A Strategic Perspective of Internet Information Providers

Forecasters predict that the new century will usher in more extensive commercial impacts of the Internet that will dwarf those achieved in the late 1990s. Strategic models need to be applied to understand electronic commerce from two perspectives: one that emphasizes the structure of the entire industry, and one that emphasizes the contribution of the particular resources of an individual firm. This chapter provides structural and resource-based analysis of Internet information providers (IIPs) along with consideration of issues important in the generation, processing, storage, and transmission of information. Structural issues address risk, barriers to entry, bargaining power, and substitute goods available in an industry, while resource-based issues focus on a particular firm’s balance of property versus knowledge, as well as its information capacity, exclusivity, and overall reputation. In general, resource-based analysis implies that generation and processing of information are knowledge-based resources, while storage and transmission are property-based resources. Structural analysis implies that there is a large and ever-increasing amount of competitiveness in the industry, bringing into doubt the effectiveness of adopting a price/cost strategy. Combined analysis leads us to conclude that knowledge-based resources will be more effective in achieving competitive advantage than property-based resources because the former will provide more capability for all-important product differentiation.