1. Major sources of competitive advantage for firms include strong brands, economies of scale, switching costs for customers, product differentiation, network effects, and effective distribution channels. 2. Brands like Amazon, eBay, and Google have become symbolic of quality and trust due to strong branding. Scale provides cost advantages and bargaining power with suppliers. 3. Switching costs, like data a customer provides to Facebook, and network effects, where a product becomes more valuable as more people use it, make it hard for competitors to enter an established market. 4. Differentiation through customization allows firms like Dell and Amazon to avoid commodity competition. Distribution channels, such as Amazon's third-party relationships, extend a firm

1. Strategy & Technology
Ratin Mathur

2. Major sources of competitive
advantage
Brand
Scale
Switching Costs & Data
Differentiation
Network Effects
Distribution Channels

3. Brand
A firm’s brand is the Brands
symbolic embodiment of Amazon
all the information eBay
connected with a product Google
or service. Viral Marketing
A strong brand proxies Google
quality and inspires trust Hotmail
Viral Marketing Skype
(consumer promotes eBay
product or service if a Facebook
firm performs well) YouTube

4. Scale
Business benefit from Economies of scale
economies of scale when BlueNile (sold as many
the cost of an investment diamonds in 1 year with one
can be spread across location as a traditional
increasing units of jeweler would with 116
stores.)
production or in serving a
growing customer base. Bargaining power with
suppliers or buyers
A growing firm may also Dell (make concessions)
gain bargaining power with eBay (raise auction fees)
its suppliers or buyers.
Scale of technology
Scale of technology of
Intel (pioneer in cutting edge
investment can also act as a technologies)
barrier to entry, Google (runs on an estimated
discouraging new, smaller 450,000 to 1 Mio servers)
competitors.

5. Switching costs & data
Switching costs exist when Switching costs
consumers incur an expense Netscape once held 80%
to move from one product to market share in web browsers,
another. but when Microsoft began
bundling IE with Windows &
Data can be a particularly AOL, Netscape’s market share
strong switching cost for firms plummet.
leveraging technology. Data
In order to win customers A customer who enters her
from an established incumbent, profile into Facebook may be
a late-entering rival must offer unwilling to try rivals – even if
a product or service that not these firms are cheaper
only exceeds the value offered Late entering rival
by the incumbent, it must Gmail provided more storage,
exceed the incumbent’s value could send photos, songs,
and any customer switching slideshows and other media
costs. files as attachments then its
rival Yahoo & Hotmail

6. Differentiation
In order to break Dell
Customized computers
commodity trap, many
Lands’ End
firms leverage Custom clothes with accurate
technology to sizing and reorder rate was
far better than rivals
differentiate their goods
Amazon
and services. Each time a visitor returns,
the firm uses browsing
records, purchase patterns
and product ratings to
present a custom home page
which customer may like

7. Network effects
Network effects AIM
(sometimes called Has majority of instant
network externalities messaging users in USA
or Metcalfe’s Law) exist Microsoft Windows
when a product or 90% market share in OS
service becomes more eBay
valuable a more people 80% share of online
use it. auctions

8. Distribution channels
The path through which Amazon
Now has over 1 mio third
products or services get party / associates /
to customers affiliations
Google
Receives over 40% of its ad
revenue from third party
sites
Google paid Dell ~ 1 bio
dollars for the privilege of
pre-installing the Google
Toolbar & Google Desktop
Search Software on all PCs
Dell sells

9. THANK YOU