COMP7880: E-Business Strategies
Creating & capturing value
Dickson K.W. Chiu
PhD, SMIEEE, SMACM, Life MHKCS
Jelassi & Enders: Chapter 8
1
Our Roadmap
Mobile e-commerce strategy
E-business strategy
Strategy
Strategy formulation
implementation
12
Strategic
analysis
3
External
analysis
9
5
Internal
organisation
Strategy
options
Opportunities/
threats
Strengths/
weaknesses
4
Internal
analysis
6
Sustaining
competitive
advantage
8
7
Exploring
new market
spaces
Creating and
capturing
value
10
13
Interaction with
suppliers
Implementation
11
Interaction with
users/customers
COMP7880-CV-2
Value is created if the perceived use
value exceeds costs
Value creation
€
Perceived
use value
Value
created
Costs
COMP7880-CV-3
The price indicates how the value
created is distributed
Value creation
€
Value capturing
Consumer
surplus
Price
Value captured
(producer surplus)
Perceived Value Costs
use value created
COMP7880-CV-4
Producers completely capture value
created in a monopolistic environment
Value creation
Value capturing
€
Price = Willingness to
pay
Perceived
use value
Value
created
Costs
Value
created
=
Producer
surplus
COMP7880-CV-5
Competitive discount = consumer surplus
provided by the strongest competitor
€
4
Consumer
surplus
1
8
7
3
Price = 19
1
5
4
20
20
15
12
Perceived
use value
1
€
Value Costs Competitive Maximum
created
discount value to be
captured
Value creation
Value capturing
Company A
Profit
Value
capturing
Costs
Value Perceived
created use value
Value creation
Strongest competitor
(Company B)
COMP7880-CV-6
2
To achieve profitability:
create and capture value
Value creation
Value capturing
€
Consumer
surplus
3
Price
Producer
surplus
1
Perceived Value
use value created
2
Costs
Value Competitive
created
discount
Profit
COMP7880-CV-7
Value Process Framework (VPF)
integrates different strategy analysis
3
1
Value chain
2
Five forces
COMP7880-CV-8
Value is created by the individual
business activities of the value chain
R&D
1
Sourcing
1
2
1
& Service
Production Marketing
sales
2
1
2
1
2
1
2
2
COMP7880-CV-9
Porter’s five forces influence the cost
lever and competitive discount
Entrants
Suppliers
Rivalry
3
Customers
1
2
Substitutes
COMP7880-CV-10
Porter’s strategy models can be used
to analyze the levers of the VPF
3
1
2
Value drivers
Cost drivers
• Entrants
• Rivalry
• Customer power
• Substitutes
Supplier power
COMP7880-CV-11
Value chain analysis of MVNO project
reveals numerous value/cost drivers
Handset
purchasing
UMTS
multimedia
Value drivers
handset
Cost drivers
Wholesale
costs
MNO
services
Content,
product
design
Marketing,
branding
Sales,
MVNE
distribution services
UMTS
technology
Concept
design,
artist roster,
applications,
features
Concept
image,
concept
brand
Content
distribution
over the air
/
MNO
service
fees
Royalties
Advertising
costs
Retail
margins
MVNE
service
fees
MVNO – Mobile Value Network Operator project by
Sony BMG Germany
MVNE - Mobile Virtual Network Enabler
COMP7880-CV-12
Multiple value drivers create perceived
use value mainly in 3 dimensions
Value drivers (step 1)
Perceived use value (step 2)
 Artist roster, content, applications, Entertainment & fun
multimedia handset
 UMTS technology, handset
24/7 access
 Applications, community
Interaction
 Applications, features
Individualization
 Image (brand)
Emotional benefit
 Image (brand)
Individualization
 UMTS technology, handset
24/7 access
 UMTS technology, handset
Fast downloads
Quality
Brand
Value
Speed
COMP7880-CV-13
Perceived use value and costs for the
Sony BMG MVNO would both be high
Value creation
€
 Quality
 Brand
 Speed
1






Handsets costs
MNO service fees
Royalties
Advertising costs
Retail commissions
MVNE service fees
2
Supplier
power
COMP7880-CV-14
German wireless telecommunications
industry: relatively low attractiveness
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
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)
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 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
Threat of substitutes
(relatively low)
• No devices in sight that
could adequately fulfil the
product’s major functions
COMP7880-CV-15
The five forces analysis indicates a
high competitive discount
Value capturing
€
New
entrants
3
Rivalry
Customer
power
Substitutes
COMP7880-CV-16
Perceived use value has to be
extremely high to achieve profitability
Value capturing
Value creation
Effects on competitive
discount
 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
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
COMP7880-CV-17
For your project & exercise
Repeat the methodology in this chapter
for your project case study
COMP7880-CV-18