Player Analysis - Value Chains and Nets

Chapter 3

Pl a y e r Ana l y s i s :

Va l ue Cha i ns & Nets

Value Chain & Value Net Analysis What an organization does has a significant bearing on who matters to it. A company such as Nike, given its focus on apparel design and marketing, needs to concern itself with a different set of players than an apparel manufacturer, such as Fruit of the Loom. Similarly, a PC component assembler and marketer such as Dell Computer Corporation maintains a different set of organizational relationships than a PC manufacturer such as Compaq. Given the differences that can exist from one organization to the next, it is essential that managers develop a clear picture of their organization’s key value adding activities. Only then can they properly identify and assess the key players who add and detract from its value adding processes. This chapter begins with a discussion of an organization’s key value adding activities through the lens of Michael Porter’s classic value chain analysis.1 After a full discussion of the value chain, the key external players that can impact the firm are examined through value net analysis,2 which serves as the organizing framework for several additional analyses. These additional frameworks, tools and techniques, taken up in subsequent chapters, provide for a focused analysis on each of the value net’s specific players.

Creating Value: Chapter 3-1

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Player Analysis – Value Chains & Nets

VALUE CHAIN ANALYSIS One way of looking at what an organization does is to identify the many distinct activities that it performs. Every organization can be viewed as the combination of a set of related and unrelated activities performed in pursuit of value creation. The greater the extent to which the activities of an organization are related and provide synergies, the greater the efficiency and effectiveness of the organization’s value creation processes. This in turn can translate into significant cost efficiencies that can allow the organization’s offerings to be priced below other organizations’ offerings. Alternatively, the way that an organization conducts its activities can provide the organization with an ability to differentiate its products sufficiently that customers will be willing to pay more for its offerings. According to Michael Porter, competitive advantage “stems from the many discrete activities an organization performs in designing, producing, marketing, delivering, and supporting its product.” 3 This is because each activity, either separately or in a linked fashion, can generate cost efficiencies or differentiation capabilities. Thus, by looking at the organization as a value chain of strategically relevant activities, an analyst is able to focus in on the basis for an organization’s competitive advantages (Exhibit 3-1).

The Value Chain

Exhibit 3-1

Organization Infrastructure General management, accounting, finance, planning, quality control Human Resources Supporting

Recruiting, training, development

Activities

Technology Development R&D, product and process improvement Procurement Purchasing of raw materials, machinery, equipment, supplies Inbound Logistics Raw materials handling and stocking

Operations Machining, assembling, testing

Outbound Logistics

Marketing and Sales

Warehousing and distribution of finished offerings

Advertising, promotion, pricing, channel selection

Profit Profit Margin Margin

Service Installation, repairs, parts

Primary Activities Source: Adapted from M. E. Porter, Competitive Advantage: Creating and Sustaining Superior Performance (New York: Free Press, 1985), p. 37.



Player Analysis – Value Chains & Nets As illustrated in Exhibit 3-1, five primary and four supporting activities can be identified for most organizations. Primary activities involve everything the organization has to do to create its offerings (products or services), market and deliver them to customers, and provide buying and after sale support and service to customers. For an organization that is efficient in creating offerings, production costs can be lower than in other organizations. This means that the organization can either charge a lower price for its offerings, and thereby maintain a low cost provider advantage over competitors, or earn higher profit margins by pricing at competitive levels. In addition, an efficient operations process also may allow the organization to improve quality levels, for instance by reducing the number of defects. This is important because higher quality generally translates into higher organization performance. 4 At the same time, an organization can also be efficient at marketing, sales and service. This can allow it to obtain market share sufficient to gain economies of scale, and thereby, to lower its costs. Efficient marketing can also allow the organization to better target customer needs and differentiate its offerings, also supporting pricing premiums. Supporting activities are those activities that allow the primary activities to take place on an ongoing basis. They provide inputs or infrastructure that the other activities require. Procurement is a support activity because every activity makes use of some type of inputs. Similarly, human resource management, technology development, and organization infrastructure are drawn upon throughout the organization as it goes about its business. Efficiencies in primary and supporting activities stem not only from how each sub-activity is performed, but also from the linkages and synergies among them. Linkages among activities are important to the extent that the performance of one activity can have cost implications for another activity. If an organization invests more in stateof-the-art production facilities, for instance, it may lower its production costs, labor requirements, and product defect rates. As another example, consider how different quality inspection procedures can affect value creation. In an organization where quality inspections occur throughout the organization’s value chain, for example, the costs attributed to the function of quality control – labor, production delays, etc. – may be higher than in an organization where quality is checked only at the finished product stage. However, it is likely that defect rates and repair and service support needs will be higher at the second organization, so its total costs may actually exceed those in the first company. Moreover, the first organization might also be able to command a pricing premium, due to the higher overall quality of its finished offerings. Thus, while the two organizations may perform the same set of activities, the way that they link the performance of the activities can result in very different outcomes. Synergies among activities can have similar impacts. Synergies can be obtained when multiple activities share economies of scope. The idea here is that if an organization can push multiple offerings through the same production facilities or



