1
COMP7880: E-Business Strategies
Creating & capturing value
Strategyoptions
Externalanalysis
Internalanalysis
Sustainingcompetitiveadvantage
Internalorganisation
Implementation
Exploringnew marketspaces
Interaction withsuppliers
Interaction withusers/customers
Creating andcapturingvalue
Strategic
analysis
Strategyimplementation
3
4
5
6
7
8
9
10
11
13
E-business strategy
Mobile e-commerce strategy
12
Opportunities/threats
Strengths/
weaknesses
Our Roadmap
Strategy formulation
COMP7880-CV-2
Value creation
Valuecreated
€
Costs
Perceiveduse value
Value is created if the perceived usevalue exceeds costs
COMP7880-CV-3
Value captured(producer surplus)
Price
Consumersurplus
Value capturing
Value creation
Costs
Valuecreated
€
Perceiveduse value
The price indicates how the valuecreated is distributed
COMP7880-CV-4
Value capturing
Value creation
Valuecreated
€
Producersurplus
Valuecreated
Price = Willingness topay
Costs
Perceiveduse value
=
Producers completely capture valuecreated in a monopolistic environment
COMP7880-CV-5
1
Valuecapturing
Value creation
Costs
Valuecreated
€
Perceiveduse value
Company A
Strongest competitor(Company B)
2
3
15
5
4
Price = 19
Consumersurplus
1
Value capturing
Value creation
Costs
Valuecreated
€
Perceiveduse value
1
4
20
12
8
Competitivediscount
7
Maximumvalue to becaptured
20
Profit
Competitive discount = consumer surplusprovided by the strongest competitor
COMP7880-CV-6
Value capturing
Value creation
Value
created
€
Competitive
discount
Profit
Value
created
Costs
Perceived
use value
Producer
surplus
1
2
3
Consumer
surplus
To achieve profitability:create and capture value
Price
COMP7880-CV-7
Five forces
Value chain
1
2
3
Value Process Framework (VPF)integrates different strategy analysis
COMP7880-CV-8
Marketing &
sales
Production
Sourcing
R&D
Service
1
2
1
2
1
2
1
2
1
2
1
2
Value is created by the individualbusiness activities of the value chain
COMP7880-CV-9
Entrants
Substitutes
Suppliers
Customers
Rivalry
1
2
3
Porter’s five forces influence the costlever and competitive discount
COMP7880-CV-10
Value drivers
Cost drivers
• Entrants
• Rivalry
• Customer power
• Substitutes
Supplier power
3
2
1
3
Porter’s strategy models can be usedto analyze the levers of the VPF
COMP7880-CV-11
Handset
purchasing
MNOservices
Content,
productdesign
Marketing, branding
Sales, distribution
MVNE services
UMTSmultimediahandset
UMTStechnology
Conceptdesign,artist roster,applications,features
Conceptimage,conceptbrand
Contentdistributionover the air
/
Wholesalecosts
MNOservicefees
Advertisingcosts
MVNEservicefees
Retailmargins
Value drivers
Cost drivers
Royalties
Value chain analysis of MVNO projectreveals numerous value/cost drivers
COMP7880-CV-12
MVNO – Mobile Value Network Operator project bySony BMG Germany
MVNE - Mobile Virtual Network Enabler
Artist roster, content, applications,multimedia handset
UMTS technology, handset
Applications, community
Applications, features
Image (brand)
Image (brand)
UMTS technology, handset
UMTS technology, handset
Quality
Brand
Speed
Entertainment & fun
24/7 access
Interaction
Individualization
Emotional benefit
Individualization
24/7 access
Fast downloads
Value
Value drivers (step 1)
Perceived use value (step 2)
Multiple value drivers create perceiveduse value mainly in 3 dimensions
COMP7880-CV-13
Handsets costs
MNO service fees
Royalties
Advertising costs
Retail commissions
MVNE service fees
Quality
Value creation
Speed
Brand
€
Supplierpower
1
2
Perceived use value and costs for theSony BMG MVNO would both be high
COMP7880-CV-14
Industry rivalry
(moderate to high)
• Telco market is close tosaturation
• Player concentration dependingon market definition
• Low exit barriers for non MNOs
• Product differentiation only viapremium content
Bargaining power of suppliers(moderate to high)
• No input differentiation in termsof air traffic (this argument ppliesonly to resellers and MVNOs)
• Moderate input differentiation interms of handsets
• Strong supplier concentration(only E-Plusin Germany)
Threat of new entrants
(moderate to high)
• Low technical barriers, high barriersfor brand and access to attractivecontent
• Low switching costs for prepaidcustomers
• Low exit barriers, only sunk costs foradvertisement
• Easy access to distribution channels
Threat of substitutes
(relatively low)
• No devices in sight thatcould adequately fulfil theproduct’s major functions
Bargaining power of customers(relatively high)
• No considerable switching costs
• Huge amount of prepaidofferings low differentiationparameters
• Willingness to pay important forpremium content providers
• High market transparency
German wireless telecommunicationsindustry: relatively low attractiveness
COMP7880-CV-15
€
Value capturing
Newentrants
Substitutes
Customer
power
Rivalry
3
The five forces analysis indicates ahigh competitive discount
COMP7880-CV-16
Value capturing
Value creation
Value drivers
Handset
UMTS
Concept design, artist
roster
Brand
Over-the-air distribution
1
Cost drivers
Wholesale costs
Increased MNO service fees
(due to high supplier power)
Royalties
Advertising costs
Retail margins
MVNE fees
2
Industry forces (lowentry barriers, relativelyhigh rivalry, highcustomer power, lowsubstitute threat)
Short-term uniquenessof resources (especiallyconcept design), butimitable in the long run
3
Effects on competitivediscount
Perceived use value has to beextremely high to achieve profitability
COMP7880-CV-17
For your project & exercise
Repeat the methodology in this chapterfor your project case study
COMP7880-CV-18