Strategy #6. Global e-Business Organizational entities with strategic issues –Firms –Cities,...
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Strategy #6
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Global e-Business
• Organizational entities with strategic issues– Firms– Cities, states, countries– Individuals
• Four components of e-business readiness– A technological infrastructure– Access to information and communication services– Favorable government practices– Willingness of organizations to redesign business
processes to take advantage of e-business capabilities
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Building e-Business Infrastructure for National Competitive Advantage• Porter’s model• Knowledge based view• Development economics and the
threat of a digital divide
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Porter’s Model of National Competitive Advantage
Firm, strategy, structure, and rivalry
Factor conditions
Related and supporting industries
Demandconditions
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Knowledge Based
• Knowledge is the key resource for building competitive advantage
• Country competitiveness is based on long-term capabilities
• Pre-conditions– Human capital development– Entrepreneurial activity– Rigor of competition– Alliances for knowledge creation– National and international connectivity– Management culture
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Importance for Emerging Economies
• Importance of e-business for emerging economies
• The digital divide and economic inequality
• Why developed countries should care about reducing economic inequality
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The Four Tigers (Finland)
• Technology leader• Independent telecommunication industry
dating back 100 years• Cell phones – Nokia 27% market share,
global presence• Industry – university alliance• Management culture - highly participative,
informal, responsive• Coffee consumption and Internet nodes
per capita
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The Four Tigers (India)
• Software industry– Geographic clusters – Bangalore, Chenai,
Heyderbad– TATA, Wipro, Satyam, Infosys, some are CMM-level
5– Complementary offerings in IT enabled services– Export revenues 2002 $6.2B
• Education – IIT, IIM• Multinational alliances and large base of
Indian nationals living abroad• English speaking
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The Four Tigers (Ireland)
• IT 33% of Irish exports• Government initiatives
– Low taxes– Good labor relations– Young workforce
• Culture suited to entrepreneurial IT work
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The Four Tigers (Singapore)
• Leveraged geographical location• IT with specialization in logistics• Technological backbone that links
industry, government, education, and citizenry
• Investment in education
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Becoming a Tiger
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Positioning of Countries
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Conclusion
• Importance of 5 dimensions: human capital formation, local and international connectivity, alliances for knowledge creation, management culture, government policy
• Visionary adaptation to take advantage of the country’s unique features
• Long term view
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Networks
• Positive and negative feedback• Positive feedback systems
– Can result in winner take all market– S-curve shaped pattern of growth
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Demand-side Economies of Scale
• Supply-side economies of scale based on production efficiencies
• Demand-side economies of scale – Based on popularity – customers value a
product because it is widely used (positive network externalities)
– Value of a network = n*(n-1)/2*β– Norm for information products
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Likelihood of a Market Tipping
Low Economies of Scale
High Economies of Scale
Low Demand for Variety
Unlikely (PBX systems)
High (spreadsheet
software)
High Demand for
Variety
Low(telephone handsets)
Depends (gaming
technology)
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Evolution versus Revolution
• Trade-off between performance and compatibility
• Evolutionary strategies offer a migration path– Technical obstacles– Legal obstacles
• Revolutionary strategies offer compelling performance– 10X improvement– Growing markets offer opportunities for
revolutionary products– Revolutionary strategies are high risk
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Openness versus Control
• Trade-off between your share and contribution to industry value– Reward = industry value added * your share
• Full openness means all are free to make products complying with the standard
• Proprietary control relies on patents, copyrights, and trade secrets
• In between are alliances where members have privileges
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Generic Network Strategies
Control Openness
CompatibilityControlled migration
(Turbo Tax)
Open migration
(Linux)
PerformancePerformance
play(Nintendo, Palm Pilot)
Discontinuity(CD audio system,
memory stick)