Week 7 - Competitive Advantage in Technology-Based Industries

Question 1

What is the traditional pipeline business model?

Answer 1

RMs -> Production -> Assembly -> Distribution

Question 2

What is the newer platform business model?

Answer 2

Source content -> edit/curate -> create bundles -> multiple channels

Question 3

What are ownership costs?

Answer 3

Costs incurred by purchasing/maintaining/depreciating physical assets.
Tech based firms often have lower ownership costs.
E.g. Uber don’t own the cars

Question 4

What are transaction costs?

Answer 4

Costs incurred when it creates a transaction in the market place.
Often lower for tech-based firms as many have transaction cost reduction at the centre of their business model.

Question 5

How does a platform’s environment work?

Answer 5

Platform/owner not in direct competition with suppliers for profits
Platform in a positive-sum relationship where if suppliers do better, so does the platform.
Customers often encouraged/promoted to become sellers, e.g. AirBnB
Consider ‘Tipping Point’ - where scale is enough to attract additional users to sustain growth.
Porter’s theory still relevant about outside forces, but more forces inside/outside the ecosystem emerge for platform businesses.

Question 6

What is Van Alstyne, Pancer & Choudary’s (2016) view in platform environments?

Answer 6

“Competition becomes more dynamic and complicated in a platform world”.
“Learn the new rules of strategy for a platform world, or begin planning your exit”.