industry (HW,SW,Svcs)

    • Internet Appliances

    • Internet Business to Business Management Links

  • Content Providers = Digital Content

    • Entertainment Industry

    • Information Industry

    • Internet Content


  • Infrastructure & Distribution

    • Telecom Industry

      • Regional Bell Operating Companies

      • AT&T, British Telecom, Japan Telecom

      • Sprint, Worldcom filed for bankruptcy

      • Qualcomm – Palm; Motorola - Microsoft

      • Qwest [U.S. West]

      • Frontier[Global Crossings]

      • Northern Telecom, France Telecom

      • Deutsche Telecom, Olivetti-IT, Telmex

      • Vodaphone-AirTouch-Mannesman-Jtel

      • AOL TW Cable IP Telephony Launch 2004


    Infrastructure & Distribution

    • Cable Industry

      • ATT Broadband-(Telecommunications, Inc.-

        MediaOne) (acquired & then spin-off)

      • Time Warner Cable

      • Comcast+ ATT Broadband

      • Charter Communications

      • Cox Cable

      • Cablevision

      • Adelphia (under criminal investigation)


    Infrastructure & Distribution

    • Satellite Industry

      • News Corp. (DirecTV) - BSkyB, StarTV

      • EchoStar

      • Loral Space & Comm. Ltd.

      • Motorola, [Iridium-bankrupt]

      • Lockheed Martin

      • Teledesic - $9billion, 840 satellites

        • Craig McCaw & Bill Gates


    Enabling Technologies/Format

    • Computer Industry

      • Hardware (For Countless Industries

        from Fin Services, Health to Retail)

        • Dell, IBM, HP - Compaq, Apple

        • Intel, Motorola

        • Sun Microsystems, Silicon Graphics

        • Sony, Sharp, NEC, Toshiba

        • 3Com, Cisco Systems, Panasonic

        • Palm, Visor, General Instruments


    Enabling Technologies/Format

    • Computer Industry

      • Software (for countless industries from jets yield maximization, financial derivatives, drugs, architecture, to mapping oil fields)

        • Microsoft MSN, MS-NBC, WebTV

        • IBM , Oracle, SAP, I2, Ariba

        • Sun Microsystems (Java, Jini)

        • Computer Associates Int’l

        • Computer Sciences Corp.

        • Open Source - Linux and Apache

        • AOL - CompuServe - Netscape


    Enabling Technologies/Format

    • Computer Industry

      • Services(For Countless Industries)

        • Electronic Data Services (EDS)

        • IBM + PriceWaterhouse Coopers

        • GE Computer Services

        • Computer Sciences/Continum

        • Accenture (Formerly Anderson)

        • D &T, E & Y, Booze Allen,


    Content Providers

    • Entertainment Industry

      • AOL-Time Warner/ Turner

      • Disney- ABC,

      • GE-NBC-Vivendi Universal

      • Viacom - Paramount - CBS

      • News Corp. – Fox TV-20Th Century Fox

      • Sony/Columbia/ SONY/BMG Music?

      • MCA / Polygram

      • EMI/Warner Music?

      • VS. PIRATES: KAZAA, GNUTELLA


    Content Providers

    • Information Industry

      • Bloomberg +++

      • Reuters,

      • Thomson Financial

      • Dow Jones

      • Google

      • Microsoft Network (MSN)+++

      • Yahoo

      • America On Line / Compuserve ++

      • Lexus – Nexus, Lycos


    Content Providers Entertainment Industry

    • Strategic Alliances & Acquisitions

      • AOL-Time Warner-Turner- EMI/Warner

      • Viacom-Paramount-CBS

      • Disney (many alliances)

      • GE-NBC-Vivendi/Universal/ USA Networks

      • News Corp + Direct TV

      • Bertelsmann Europe TV,

      • SONY/BMG Music? -EMI/Warner Music?

      • MCA- Polygram


    Threat of New Entrants

    Bargaining Power of Suppliers

    Bargaining Power of Buyers

    Rivalry Among Existing Competitors

    Threat of Substitute Products or Services

    Porter’s Five Forces Model(Telecom, Cable, Satellite)

    Su97

    Sp04

    High

    High

    Low

    Mix

    Med

    High

    High

    High

    High

    High


    Convergence (Internet Media)

