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 of Suppliers Industry Competitors Suppliers Buyers Rivalry Among Existing Firms Bargaining Power of Buyers Threat of Substitute Products or Services Substitutes 1
Discovering new sourcesof 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
Options for Strategic Positioning System Lock in Dominant Exchange ebay Proprietary Standard Microsoft, Intel Exclusive Channel Rural Wal-Mart Horizontal Breath Fidelity Enabled through Effective Use of Technology Low Cost Southwest Total Customer Solutions Redefining Customer Rel. Saturn Customer Integration EDS Differentiation Sony Best Product 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
Key Insights Think of your firm as a bundle of competencies Not merely as anengine for developing, making, and distributing products. Understand deeply your customer needs Segment the customer base to differentiate meaningful value propositions to each customer tier. f 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
Revenue Model Should Hulu move away from its ad supported model? Online Video and Television Industry Producers Networks Advertisers Satellite Cable Hulu Networks Own Sites YouTube BitTorrent Viewers 5
Jeff Zucker s reference to Hulu s launch: The largest internet video distribution network ever assembled 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 Cable TV Fox movie Fox News Fox Sports FX Newspapers Fox Interactive Media (formed July 2005) MySpace (bought 2006) IGN Entertainment (online gaming) Mobizzo: Content for mobile devices MyNetwork TV (launched 2006) 9 owned & 1 Operated, 1 independent 175 affiliate stations 12 hours weekly programming News Corporation ($36.33 Billion) Direct: Satellite TV Fox Entertainment Group Fox Sports Aust. Fox Broadcasting Network American Idol The Simpsons, House #1 in 18-49 segment FoxTel Publishing (books, inserts & Magazines Film 20 Century Fox TV 7 prime titles: Content for mobizzo Fox TV stations 25 stations STAR (TV in Asia) 6
Hulu s Platform Advertisers HULU Users News NBCU Disney Corp. Other content owners 7
Hulu versus YouTube Popularity of Video HULU YouTube Rank of Video 8
Epilogue Dec 2009: Comcast & GE signed a joint venture to integragenbc 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
THE PRIMARY OBJECTIVES OF THE HULU CASE STUDY WERE: 1. Explore how IT can change channels and market structures t 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