Summary : Strategy and the Internet by Micheal E. Porter

[Erum]

Erum Masood
Bicse 2C
Reg#193


Strategy and the Internet
Michael E. Porter

In this chapter Michael Porter tells that Internet is a new technology
and it provides better opportunities for companies to institute
distinctive strategic positioning than earlier generations of IT.
However Internet is not necessarily a consent it may amend industry
organization in ways that diminish over all profitability. The key
question is how to deploy Internet technology. Because it gives
competitive advantage to one company from another and doesn't even
require new strategy. In order to succeed Internet must be used as a
compliment to traditional ways of competing.

Porter also explains that sales figures over the Internet have been
unreliable this is because companies are not focusing on profits they
have been trying to chase customers aimlessly through discounting and
advertisement etc. Rather than selling products to customers and
earning profit from it they are following indirect revenue generation
strategy such as advertisements and click through fees.

Internet has also created some new industries such as online auctions
and digital market places. Porter also states whether an industry is
old or new its structural charisma is determined by five underlying
forces of competition, which determines the profitability even if
suppliers, channels, substitutes or competitors change. Internet can
enhance the industry's efficiency by expanding the overall size of the
market by improving its position relative to traditional substitutes.
But some drifts are negative too such as providing easier access to
information and that too in bulk thus strengthening buyers bargaining
power. That doesn't mean that every industry in which Internet
technology is applied will become unattractive

Porter argues that contrary to the recent notion the Internet is not
disruptive to the existing industries and established companies. It
seldom abolishes the basis of competitive advantage to the industry
and frequently makes them more valuable As a result vigorous
competition crops up instead of conventional forces such as "unique
products, distinctive physical activates" etc.

Then Porter talks about the Myth of the "first mover", Which states
that the general assumption is that deployment of Internet would
increase switching cost as switching cost goes up the buyers
bargaining power falls down ad barriers to entry rise, which would
provide fist movers with competitive advantage and robust
profitability. In reality switching costs are likely to be lower.
Another myth that has generated groundless keenness for the Internet
is "partnering win" - win means to progress industry economy. With
the Internet, widespread partnering with the producers of complements
is just likely to aggravate an industry's structural problems as
alleviate them. As partnerships multiply, companies tend to become
more alike which heats up competition instead of focusing on their own
strategic objectives

Porter explains how Internet compliments than cannibalizing existing
ways of doing business he also explains that Internet is possibly the
most powerful tool available today for enhancing operational
effectiveness. By easing and speeding exchange of real time
information, it enables advancement throughout the whole value chain
across every company and industry. As it becomes harder to maintain
operational advantages, strategic positioning becomes all the more
important.

[Dr. Ijaz A. Qureshi]

Hello Erum,
It is good work but too lengthy analysis, please keep it to max two
paragraphs. I need only one page and I am interested in your approach to the
situation. Do you agree, disagree with the author? If yes, why? Prove your
point with some references and citations.
Ijaz

-----------
Help save paper - do you really need to print this email?

This message is for the use of the intended recipient(s) only. If you have
received this message in error, please notify the sender and delete it. The
NUST Institute
of IT accepts no liability for loss or damage caused by software viruses and
you
are advised to carry out a virus check on any attachments contained in this
message.

NUST Institute of IT is the IT wing of National University of Sciences and
Technology, Pakistan. Striving hard to promote research culture in Pakistan.

-------

This message has been scanned for viruses and
dangerous content by MailScanner,and is
believed to be clean.

-----------
Help save paper - do you really need to print this email?

This message is for the use of the intended recipient(s) only. If you have
received this message in error, please notify the sender and delete it. The NUST Institute
of IT accepts no liability for loss or damage caused by software viruses and you
are advised to carry out a virus check on any attachments contained in this message.

NUST Institute of IT is the IT wing of National University of Sciences and
Technology, Pakistan. Striving hard to promote research culture in Pakistan.

-------

This message has been scanned for viruses and
dangerous content by MailScanner,and is
believed to be clean.

[Erum]

Thanks for appreciating sir!

Yes I Agree with what Poster said as many people have this miss
conception that new strategies have to be developed when moving to
Internet, but this is not the case you just take your business online
and suffer the same competition. Also nowadays many companies are
emphasizing on indirect revenue generation which I think is not a good
practice because eventually the customers become immune to these
advertisements and hardly pay any attention. They might click it but
not actually buy anything. Since indirect revenue generation is not as
efficient as customer loyalty (customer actually buying products from
you) so it adversely affects a company.

Also that by growing business online and providing variety of products
can increase a company's efficiency but due to a lot of competitors
huge amount of information and low barriers to entries for competitors
the bargaining power lies mostly in the hands of buyers. But the
competition over the Internet is healthy since now there are no
physical boundary distinctions everyone has a website and products to
sell as a result companies will try to emphasize on better quality and
value added services to grasp more and more customers. Also companies
make partnerships trying to make an economic progress but this
adversely effects since different companies join hands and as a result
various clusters arise but the clusters tend to move towards monotony
hence competition heats up unlike what the companies predicted.