Player Analysis – Value Chains & Nets marketing and distribution channels, then costs will be less than if it had to perform these same activities separately for each individual offering. An important insight to gain from value chain analysis is that differently configured value chains may generate different types of competitive advantages. In an organization with a value chain organized to provide low cost leadership, for instance, key value creation activities might include, among others: 

Process improvement technology – activities that can lead to more efficient production capabilities;



Marketing and advertising – activities that can generate the economies of scale needed to support huge production and distribution facilities and capabilities, and quantity buying; and



Supply chain management – activities that can reduce throughput costs (sourcing, inventory, warehousing, etc.).

In an organization with a value chain organized to provide premium pricing, on the other hand, key value creation activities might include, among others: 

Quality control – activities that can enhance the overall quality of the organization’s offerings to avoid direct price comparisons; and



Service – activities through which customers’ satisfaction is enhanced.

While the development of a detailed diagram of an organization’s value chain proves enlightening, analysts often simply identify the key value creation activities in list form. Porter calls the two different approaches to competitive positioning – low cost and differentiation – generic strategies, and argues against organizations getting stuck in the middle.5 Being stuck in the middle implies that the organization’s value chain is likely not as efficient or effective as competitors who are pursuing just one of the generic strategies. This means that the organization’s competitors will be able to provide either lower cost or higher quality offerings, thereby putting the organization at a competitive disadvantage. A third generic strategy, an alternative to low cost and differentiation, is the focus strategy. According to Porter, a focus strategy involves taking a middle path, but only in a defined segment in which such a strategy is viable. 6 However, at times a focus strategy may become viable beyond a particular segment. For instance, logic suggests that if enough customers seek products with a few, rather than every bell and whistle, then someone will seek to service them. As a result, at times organizations may have successful business models that purposely seek the middle ground between low cost and differentiation. As long as customers remain committed to getting both not the best quality and not the lowest cost, therefore, being stuck in the middle can be just fine. Moreover, an alternative to any of the generic strategies, including focus, is to achieve both low cost and differentiation, a dual competitive advantage. 7 While seemingly impossible, numerous Japanese manufacturers such as Sony have managed to



Player Analysis – Value Chains & Nets improve quality while reducing costs through use of sophisticated flexible manufacturing and quality control methodologies. Finally, consistent with the idea of anticipatory management, organizations can also seek to find the right mix of each approach as well. While pursuit of greater differentiation will indeed likely also mean higher costs, at times the marginal rate of pricing premium increases can exceed the marginal rate of cost increases. Organizations with stellar reputations and brands, for instance, are often able to command pricing in excess of the costs of obtaining such positions. This means that an organization can more than recover the additional differentiating costs through premium pricing. On the other hand, the means by which greater differentiation is achieved by one organization may be less costly than the means used by others. Charles Schwab, the discount brokerage organization, for instance, employs salaried brokers who assist with, rather than sell transactions, to their clients. By removing the commission structure found at competing brokerages, Schwab lowered its advising costs and simultaneously enhanced its image as the place to get impartial, disinterested investment advice. Schwab’s use of Internet technology further enhances its competitive positioning.

