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306 Part 2 Strategy and applications

These factors enable Amazon to charge more than competitors and still achieve the
greatest sales volume of online booksellers. In summary, trust becomes the means
of differentiation and loyalty. As a result, price comparison sites are being super-
seded by sites that independently rate the overall service, such as Gomez
(www.gomez.com), or use customers’ opinions to rate the service, such as Bizrate
(www.bizrate.com) and Epinions (www.epinions.com).
3 E2E (end-to-end) integration. This is an efficiency strategy that uses the Internet
to decrease costs and increase product quality and shorten delivery times. This
strategy is achieved by moving towards an automated supply chain (Chapter 8) and
internal value chain. A key issue in moving towards the automated supply chain is
determining which process should be owned internally, which should be achieved
via partnerships, and which should be outsourced.
4 Market creation. Picardi (2000) defines market creation as ‘the business of
supplying market clearing and ancillary services in cyberspace, resulting in the
creation of an integrated ecosystem of suppliers’. The term ‘ecosystem’ was coined
in the new millennium to emphasize the move from relatively static supply chains
with defined suppliers, partners and customers for an organization to a more
dynamic environment in which such links are formed more readily. In tangible terms,
this strategy involves integrating and continuously revising supply chains with
market-maker sites such as business-to-business exchanges (Chapter 8).
5 Customer as designer. This strategy uses the technology to enable customers to
personalize products, again as a means of differentiation. This approach is particu-
larly suited to information products, but manufactured products such as cars can
now be specified to a fine degree of detail by the customer.
6 Open-source value creation. The best-known example of this is the creation and
commercial success of the operating system Linux by over 300,000 collaborators
worldwide. Picardi (2000) suggests that organizations will make more use of
external resources to solve their problems.
Answers to activities can be found at www.pearsoned.co.uk/chaffey

Decision 4: Business, service and revenue models

A further aspect of Internet strategy formulation closely related to product development options

Business model is the review of opportunities from new business and revenue models (first introduced in
A summary of how a Chapter 2). As well as new business and revenue models, constantly reviewing innovation in
company will generate
revenue, identifying its services to improve the quality of experience offered is important for e-businesses. We also dis-
product offering, cuss this later in the context of positioning and differentiation. For example, holiday company
value-added services, Thomson (www.thomson.co.uk) innovates to improve the quality of the purchase experience.
revenue sources and
target customers. Innovations have included: travel guides to destinations, video tours of destinations and hotels,
‘build your own’ holidays and the use of e-mail alerts and RSS (Really Simple Syndication,
Revenue models
Chapter 3) feeds with holiday offers. Such innovations can help differentiate from competitors
Describe methods of
generating income for an and increase loyalty to a brand online.
organization. Evaluating new models and approaches is important since if companies do not review
opportunities to innovate then competitors and new entrants certainly will. Andy Grove of
Intel famously said: ‘Only the paranoid will survive’, alluding to the need to review new revenue
opportunities and competitor innovations. A willingness to test and experiment with new
business models is also required. Dell is another example of a tech company that regularly
reviews and modifies its business model, as shown in Mini Case Study 5.3. Companies at the
bleeding edge of technology such as Google and Yahoo! constantly innovate through acquiring
other companies. For example, Google purchased linguistic analysis company Applied Seman-
tics in 2003 to improve its search results algorithm; it developed social networking site Orkut