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Teaching courses about Internet Businesses: The capstone approach. Internet Business Models and Strategies: Text and Cases Allan Afuah Christopher L. Tucci Published by McGraw-Hill / Irwin http://www.mhhe.com/afuahtucci2e/. Capstone Approach to Strategy.

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teaching courses about internet businesses the capstone approach

Teaching courses about Internet Businesses: The capstone approach

Internet Business Models and Strategies: Text and Cases

Allan Afuah

Christopher L. Tucci

Published by McGraw-Hill / Irwin

http://www.mhhe.com/afuahtucci2e/

capstone approach to strategy
Capstone Approach to Strategy
  • Takes the General Manager’s point of view
  • General Manager’s primary responsibility is the performance of the firm
  • Performance often means profitability
  • Primary goal is to gain and maintain a competitive advantage
  • Having a competitive advantage means earning a higher rate of return than rivals
determinants of performance
Determinants of performance

Business Model

• Components and linkages

• Dynamics

Change

• Properties

• Underpinnings

Performance

Environment

• Competitive

• Macro

internet performance
Internet performance

Internet Business Model

• Components and linkages

• Dynamics

Internet

• Properties

• Underpinnings

Performance

Environment

• Competitive

• Macro

slide5

Internet Business Models and Strategies

Business Model

• Chapter 4: Components of a business model

• Chapter 5: Dynamics of business models

• Chapter 6: A taxonomy of business models

• Chapter 7: Value configurations and the Internet

• Chapter 8: Valuing and financing Internet start-ups

• Chapter 9: Appraisal of business models

Chapter 1: Introduction and overview

Internet

• Chapter 2: Overview of Internet technology and value network

• Chapter 3: Competitive landscape-transforming properties of the Internet

Performance

• Chapter 10: Competitive and macro environments

Chapter 11: The general manager and the Internet

Chapter 12: Sample analysis of an Internet business model case

Environment

2

slide6

Figure 2.1: Internet components

User’s computer

POP

Homes & small organizations

User’s computer

Router (digital switch)

backbone

Individuals

Wireless gateway

User’s computer

User’s computer

Gateway (LAN server)

Server (web / file)

Other mobile devices

Cell phones

PDAs

Enterprises

slide7

Internet Value Network (continued)

Large organization

POP

Home users

LAN

ATM switch

High Speed backbone line

Home users

Home users

OSPs (e.g., AOL)

Access to proprietary content and the Web

ISPs

Access to the Web

POP

POP

slide8

Chapter 2: Value network profit sites with representative companies

I. Users

1. E-commerce

(Dell, Amazon)

2. Content aggregators

(AOL, Yahoo)

3. Market makers

(Priceline, eBay)

4. Brokers-agents

(Schwab, E*Trade)

5. Service providers

(EDS, EMC)

II. Communications service providers

6. Backbone

(MCI Worldcom, AT&T)

7. ISPs/OSPs (AOL, MSN)

III. Suppliers

9. Content creators

(Disney, Time-Warner)

10. SW suppliers

(Microsoft, Oracle)

11. HW suppliers

(IBM, HP)

Homes and

organizations

8. Last Mile

(Verizon, SBC)

slide9

Chapter 3: What are those properties of the Internet that potentially have an impact on inter- and intra-firm activities?

Properties of the Internet

• Mediating technology

• Universality

• Network externalities

• Distribution channel

• Time moderator

• Information asymmetry shrinker

• Infinite virtual capacity

• Low cost common standard

• Creative destroyer

• Transaction cost reducer

5-Cs

Coordination

Commerce

Community

Content

Communication

Business Model

Performance

Environment

commerce

Chapter 3

Commerce

C2C

C2B

Consumer

Priceline.com

eBay

From

Business

VerticalNet

Amazon.com

B2C

B2B

Business

Consumer

To

slide11

Chapter 4

Successful Business Model

  • High Customer Value
  • Complementary Scope
  • Control over Pricing
  • Defensible Sources of Revenue
  • Consistent Connected Activities
  • Unique, Inimitable Capabilities
  • Excellent Implementation
  • Sustainability for the Future
  • Low cost
  • Correct profit site
slide12

Chapter 4

Customer

value

Implementation

Activities

Pricing

Scope

Capabilities

Revenue sources

Cost

Sustainability

Profit site

slide13

Chapter 4

Critical Business Model Questions

slide15

Chapter 4

Critical questions for a business model (continued with components emphasized in the second edition)

generic sustainability strategies and complementary assets

Chapter 5

Generic sustainability strategiesand complementary assets

Complementary assets

Freely available or unimportant

Tightly held and important

I

II

• Team-up

Joint venture

Strategic alliance

Acquisition

• Run

• Run

High

Imitability

• Block

• Team-up

Joint venture

Strategic alliance

Acquisition

IV

III

Low

• Block

slide20

Chapter 5

Dynamics of the Internet

• Determine strengths and weaknesses of business model

• Build business model

Defend competitive advantage

Locate profit site

MATURE or

STABLE

Sales

GROWTH or

TRANSITIONAL

EMERGING or

FLUID

Time

• Build capabilities

• Build network

• Invest in

infrastructure

• Win customers

• Build brand name

• Team-up/Run

• Where in the internet value network do you want to be?

