1. Strategy and the Internet
by Michael E. Porter
Harvard Business Review, Vol. 79, No. 3, March 2001
指導老師　林娟娟教授
資碩專一　史元瑜
資碩專一　林仲葦
報告日期 /11/22

2. Outline Background Myth of Internet Return to fundamentals
Internet and industry structure
Future of Internet Competition
Internet and Competitive Advantage
Absence of Strategy
Internet as Complement
Conclusion

3. Background Dot-com bubble (1995-2000) Distorted Market Signals
Discount provided by enterprise
Curiosity , freshness and discount that influenced consumers
Distorted revenue from capital gains instead of profitability from products and services

4. Myth of Internet First mover Proprietary makes winner-take-all
Switching costs
Brand advantages
Proprietary makes winner-take-all
Partnering improves industry economics

5. Return to fundamentals
Strategy creates economic value, not Internet technology
Basis of economic value : price and cost
Economic value of Internet
Uses of Internet
Internet technologies
Factors determine profitability
Industry structure
Sustainable competitive advantage

6. Internet and industry structure(1/8)
Impacts of Internet
Reduce cost of communicating, information gathering, transaction accomplishing

7. Internet and industry 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

8. Internet and industry structure(3/8)
substitutes
suppliers
competitors
buyers
barriers

9. Internet and industry structure(4/8)
Bargaining power of suppliers
Advantage
Raise bargaining power over suppliers
Disadvantage
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

10. Internet and industry 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

11. Internet and industry structure(6/8)
Rivalry among existing competitors
Disadvantage
Reduces differences
Migrates competition to price
Increasing competitors
Lowers variable cost relative to fixed cost

12. Internet and industry 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

13. Internet and industry 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

14. Future of Internet Competition
Continuously put pressure on profitability
Strengthen customers and advertisers’ power because of low switching cost
Opportunities of profitability from Internet

15. Internet and Competitive Advantage
Sustainable competitive advantage
Lower cost
Premium price
Cost and price advantages
Operational effectiveness
Strategic positioning

16. Absence of Strategy Drought of distinctive strategic positioning
Advantage of Internet with traditional IT service

17. Internet as Complement(1/3)
Internet complements companies’ traditional activities and ways of competing
Critical corporate assets vs. noncompetitive activities
Examples: Wal-greens , W.W. Grainger

18. Internet as Complement(2/3)
Virtual activities amplify importance of physical activities
Reasons 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

19. Internet as Complement(3/3)
Internet and value chain
Firm infrastructure
Human resource management
Technology department
Procurement
Inbound logistics
Operations
Outbound logistics
Marketing and sales
After-sales services
Web-distributed supply chain management

20. Conclusion Internet makes competitive advantage more important
Dot-coms must pursue distinctive strategies rather than emulate established companies
“New economy” is more like an old economy access to a new technology

21. Thanks for your listening