Illustration

Value Chain of an Internet Portal

The Internet Portal Industry8 Internet portals are search engines with added bells and whistles. A search engine is a tool that allows an Internet user to find information on the Web. As the volume of users and information on the Internet continues to increase exponentially, finding what you need on the Web is increasingly challenging. This is where portals step in. The main purpose of a portal is to make the Internet, a wholly impersonal medium, tailored to the individual user. Useless information is filtered out, leaving the user with a customized Web page filled with information and tools relevant to the individual. In addition to Web searching tools, most portals also provide e-mail capabilities, personalized news, weather reports, chat rooms and stock quotes. Leading portals include America Online, Yahoo!, Microsoft MSN, Lycos, Netscape Netcenter, Excite, Infoseek, Altavista, and Snap. Portals may be geographically focused or personally focused. Geographically focused portals contain information relevant to a specific region, filled with local news, weather, movie listings, and community interest stories. These are generally known as vertical portals – they have a tightly focused content area geared towards a particular audience. Personally focused portals contain any content that the user chooses, from weather reports to stock quotes to news. These types of portals appeal to a much broader audience and are considered horizontal portals. The main problem facing horizontal portals lies in differentiating themselves from one another. Studies have found that brand loyalty is low among Internet portals, as there is an obvious lack of distinctiveness among the largest organizations. 9 Industry analysts predict that the market can only support three to five portals, due to this problem. Those that do not form partnerships, or cannot market on their own, will perish, consolidate, or shift strategies to become a site catering to a specific interest, rather than continuing as a general interest portal. What makes portal organizations unique is the fact that their largest source of revenue is from advertising. Banner advertisements appear at the top of every portal site. When a site is customized, advertising can be targeted at a particular user. Organizations hope that users will make the organization’s site their personal site. The more users a portal attracts, and the more stable the base and the longer the viewing times of users, the greater the ad revenues the portal can generate.




In addition to advertising revenues, portals also increasingly seek revenues from e-commerce transactions, and to a lesser extent, from subscriptions and sponsorships. Portals, therefore, in addition to forming alliances with companies that can get viewers to their sites, they also seek to create switching costs for users so that, once they have visited the portal, they will remain with the portal. Portals do this by 1) encouraging users to bookmark their personal site for easy returns, 2) seeking to form agreements with PC companies to provide the portal’s address and icon on the PC user’s browser start page, and 3) offering interesting content – including buddy lists and other devices that get built through the user’s use of the portal’s services. In order to compete in the marketplace, portals must master Internet technologies, devise efficient information categorization systems (directory databases) and presentation systems (user-viewed Web sites), negotiate alliances with key content providers (stock quotes, news, weather, etc.) and tool providers (e-mail, chat rooms, etc.), and establish advertising and e-commerce relationships. Importantly, portals also have significant interoperability benefits available to them. That is, the value of many of a portal’s features increases to a user the more that he uses them (e.g., tracking one’s investment performance, maintaining e-mail relationships). Moreover, in some instances, value also increases the more others use a feature (e.g., buddy lists that allow users to see who else is online at a given time). Such virtuous cycles10 highlight the need for portals to be very proficient at attracting visitors to their sites. Hence, another key activity of a portal is in marketing. A value chain for a hypothetical Internet portal is illustrated below. Organization Infrastructure Human Resources Technology Development

Procurement

Financing, legal support, accounting, quality control Recruiting, training, development Site directory database

