Strategy & Technology

Ratin Mathur

� Brand

� Scale

� Switching Costs & Data

� Differentiation

Major sources of competitive

advantage

� Differentiation

� Network Effects

� Distribution Channels

� A firm’s brand is the symbolic embodiment of all the information connected with a product or service.

� Brands

� Amazon

� eBay

� Google

� Viral Marketing

Brand

or service.

� A strong brand proxies quality and inspires trust

� Viral Marketing (consumer promotes product or service if a firm performs well)

� Viral Marketing

� Google

� Hotmail

� Skype

� eBay

� Facebook

� YouTube

� Business benefit from economies of scale when the cost of an investment can be spread across increasing units of production or in serving a growing customer base.

� Economies of scale� BlueNile (sold as many diamonds in 1 year with one location as a traditional jeweler would with 116 stores.)

� Bargaining power with

Scale

growing customer base.

� A growing firm may also gain bargaining power with its suppliers or buyers.

� Scale of technology of investment can also act as a barrier to entry, discouraging new, smaller competitors.

� Bargaining power with suppliers or buyers� Dell (make concessions)

� eBay (raise auction fees)

� Scale of technology� Intel (pioneer in cutting edge technologies)

� Google (runs on an estimated 450,000 to 1 Mio servers)

� Switching costs exist when consumers incur an expense to move from one product to another.

� Data can be a particularly strong switching cost for firms leveraging technology.

� Switching costs� Netscape once held 80% market share in web browsers, but when Microsoft began bundling IE with Windows & AOL, Netscape’s market share plummet.

Data

Switching costs & data

leveraging technology.

� In order to win customers from an established incumbent, a late-entering rival must offer a product or service that not only exceeds the value offered by the incumbent, it must exceed the incumbent’s value and any customer switching costs.

� Data� A customer who enters her profile into Facebook may be unwilling to try rivals – even if these firms are cheaper

� Late entering rival� Gmail provided more storage, could send photos, songs, slideshows and other media files as attachments then its rival Yahoo & Hotmail

� In order to break

commodity trap, many

firms leverage

technology to

differentiate their goods

� Dell� Customized computers

� Lands’ End� Custom clothes with accurate sizing and reorder rate was far better than rivals

Differentiation

differentiate their goods

and services.

far better than rivals

� Amazon� 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

� Network effects

(sometimes called

network externalities

or Metcalfe’s Law) exist

when a product or

� AIM

� Has majority of instant

messaging users in USA

� Microsoft Windows

Network effects

when a product or

service becomes more

valuable a more people

use it.

� 90% market share in OS

� eBay

� 80% share of online

auctions

� The path through which

products or services get

to customers

� Amazon� Now has over 1 mio third

party / associates / affiliations

� Google� Receives over 40% of its ad

Distribution channels

� 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

THANK YOU