9/14/2010 Effective strategies tackle 3 questions… •Why do you do what you do? •How do you want to get there? •What do you need to do? Five Forces Determine Industry Profitability New Entrants Threat of New Entrants Bargaining Power Industry of Suppliers Competitors Suppliers Buyers Rivalry Among Bargaining Power Existing Firms of Buyers Threat of Substitute Products Substitutes or Services 1 9/14/2010 Discovering new sources of growth and profitability in a networked economy Options for Strategic Positioning System Lock‐in Enabled through Effective Use of Technology Total Customer Solutions Best Product 2 9/14/2010 Options for Strategic Positioning System Lock‐in Dominant Exchange Proprietary Standard eBay Microsoft, Intel Exclusive Channel Rural Wal-Mart Enabled through Effective Use Horizontal Breath of Technology Low Cost Fidelity Southwest Total Customer Redefining Customer Differentiation Best Product Solutions Customer Rel. Integration Sony Saturn EDS Reasons for Customer Segmentation • Do not commoditize your customer. You should not treat every customer equally. • Customers are different in many ways: ‐ Needs ‐ Capabilities ‐ Business economics and strategies ‐ Willingness to engage in business with you ‐ Demographic characteristics: size, profitability, participation in vertical markets, geography • The most attractive customer usually is the one that has the greatest gap between its needs and your ability to satisfy them. 3 9/14/2010 Key Insights • Think of your firm as a bundle of competencies —Not merely as an engine for developing, making, and distributing products. • Understand deeply your customer needs—Segment the customer base to differentiate meaningful value propositions to each customer tier. • The key to exploit opportunities for growth and profitability is to match your competencies with your customer needs. Try to be creative, bold, and fast. 4 9/14/2010 Revenue Model Should Hulu move away from its ad‐supported model? Online Video and Television Industry Producers Networks Advertisers Networks’ Satellite Cable Hulu YouTube BitTorrent Own Sites Viewers 5 9/14/2010 Jeff Zucker’s reference to Hulu’s launch: “The largest internet video distribution network ever assemble d with the most sought‐after content from television and film” And the intent: “to make sure consumers know they don’t need to steal our content” News Corporation ($36.33 Billion) Publishing (books, inserts & Cable TV Direct: Satellite Newspapers TV Magazines Fox movie Fox News Fox Sports Film FX Fox Entertainment Group Fox Interactive Media 20 Century Fox TV (formed July 2005) 7 prime titles: Fox Broadcasting Content for mobizzo MySpace (bought 2006) Network IGN Entertainment (online gaming) American Idol Mobizzo: Content for mobile devices The Simpsons, House Fox TV stations #1 in 18-49 segment MyNetwork TV 25 stations (launched 2006) Fox Sports Aust. 9 owned & 1 Operated, 1 independent STAR 175 affiliate stations FoxTel (TV in Asia) 12 hours weekly programming 6 9/14/2010 Hulu’s Platform Advertisers HULU Users News NBCU Disney Corp. Other content owners 7 9/14/2010 Hulu versus YouTube Popularity of Video HULU YouTube Rank of Video 8 9/14/2010 Epilogue • Dec 2009: Comcast & GE signed a joint venture to integrage NBC Universal & Comcast’s cable network. • March 2010: Viacom’s Comedy Central pulled The Daily Show and The Colbert Report out of Hulu. • June 2010: Hulu announced a subscription service, Hulu Plus. 9 9/14/2010 THE PRIMARY OBJECTIVES OF THE HULU CASE STUDY WEREWERE:: 1. ElExplore hIThhow IT can change c hanne ls an d mar ktttket structures 2. Analyze incumbents’ decisions/consequences in capitalizing on new forms of content distribution 3. Understand that running a sustainable IT-enabled platform requires a careful balancing act. It is all about making tradeoffs! For Next Class Please prepare: Google 10.