Site interface

Search engines

Computers

Database design, content Content and ad collection and updating

Telecomm

Server operations Directory design

e-commerce transaction processing

Site look and feel

Merchant card services

Media

Customer call center

Electronic transaction processing

eCommerce/ advertising agreements

eCommerce facilitation

Contact database

Content alliances

Content development

Customer research procedures

Customer feedback

Awareness and brand marketing

Billing Collections Inbound Logistics


Operations

Outbound Logistics

Marketing and Sales

Service



VALUE NET ANALYSIS As suggested by the value chain discussion, the ability of an organization to create and capture value is often constrained by the various external players with whom it interacts. Moreover, expanding the pie often also involves bringing entirely new players into the game. Thus, in addition to understanding the role of suppliers and customers with respect to value creation, the impact of two other external players on an organization’s success must also be assessed. These additional players, along with the organization and its supplies and customers, serve as the focus of the value net (Exhibit 3-2). In order to develop comprehensive business strategies, organizations must understand which players count and which relationships are most pronounced. Adam Brandenburger and Barry Nalebuff’s value net is a framework through which a company can map players on the basis of their relative impact on an organization’s value adding activities.11 This framework suggests that four groups of organizations or “players” interactively and interdependently define the “game” of business for a company. The term “players” is used to represent the different roles or positions that various economic stakeholders “play” in their interactions with the focal company’s economic value creation process. The four players include customers, suppliers, competitors, and complementors. The players along the horizontal axis of the value net are the company’s customers and suppliers. Resources, such as raw materials, labor and services, flow through the value chain from suppliers through the company to its customers. Financial wealth flows in the reverse direction, from customers to the company, and from the company to suppliers. Analysis of the focal company’s value chain and value system provides guidance in terms of identifying the suppliers and customers at each phase within the economic value creation process. The organization adds value through this process to the extent that it is able to efficiently gather inputs, and then efficiently and effectively transform inputs into outputs that are valued by customers. This, in turn, requires it to have devised an appropriate business model through which the organization can continually capture value from the right customers by conducting the right activities.




Value Net

Exhibit 3-2

Economic Competitors

Make it harder to obtain customers & supplies (-)

Company Suppliers

(-)

(-)

Provide goods & services in exchange for money

Customers

Provide money in exchange for goods & services (+)

(+) (+)

Economic Complementors

Make it easier to obtain customers & supplies

Source: Adapted from A. M. Brandenburger and B. J. Nalebuff, Co-opetition (New York: Doubleday, 1996).

In addition to customers and suppliers, two other players have an impact upon the organization’s ability to sustain profitability. These players, along the vertical axis of the value net, are the company’s economic competitors and economic complementors. Economic competitors are defined as those companies who compete with the company for customers, suppliers or both. A player is a customer competitor if customers value the focal company’s offerings less when they also or instead possess or have access to the other player’s offerings.12 In this context, “offerings” refers to goods and services. Customers who can choose among multiple cell phone providers would value their provider less than those who only have one choice would value their provider. This is especially true if switching costs are low. The second type of economic competitor is a supplier competitor. A company is a supplier competitor if suppliers value the focal company’s supply opportunities less when they also or instead possess or have access to the other player’s supply Creating Value: Chapter 3-8


Player Analysis – Value Chains & Nets opportunities. In this context, “supply opportunities” refers to the supplier’s opportunity to sell goods and services to the company. An automobile parts manufacturer which supplies parts to GM would likely value GM’s supply opportunities less if it also possessed supply opportunities from Ford. As the focal company, GM would find its supply opportunities more valuable to the parts supplier in the absence of any from Ford. A third type of economic competitor is a value chain competitor. A company is a value chain competitor if it makes it harder for the focal company to build, operate or sustain its means of conducting its value chain of activities. A company such as Peapod, which makes it very convenient and cost-efficient to order groceries online and have them delivered to your home, makes its harder for retailers who locate in close proximity to major grocery stores to attract as much customer traffic, since many potential customers may not frequent the anchor grocery store as frequently. Thus, the value chains of these retailers are affected negatively by the presence of Peapod and it can be deemed a value chain competitor to them. In Exhibit 3-2, the impact of economic competitors is illustrated by flows of money and goods and services that bypass the focal company, as represented by the negative sign (-) next to the unshaded arrows flowing from the customers and suppliers to the company; and by the greater challenges the presence of economic competitors can exert upon the organization’s ability to operate its chosen value chain of activities (also represented by a negative sign (-) between competitors and the company). In the presence of companies playing competitor roles, the company sells less of its goods and services to customers, gains access to fewer resources from suppliers, and experiences greater challenges in operating its value chain than it might if this player were not in the game in this way. Economic complementors are defined as those players who complement the company for customers, suppliers or both. A company is a customer complementor if customers value the focal company’s offerings more when they also possess the other player’s offerings than when they possess only the focal company’s offering. Customers who possess computers would likely value their computers more if they also possess high-quality computer software. As the focal company, the computer maker would find its offerings more valuable to customers in the presence of those from high-quality computer software makers. The second type of economic complementor is a supplier complementor. A company is a supplier complementor if a supplier finds it more attractive to supply the focal company when it also supplies the other company than when it supplies only the focal company. An aircraft manufacturer such as Boeing which supplies aircraft to American Airlines would likely value American’s supply opportunities more if it also possessed supply opportunities from Delta Airlines, given the potential to share the huge costs involved in aircraft development and the benefits of joint orders. At the same time, as the focal company, American would find its supply opportunities more valuable to aircraft suppliers such as Boeing in the presence of those from Delta.



