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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
� 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
� Hotmail
� Skype
� eBay
� 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
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