Internet

actions:

slide21

Chapter 6

Business Model du jour

  • Advertising
  • Auction
  • E-hub
  • Intermediary
  • Subscriber
  • Disintermediation
  • Coffee Shop
  • Picks & Shovels
  • Tens of others
chapter 6 the basis of business models
Chapter 6. The basis of business models

Profit Site

(from Chapter 2)

Revenue models

— ads

— subscription

— commission

— fee-for-service

— production

— markup

— referral

business model classification

Commerce model

— B2C

— B2B

— P2P (C2C)

Pricing models

— fixed

— one-to-one

— auction

— rev. auction

— barter

slide24

Chapter 7

Value chain

Firm infrastructure activities

Support activities

Research, development and design

Human resource management

Dealer support and customer service

Purchasing, inventory holding, materials handling

Mfg

Marketing & Sales

Outbound logistics

Primary activities

Purchasing

Vendor relations

Inbound logistics

Inventory holding

Materials

handling

Integration

Raw materials

Capacity

Location

Parts production

Assembly

Prices

Advertising

Promotion

Sales force

Packaging

Brand

Channels

Inventory

Warehousing

Transport

Warranty

Speed

Captive/

independent

slide25

Chapter 7

Value chain

Firm infrastructure

Human resource management

Support activities

Technology development

Procurement

Inbound logistics

Outbound logistics

Marketing & Sales

Operations

Service

Primary activities

Procurement

R&D

Operations

Marketing

Distribution

Service

Purchasing

Vendor relations

Inbound logistics

Inventory holding

Materials

handling

Source

Sophistication

Patents

Product tech.

Process tech.

Product design

Integration

Raw materials

Capacity

Location

Procurement

Parts production

Assembly

Prices

Advertising

Promotion

Sales force

Packaging

Brand

Channels

Integration

Inventory

Warehousing

Transport

Warranty

Speed

Captive/

independent

value shop

Chapter 7

Value shop

Problem Finding

• Collect patient history

• Patient examination

• Diagnostic tests

• Maintain patient data

Problem Solving

• Generate treatment plans

• Evaluate treatment plans

Choice

• Choice of treatment plan

Control/Evaluation

• Monitor patient history

• Maintain patient data

Execution

• Treatment

Value shop of a general practitioner

slide27

Chapter 7 Activities of the Value Network

Network promotion/

Contract management

• sell services

• evaluate membership

• contract

• monitor and enforce

Service provisioning

• enable buying & selling

• support buyers & sellers

• ancillary services

Primary

Infrastructure operations

• administration

• operate IT systems

• maintain "liquidity"

• link with ancillaries

Firm infrastructure

Human resource management

Technology development

design new services reconfigure infrastructure

expand network

Procurement

Secondary

Adapted from Charles B. Stabell and Øystein D. Fjeldstad, "Configuring Value for Competitive Advantage: On Chains, Shops, and Networks," Strategic Management Journal 19 (1998), p. 430.

slide28

Britannica

Chapter 7

Customer

Consumer

Authors

Publishers

Wholesalers

Retailers

Microsoft

Customer

Consumer

Author and Publisher

The Internet offers:

  • Multimedia capabilities (motion)
  • Searching ability
  • Links to the rest of the world
  • Limitless capacity
  • Frequent and instantaneously available updates
  • Saves space and weight
  • Customers go to Microsoft
  • No printers, No door-to-door salespeople
  • More fun for kids
  • Available to anyone anywhere anytime
  • Customers can form communities
chapter 8 valuing and financing a business model or startup
Chapter 8: Valuing and financing a business model or startup

Business model component attribute measures

Profitability predictor measures

Profitability measures

Number of subscribers

Network size

Content

Ease of use

Management leadership

Margins

Market share

Revenue share growth rate

Profits (earnings)

Cash flows

slide31

Chapter 9

Appraising a Business Model

slide32

Chapter 9

Appraising a Business Model (continued)

slide33

Chapter 10: Competitive and macro environments

Business Model

Internet

Performance

Environment

Competitive

Five forces

Industry drivers Macro

incumbent vs new entrants advantages and disadvantages

Chapter 11

Incumbent vs New entrants: Advantages and disadvantages
  • Incumbent disadvantages
    • Dominant managerial logic
    • Competency trap
    • Fear of cannibalization
    • Channel conflict
    • Political power
    • Co-opetitor power
    • Emotional attachment
    • Customers can form communities
  • Incumbent advantages
    • Have complementary assets
    • Internet technology is easy to imitate
  • New Entrant disadvantages
    • May not have some complementary assets
  • New Entrant advantages
    • Less inertia
    • Equity capital
    • Attraction of talent
slide35

Chapter 11

Appraisal of firm’s business model

What are firm’s strengths and weaknesses?

What are the sources of competitive advantage?

Are the sources sustainable?

Evaluate current performance

Does firm have a sustainable competitive advantage?

Business Model

Change

Performance

Evolution of Internet

Strategic change

Macro changes

Environment

Competitive analysis

Appraisal of competitors’ business models

Porter’s 5-forces

Likely actions and reactions of competitors

Industry value drivers

What are the major drivers of cost

and differentiation?

How has the Internet affected them?

Macro environment

Economic, social, demographic

and political forces

Opportunities and threats

chapter 12 sample case analysis
Chapter 12: Sample case analysis
  • Cases
    • Broadcast.com
    • Webvan: Reinventing the milkman
    • Reflect.com
    • VerticalNet
    • LiveREADS
    • Beyond Interactive
    • Hotmail: Free e-mail for sale
    • GMBuyPower.com
    • iVillage: Innovation in Women’s Websites
    • eBay, Inc.
    • Microsoft Xbox Online
    • Sun Microsystems: Jumping for Jarva
    • OSCAR
    • E*Trade
    • RIM Blackberry
    • Sprint PCS
    • Napster: The Giant Online Pirate Bazaar