Player Analysis – Value Chains & Nets A third type of economic complementor is a value chain complementor. A company is a value chain complementor if it makes it easier for the focal company to build, operate or sustain its means of conducting its value chain of activities. For the major, anchor grocery stores that it works with, Peapod functions as a value chain complementor in that it allows the groceries to focus their efforts on running their stores, while also providing them an opportunity to better serve some customers who might not patronize their stores but for the presence of Peapod. Thus, to the anchor grocery stores, Peapod is a value chain complementor; while to the smaller retailers who co-locate nearby the major grocery stores, Peapod is a value chain competitor. The impact of economic complementors is illustrated in Exhibit 3-2 by flows of money and goods and services that are directed toward the focal company, as represented by the positive sign (+) next to the shaded arrows flowing from the customers and suppliers to the company; and by the positive effects the presence of economic complementors can exert upon the organization’s ability to operate its chosen value chain of activities (also represented by a positive sign (+) between complementors and the company). In the presence of companies adopting complementor roles, the company sells more of its goods and services to customers, gains access to more resources from suppliers, and experiences greater ease in operating its value chain of activities than it might if complementors were not positioned as an active player in this set of exchanges. This is the complete mirror effect of that described for competitors. In sum, complementors are players with which the focal company can interact on a win-win, rather than on a win-lose basis. Multiple and changing roles As is evident from the American and Delta example, companies may play different roles simultaneously, and/or their roles may evolve over time. While American and Delta are indeed supplier complementors when it comes to procuring aircraft, they are supplier competitors when it comes to obtaining pilots, flight attendants and other employees. Moreover, the two organizations are clearly customer competitors as well – the offerings of each make it harder for the other to obtain customers. On certain routes, however, the presence of service by each allows a customer to reach his or her destination by flying a leg of the trip on each airline. This makes the two organizations customer complementors in this regard. The value net framework provides managers with a tool to map those players, in all of their roles, which have the greatest impact on the organization’s economic value creation process. This then allows managers to develop micro- and macro-level strategies with respect to important economic players. For example, while long distance companies AT&T, Sprint and MCI have been competing vigorously for long distance service market share for many years, AT&T’s equipment business, recently spun off as Lucent Technologies, also sought to serve as a network equipment supplier to both MCI and Sprint. A second aspect of the value net is that players may frequently shift both their strategies and roles with respect to the focal company, adding a dynamic element to the



