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Chapter 5

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PLUMS

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  • 1. CHAPTER 5
    DYNAMICS OF INTERNET BUSINESS MODEL
    Business is not constant, so as its business model, it has a direct impact
    This chapter examines the dynamics of business models
    Who profits from technological change
    Examine several technological change models
    Its implication towards Internet business model
  • 2. WHO PROFITS FROM TECHNOLOGICAL CHANGE
    Business model = strategy for making money
    Understand what it takes to make money from technological change
    Complementary assets model examine.
  • 3. Complementary Assets Model
    Complementary assets = capability/ability/ qualification, that the firm needs to exploit the technology
    (includes brand name, manufacturing, marketing, distribution channel, service, reputation, installed base of products, relationships with clients /suppliers & complementary technologies)
    Imitability = the extent to which the technology can be copied, substituted by competitors.
  • 4. Pg 79. complementary assets model table figure 5.2
    Imitability = the extent to which the technology can be copied, substituted by competitors. E.g. Internet
    I
    II
    High
    Imitability
    III
    IV
    Low
    Freely available/unimportant
    Tightly held & important
    Complementary assets
  • 5. How to use table 5.2
    Implications of the internet
    Internet;easy to imitate, so imitability is high
    Strategic Implications of Complementary Assets Model
    Determining One’s Complementary Assets
  • 6. Strategic Implications of Complementary Assets Model(figure 5.3 pg 81)
    I
    II
    High
    Imitability
    III
    IV
    Low
    Freely available/unimportant
    Tightly held & important
    Complementary assets
  • 7. Determining One’s Complementary Assets
    To determine its complementary assets it must follow these steps:
    Understand the product-market position it occupies or wants to occupies
    Understand its value configuration & determine what capabilities other than technology that are critical
    • Customer value
    • 8. Scope
    • 9. Positioning (firm attains /wants to attain)
  • DEVELOPING THE TECHNOLOGY
    Developing technology is not easy, the inability of a firm to develop products or services using a new technology is often reason why such firm fail to exploit new technology
    Models of technological change provide guidance for developing successful technology
  • 10. MODEL OF TECHNOLOGICAL CHANGE
    5 models of technological change provide guidance for developing successful technology
    Radical versus incremental change
    Architectural innovation
    Disruptive change
    Innovation, value added change
    Technology life cycle
  • 11. 1. Radical versus incremental change
    Type of firm that is likely to exploit a technological change is a function of the type of change
    The change impacts the firm’s product-market position & capabilities
  • 12. 2. Architectural innovation
    A new design that wants to take advantage of the speed of a much faster processor is an architectural innovation & must consider the changes in the linkages between new processor & other components of the computer
    architectural innovation model can help explore the potential impact of the Internet on some industries
  • 13. 3. Disruptive change
    Has 4 characteristics:
    Create new markets by introducing new kind of product or services
    New products/services from new technology cost less than existing products/services from old technology
    Product perform worst at the beginning but catches up & improve itself by fulfilling the needs of consumer
    Technology are difficult to protect using patents
  • 14. Disruptive change model e.g. pg 90 figure 5.5
    Measure of key
    performance Attributes
    A
    Cost
    Improvement over the years
    Meets key performance attributes
    Meets key performance
    attributes
    C
    B
    product
    D
    demand
    0
    6
    1
    2
    3
    4
    5
  • 15. 4. Innovation, value added change
    The value that a firm offers its customers is a function of the firm’s capabilities & collaboration of its suppliers, customers & complementor
    DELL
    VALUE
    ADDED
    CHAIN
    MICROSOFT
    INTEL
    SOFTWARE
    BUNDLE
  • 16. 5. Technology life cycle
    Used as a framework for understanding the evolving competitive landscape following a technological change
    According to the model, technology undergone 3 phase.1.fluid2.transitional
    3. stable
  • 17. Figure 5.7 pg 94, Internet Technology Life Cycle
    GROWTH/
    TRANSITIONAL
    MATURE/
    STABLE
    EMERGING/
    FLUID
    Stable Phase (mature)
    • Product highly define
    • 18. Demand growth
    • 19. Fewer competitors
    • 20. Firm’s strategy is to defend its position in the market, & look for next technology
    Fluid Phase
    • Product & market uncertainty
    • 21. Confusion among producer & customers on products
    • 22. Product quality is low & cost/prices high
    • 23. E.g. auto industry
    Transitional Phase
    • Standardization took place, common standard for producing product emerge
    • 24. Reduce the phase of uncertainty for the product
    • 25. Customer base increase->mass market
    SALES
    Where in the Internet value
    Network do you want to be
  • 26. THE “dotcom” BOOM & BURST
    Should the dotcom bubble & burst have been expected?
    Who wins in a dotcom vs. Brick-and mortar battle?

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