Casey Rosen BMGT301 Karake Chapter 2 Netflix Business model buy a subscription plan mail the dvd with prepaid envelope send it back Also have the watch now feature Hasting wish he had waited longer to go public because competitors began imitating his business However Netflix has competitive advantage which distinguishes them from competitors such as wal mart and blockbuster It had the brand Cinematch scale o Brand comes from customer experience The Netflix prize stripped data and made it available to anyone to try to improve the software algorithm 186 countries participated offered a 1M prize to first who could raise accuracy by 10 Netflix has an extremely long tail since shelf space is not an issue Issues atoms to bits they created Watch Now feature to fix this After amazon signed a deal with Epix stock went down by 6 Chapter 4 Components of the Macro Environment o Demographic global technological economic political legal sociocultural Porters 5 forces model Industry structure and the profitability of the average competitor are shaped by 5 forces it determines the attractiveness of an industry Objective of looking at the five forces is to gain competitive advantage Must look at firms as an open system allowing outside forces to affect it It is industry specific AND time specific o Rivalry among existing competitors o Threat of substitutes o Buyer power bargaining power of suppliers o Supplier power bargaining power of buyers o Threat of new entrants The value chain connected series of activities each of which adds value or supports the addition of value to the firm s goods and services o Once an organization chooses its strategy it uses the value chain to determine the success or failure of the strategy o Every action an organization takes is either a primary or secondary activity Primary activity directly related to the production and distribution of the product service Example inbound logistics operations outbound logistics marketing sales and service Secondary activity activities that support the creation of business value Example HR technology development procurement sourcing Basic strategy Align IT with business objectives 75 fo business fail to do this which leads to lower profitability o Coca Cola rarely uses IS whereas Facebook and Amazon are intensely using it Supermarkets such as WalMart use a Continuous Replenishment System which captures data at check out and transmits orders to restock directly to its suppliers This helps wal mart keep costs low while still meeting customer s demands A value web is a collection of independent firms that use IT to coordinate their value chains to produce a product collectively o Moved from a value chain to a value web since so many countries are now involved in production Virtual value chain mirrors with information the physical value chain Collaborative filtering Software that monitors trends among customers and uses the data to personalize the customer experience Pure play a firm that focuses on a specific product service or business mode o An internet pure play is a business which only operates through the internet so storefront Long tail refers to an extremely large selection of content or products This is a phenomenon which firms can make money by offering near a limitless selection Customers appreciate the less popular selection Churn rate the rate at which customers leave a product or service Crowdsourcing taking a job usually performed by an employee and outsourcing it to the general public Netflix Netflix Prize From atoms to bits shift towards internet Windowing a practice where content is available to a given distribution channel for a specific period of time 1 month free Straddling when a firm attempts to match the benefits of a successful position while maintaining its existing position Brick and mortar business which is only a physical storefront almost extinct now brick and click business which has a physical store and is also online companies which straddle Chapter 6 Network effects Metcalfe s Law or Network Externalities The value of a product or service increases as the number of users grow o More users more value o When present it is among the most important reasons why you choose a product or service The value derived from network effects comes from 3 sources exchange staying power and complementary benefits o Exchange every product or service subject to network effects fosters some kind of exchange o Staying power long term viability people don t want to invest time money in a product if it not going to be supported anymore Switching costs can strengthen the value of network effects as a strategic asset Also known as sticky friction lock in Directly related to the fear of being stranded in an unsupported product or service The higher the value of the users investment the more they re likely to consider the staying power of any offering before choosing to adopt it Barnacles customers tightly anchored to the firm butterflies flutter away to rivals o Complementary benefits products or services that add additional value to the network How to books software add ons etc Platforms products and services that encourage others to offer complementary goods TCO Total cost of ownership an economic measure of the full cost of owning a Brands make speakers for IPOD cars are IPOD ready product includes direct costs and indirect costs One sided market a market that derives most of its value from a single class of users Technological Leap Frogging competing by offering a new technology that is so superior to existing offerings Same side exchange benefits benefits derived by interaction among members of a single class of participant Two sided market a network market comprised of two distinct categories of participant both of which that are needed to deliver value for the network to work Cross side exchange benefit when an increase in the number of users on one side of the market creates a rise in the other side Console owner s software developers When network effects play a roll competition in an industry can be different than in conventional nonnetwork industries o Network markets experience early fierce competition o Markets are often winner take all or winner take most exhibiting monopolistic tendencies where one firm dominates all rivals o The best product or service doesn t always win Chapter 7 Social media provides Four M of engagement o Megaphone to sound out messages o Magnet to attract inbound communication o Monitor and
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