Player Analysis – Value Chains & Nets framework. When suppliers, customers and the focal company come together to create value for all involved, for example, they generally operate on a cooperative basis. But when the pie has to be divided up, customers press for lower prices and suppliers also want their slice of the pie.13 In other words, the organizations shift their strategies from cooperative to competitive. In addition, at times players may shift from one role to another, such as from supplier to supplier competitor, or vice versa, depending upon integration or other strategies the players follow. Since such strategy and role shifts may prove detrimental to the focal company, the development of a clear picture of which players occupy which roles currently, and which ones might shift to which new roles with what detriments, is something that could greatly enhance managers’ abilities to engineer these interdependencies. In summary, doing well in the market context requires companies to create value by efficiently transforming inputs into products and services. This economic value creation process is complicated by multiple interdependencies among the organization and organizations whose actions make it easier or harder for the focal company to obtain and keep both customers and suppliers. Moreover, given that organizations may simultaneously and/or dynamically adopt different roles with respect to the focal company, an understanding of which companies occupy which roles, and which companies may switch to which roles, seems key to effectively managing this value creation process. The key insight to be drawn from value net analysis is that there are both players that can make the company’s economic value creation process harder to manage (competitors) and players that can make it easier to manage (complementors). In terms of those making it harder, in addition to traditional competitors – those that compete with the company for customers – the value net also points out that there are also competitors for supplies. These supplier competitors are often overlooked as a focus of strategy making. The recent attempt by barnesandnoble.com to acquire Ingram Book Group, the leading book supplier for competitor Amazon.com, however, highlights how developing an understanding of supplier competitors and their related strategies can be critical.14 This acquisition, despite its ultimate dissolution, 15 forced Amazon to recognize that one of its leading suppliers could end up in the hands of one of its leading customer competitors. In terms of those making it easier for a company to manage value creation, this very idea opens up numerous strategic possibilities. Consider Microsoft and Intel, two customer complementors. Whenever Microsoft releases a new, more processing-heavy version of its Windows operating system, PC owners demand faster chips in their PCs to run the new products. This means that demand for Intel’s microprocessor chips increases simply because Microsoft releases a new version of its products.16 The sellers of motorbikes and motorcycles similarly act as customer complementors for motorcycle helmet organizations. Every sale of a bike represents a likely sale of a helmet, no matter what the helmet manufacturers do. Given this, it is essential for managers to broaden their view of who matters to their organization in order to develop strategies that explicitly link their offerings to those that can best help them succeed in obtaining customers. Creating Value: Chapter 3-11


Player Analysis – Value Chains & Nets On the supply side, moreover, there are also players in most industries that can help an organization gain access to supplies that otherwise would be difficult or expensive to obtain. The case of Delta and American in terms of their airframe needs provides an example of this. Direct competitors for customers, they join forces to obtain new airplanes. In whole, value net analysis provides an approach to identify the key players who add and detract from an organization’s economic value adding process. Importantly, while value analysis examines players within the traditional economic context, it may also be used to examine players within the technological and the political-social contexts as well. In the external trend analysis chapters, therefore, extensions of value analysis to these additional dimensions are described. Through application of the more advanced mapping procedures provided in these chapters, managers can gain access to powerful tools to systematically examine value creators and destroyers in each context, from which they can pursue comprehensive player mapping and valuation analyses. Below is an illustration of an economic value net for Nintendo. Following this illustration, Exhibit 3-3 provides a summary framework that managers might find helpful in reporting their player analyses. Note therein that the framework supports inclusion of the focal firm’s key activities in the center, as derived from value chain analysis, as well as each of the key external players on the focal firm’s value net in their respective cells.




Value Net of Nintendo17

Illustration

Adam Brandenburger and Barry Nalebuff describe Nintendo’s rise to domination of the home video game business as being the result of its creation of a virtuous circle among the key players on its value net. By offering game hardware at prices that competitors claimed were below its costs, and developing hot game titles under tight licensing arrangements, Nintendo was able to limit competition and reduce the negotiating power of the other players. As a result, it was able to capture a major slice of the value-added pie. See Chapter 5 for further development of the role of bargaining power in an organization’s performance.

Competitors

Atari, Commodore, Sega (hardware) Other entertainment providers (TV, books, sports) (-)

Suppliers

Ricoh, Sharp (microchips) Marvel, Disney (game characters)

(-)

Nintendo

(-)

Customers

Video games and related products (magazines, toys) (+)

Toys “R” Us, WalMart, other retailers (+)

(+)

Complementors

Acclaim, Electronic Arts (game developers) Source: Adapted from A. M. Brandenburger and B. J. Nalebuff, Co-opetition (New York: Doubleday, 1996), p. 115.




