Dickson K.W. Chiu

1
COMP7880 E-Business Strategies Creating
capturing value

• Dickson K.W. Chiu
• PhD, SMIEEE, SMACM, Life MHKCS
• Jelassi Enders Chapter 8

2
Our Roadmap
Mobile e-commerce strategy
12
E-business strategy
Strategic analysis
Strategy implementation
Strategy formulation
3
Externalanalysis
5
9
Strategyoptions
Internal organisation
Opportunities/ threats
6
7
10
13
Sustaining competitive advantage
Implementation
Exploring new market spaces
Interaction with suppliers
Strengths/ weaknesses
4
Internalanalysis
11
8
Creating and capturing value
Interaction with users/customers
3
Value is created if the perceived use value
exceeds costs
Value creation

Value created
Perceived use value
Costs
4
The price indicates how the value created is
distributed
Value capturing
Value creation

Consumer surplus
Price
Value captured (producer surplus)
Value created
Perceived use value
Costs
5
Producers completely capture value created in a
monopolistic environment
Value capturing
Value creation

Price Willingness to pay
Value created
Producer surplus
Value created
Perceived use value

Costs
6
Competitive discount consumer surplus provided
by the strongest competitor


Consumer surplus
3
4
Price 19
1
1
5
4
8
7
20
20
15
12
Maximum value to be captured
Costs
Value created
Costs
Value created
Competitive discount
Profit
Perceived use value
Perceived use value
Valuecapturing
Value creation
Value capturing
Value creation
2
1
Strongest competitor (Company B)
Company A
7
To achieve profitabilitycreate and capture value
Value creation
Value capturing

Consumer surplus
3
Price
Producer surplus
1
2
Value created
Competitive discount
Value created
Perceived use value
Profit
Costs
8
Value Process Framework (VPF) integrates
different strategy analysis
Value chain
Five forces
9
Value is created by the individual business
activities of the value chain
Marketing sales
Service
Production
Sourcing
RD
2
2
1
2
10
Porters five forces influence the cost lever and
competitive discount
Entrants
3
Customers
Suppliers
Rivalry
1
2
Substitutes
11
Porters strategy models can be used to analyze
the levers of the VPF
3
3

• Entrants

• Rivalry

1
2

• Customer power

• Substitutes

Value drivers
Supplier power
Cost drivers
12
Value chain analysis of MVNO project reveals
numerous value/cost drivers
Handset purchasing
MNOservices
Content, productdesign
Marketing, branding
Sales, distribution
MVNE services
UMTS multimedia handset
UMTS technology
Concept design, artist roster, applications,
features
Concept image, concept brand
Content distribution over the air
/
Value drivers
Wholesale costs
MNO service fees
Advertising costs
MVNE service fees
Retail margins
Royalties
Cost drivers
MVNO Mobile Value Network Operator project by
Sony BMG Germany MVNE - Mobile Virtual Network
Enabler
13
Multiple value drivers create perceived use value
mainly in 3 dimensions
Perceived use value (step 2)
Value drivers (step 1)
Entertainment fun

• Artist roster, content, applications, multimedia
  handset
• UMTS technology, handset
• Applications, community
• Applications, features

24/7 access
Quality
Interaction
Individualization

• Image (brand)

Emotional benefit
Brand
Value

• Image (brand)

Individualization

• UMTS technology, handset

24/7 access
Speed

• UMTS technology, handset

Fast downloads
14
Perceived use value and costs for the Sony BMG
MVNO would both be high
Value creation

• Quality

• Brand

• Speed

1
2

• Handsets costs
• MNO service fees
• Royalties
• Advertising costs
• Retail commissions
• MVNE service fees

Supplier power
15
German wireless telecommunications industry
relatively low attractiveness
16
The five forces analysis indicates a high
competitive discount
Value capturing

New entrants

• Rivalry

Customer power
3
Substitutes
17
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

• Cost drivers
• Wholesale costs
• Increased MNO service fees
• (due to high supplier power)
• Royalties
• Advertising costs
• Retail margins
• MVNE fees

2
1
18
For your project exercise

• Repeat the methodology in this chapter for your
  project case study