dickson k.w. chiu phd, smieee, smacm, life mhkcs jelassi & enders : chapter 8
DESCRIPTION
COMP7880: E-Business Strategies Creating & capturing value. Dickson K.W. Chiu PhD, SMIEEE, SMACM, Life MHKCS Jelassi & Enders : Chapter 8. Our Roadmap. Mobile e-commerce strategy. 12. E-business strategy. Strategic analysis. Strategy formulation. Strategy implementation. 3. - PowerPoint PPT PresentationTRANSCRIPT
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Dickson K.W. ChiuPhD, SMIEEE, SMACM, Life MHKCS
Jelassi & Enders: Chapter 8
COMP7880: E-Business StrategiesCreating & capturing value
Strategyoptions
Externalanalysis
Internalanalysis
Sustaining competitive advantage
Internal organisation
Implementation
Exploring new
market spaces
Interaction with suppliers
Interaction with
users/customers
Creating and
capturing value
Strategic analysis
Strategy implementation
3
4
5
6 7
8
9
10
11
13
E-business strategyMobile e-commerce strategy12
Opportunities/ threats
Strengths/weaknesses
Our Roadmap
Strategy formulation
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Value creation
Value created
€
CostsPerceived use value
Value is created if the perceived use value exceeds costs
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Value captured (producer surplus)
Price
Consumer surplus
Value capturing
Value creation
CostsValue created
€
Perceived use value
The price indicates how the value created is distributed
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Value capturingValue creation
Value created
€
Producer surplus
Value created
Price = Willingness to pay
CostsPerceived use value =
Producers completely capture value created in a monopolistic environment
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1
Valuecapturing Value creation
Costs Value created
€
Perceived use value
Company AStrongest competitor
(Company B)
2
3
15
54
Price = 19Consumer
surplus 1
Value capturingValue creation
CostsValue created
€
Perceived use value
1
4
20
12
8
Competitive discount
7
Maximum value to be captured
20
Profit
Competitive discount = consumer surplus provided by the strongest competitor
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Value capturingValue creation
Valuecreated
€
Competitive discount
ProfitValue created
CostsPerceived use value
Producersurplus
1 2
3
Consumersurplus
To achieve profitability:create and capture value
Price
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Five forcesValue chain
1 2
3
Value Process Framework (VPF) integrates different strategy analysis
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Marketing &sales ProductionSourcingR&D Service
1
2
1
2 1 2 1 2 1 2 1 2
Value is created by the individual business activities of the value chain
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Entrants
Substitutes
Suppliers CustomersRivalry1 2
3
Porter’s five forces influence the cost lever and competitive discount
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Value drivers
Cost drivers
• Entrants• Rivalry
• Customer power • Substitutes
Supplier power
3
21
3
Porter’s strategy models can be used to analyze the levers of the VPF
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Handset purchasing
MNOservices
Content,productdesign
Marketing, branding
Sales, distribution
MVNE services
UMTS multimedia
handsetUMTS
technology
Concept design,
artist roster, applications,
features
Concept image, concept brand
Content distribution over the air
/
Wholesale costs
MNO service
feesAdvertising
costsMVNE service
feesRetail
margins
Value drivers
Cost drivers Royalties
Value chain analysis of MVNO project reveals numerous value/cost drivers
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MVNO – Mobile Value Network Operator project by Sony BMG GermanyMVNE - 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 perceived use value mainly in 3 dimensions
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Handsets costs MNO service fees Royalties Advertising costs Retail commissions MVNE service fees
Quality
Value creation
Speed Brand
€
Supplier power
1 2
Perceived use value and costs for the Sony BMG MVNO would both be high
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Industry rivalry(moderate to high)
• Telco market is close to saturation• Player concentration depending on market definition• Low exit barriers for non MNOs• Product differentiation only via premium content
Bargaining power of suppliers (moderate to high)
• No input differentiation in terms of air traffic (this argument pplies only to resellers and MVNOs)• Moderate input differentiation in terms of handsets• Strong supplier concentration (only E-Plusin Germany)
Threat of new entrants(moderate to high)
• Low technical barriers, high barriers for brand and access to attractive content • Low switching costs for prepaid customers• Low exit barriers, only sunk costs for advertisement• Easy access to distribution channels
Threat of substitutes(relatively low)
• No devices in sight that could adequately fulfil the product’s major functions
Bargaining power of customers (relatively high)
• No considerable switching costs• Huge amount of prepaid offerings low differentiation parameters• Willingness to pay important for premium content providers• High market transparency
German wireless telecommunications industry: relatively low attractiveness
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€
Value capturing
New entrant
s
Substitutes
CustomerpowerRivalry
3
The five forces analysis indicates a high competitive discount
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Value capturingValue 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 (low entry barriers, relatively high rivalry, high customer power, low substitute threat)
Short-term uniqueness of resources (especially concept design), but imitable in the long run 3
Effects on competitive discount
Perceived use value has to be extremely high to achieve profitability
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For your project & exercise
Repeat the methodology in this chapter for your project case
study
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