Exhibit 3-3

Value Analysis Initial Summary Diagram

Competitors ______________________ ______________________ ______________________ ______________________

Suppliers __________________ __________________ __________________ __________________ __________________

Company

Key Activities:

______________________ ______________________ ______________________ ______________________ ______________________

Customers __________________ __________________ __________________ __________________ __________________

Complementors ______________________ ______________________ ______________________ ______________________

Ready to Learn

Value Chains & Nets

Upon completion of this chapter students should be able to: 1. Describe the value chain and each of its components. 2. Describe the value net and each of its components. 3. Devise a value chain of activities for a given company. 4. Identify the key relationships and interdependencies of a given company.



Player Analysis – Value Chains & Nets Notes 1

M. E. Porter, Competitive Advantage: Creating and Sustaining Superior Performance (New York: Free Press, 1985). 2

A. M. Brandenburger and B. J. Nalebuff, Co-opetition (New York: Doubleday, 1996).

3

M. E. Porter, Competitive Advantage: Creating and Sustaining Superior Performance (New York: Free Press, 1985), p. 33. 4

R. D. Buzzell and B. T. Gale, The PIMS Principles (New York: Free Press, 1987).

5

M. E. Porter, Competitive Strategy (New York: Free Press, 1980).

6

M. E. Porter, Competitive Strategy (New York: Free Press, 1980).

7

R. Hallowell, “Dual Competitive Advantage in Labor-Dependent Services: Evidence, Analysis and Implications,” in D. E. Bowen, T. A. Swartz, and S. W. Brown, eds., Advances in Services Marketing and Management (Greenwich: JAI Press, 1997). 8

This illustration is adapted from T. Loiacano, “Yahoo!: A Strategic Audit” (unpublished manuscript, School of Business and Public Management, George Washington University, April 27, 1999). Facts, unless otherwise attributed, were obtained from portal company Web sites. 9

J. Kornblum, “Portals Open New Frontiers: USA/Lycos Deal Treads on Heels of Internet Gold Rush,” (USA Today, February 10, 1999), p. 1B. 10

Sources for discussion of virtuous cycles include in P.W. Anderson, K.J. Arrow, and David Pines, eds., The Economy as an Evolving Complex System (Redwood City, CA: Addison-Wesley, 1988); B. W. Arthur, “Increasing Returns and the New World of Business,” Harvard Business Review (Jul/Aug, 74: 4, 1996), pp. 100-109; K. E. Boulding, Evolutionary Economics (Beverly Hills, CA: Sage, 1984); P. Hall, Innovation, Economics and Evolution: Theoretical Perspectives on Changing Technology in Economic Systems (New York: Harvester Wheatsheaf, 1994). 11

A. M. Brandenburger and B. J. Nalebuff, Co-opetition (New York: Doubleday, 1996); M. E. Porter, Competitive Strategy: Techniques for Analyzing Industries and Companies (New York: Free Press, 1980). 12

The potential possession of offerings is assumed to be as valid as the actual possession of offerings. Hence, ‘possession’ refers to both actual and potential possession. 13

A. M. Brandenburger and B. J. Nalebuff, Co-opetition (New York: Doubleday, 1996), p. 36.

14

P. A. Madden, “Less Than Zero Margins,” Red Herring (64, March 1999).

15

S. Labaton and D. Carvajal, “Book Retailer Ends Bid for Wholesaler,” New York Times, June 3, 1999 C1. 16

A different perspective on this relationship is that Microsoft has aggressively enhanced and marketed the functionality of its products in attempt to match the microprocessor improvement rates, thereby avoiding the occurrence of performance oversupply. See Chapter 10 and C. M. Christensen, The Innovator’s Dilemma: When New Technologies Cause Great Organizations to Fail (Boston, MA: Harvard Business School Press, 1997), pp. 179-182. 17

A. M. Brandenburger and B. J. Nalebuff, Co-opetition (New York: Doubleday, 1996), pp. 110-117.



Player Analysis - Value Chains and Nets

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