    • Industry Attractiveness-Business Strength Matrix

    Industry Attractiveness

    High Medium Low

    AOL & TW

    2000

    High

    TW

    2003

    Business Strength

    Medium

    AOL

    2003

    Low


    Telecom Industry

    • Technological convergence undermines usefulness of many strategy tools

    • Industry Attractiveness-Business Strength Matrix

    Industry Attractiveness

    • WorldCom

      Bankruptcy

    • Mannesman

    • BellAt-GTE

    • NTelecom

    • BT, FT, DT

    • Japan Tel

    1998 High Medium Low 2002

    MCI

    2004

    AT&T

    World Com

    High

    RBOCs

    Vodaphon

    AT&T

    Business Strength

    Medium

    WorldCom

    2002

    Low


    Industry Attractiveness

    High Medium Low

    Bloomberg

    Thompson

    High

    Google

    Reuters

    Business Strength

    Medium

    Low

    Content ProvidersInformation Industry

    • Industry Attractiveness-Business Strength Matrix

    • Microsoft ++

    • Yahoo ++

    • Lexus-Nexus

    AOL TW

    CNN

    Telerate X


    The Convergence - Horizontal

    Entertainment & Information

    - Viacom-Paramount

    - Disney/ABC,

    - Time Warner Turner

    - GE-NBC, Universal/MCA

    - Bloomberg

    - Yahoo/Thomson

    - Microsoft Network

    - Microsoft

    - Oracle, Cisco

    - Sun Microsystems

    - AOL/Netscape

    - News Corp. - -

    -Time Warner Cable

    - Cox Cable,

    - Comcast

    - Sony/Columbia

    - CBS-Westinghouse

    - Matsushita/Universal

    - News Corp-Direct TV.

    - Reuters, Dow Jones

    - AOL/CompuServe

    - Miscellaneous

    - General Instruments

    - Intel, HP, Dell, Apple

    - Palm, Silicon Graphics

    - HP Compaq +DEC

    - Direct TV

    - - AT&T, Broadband

    - FT, DT

    - Bell Atlantic, GTE

    Computer (Hardware & Software)

    Telecom, Cable, Satellite


    The Convergence - Vertical

    Entertainment & Information

    - Viacom-Paramount

    - Disney/ABC,

    - Microsoft Network

    - GE-NBC, Universal

    - Bloomberg, Thomson

    - Yahoo, Google - - - AOL TW Telephony

    - Microsoft

    - Oracle, Cisco

    - Sun Microsystems

    - Palm

    - News Corp.,

    - Time Warner Cable

    - Comcast AT&T Broadban

    - Cox Cable,

    - Sony/Columbia

    - CBS-Westinghouse

    - Matsushita

    - News Corp.

    - Reuters, Dow Jones

    - America On Line

    - Miscellaneous

    - General Instruments

    - Intel, Dell

    - Silicon Graphics

    - HP- Compaq-DEC

    - Direct TV

    - Motorola

    - FT, DT, BTelecom, JT

    - Bell Atlantic, GTE

    Computer (Hardware & Software)

    Telecom, Cable, Satellite


    Merger

    Portfolio Mgmt.

    Restructuring

    Transferring Skills

    Sharing Activities

    ...per Porter

    Alliance or

    Network

    Sharing knowledge as a competitive tactic

    per Hamel, Doz, Prahalad

    Corporate Strategy:Merger, Alliance, Network or Build from within?

    Build

    From

    Within

    ...


    The Convergence

    • Business Based

    • Technology Based

    • Resource Based

    • Intellectual Property

    • Establish an alliance ?

    • Form a merger ?


    Vertical & Horizontal Convergence

    Entertainment & Information

    - Viacom-Paramount

    - Disney/ABC,

    - Time Warner Turner

    - GE-NBC, Vivendi-Univer

    - Bloomberg

    - Yahoo, Thomson

    - Microsoft Network

    - Microsoft

    - Oracle

    - Sun Microsystems

    - AOL-Netscape

    - News Corp.

    - Time Warner Cable

    - Cox Cable,

    - Comcast

    -

    - Sony/Columbia

    - CBS-Westinghouse

    - News Corp.

    - Reuters, Dow Jones

    - Google

    - America On Line

    - Miscellaneous

    - General Instruments

    - Intel, HP, Dell

    - Silicon Graphics

    - Compaq-DEC

    - Direct TV, Sprint,

    - ATT Broadband, BTelecom

    - GTE, Vodaphone AirTouch

    - Bell Atlantic, FT, DT

    Computer (Hardware & Software)

    Telecom, Cable, Satellite


    The Convergence

    “These big players are ‘octopuses all with

    their hands in each other’s pockets. Where

    one industry starts and the other stops

    will be hard to decide.’ ”

    John Malone

    CEO & Chairman

    TCI, Inc.


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