Strategy and AntitrustCompetitive Advantage•Value creation•Operational effectiveness•Strategic positioning•Sustaining advantage•Matching buyers and sellers–Customer preferences, supplier capabilities•Transactions–Automation, margin, aggregation•Fulfillment–Logistics, clearing houses, ERP linkage, credit•Collaboration–Product design, capacity sharing, standards Value CreationOperational Effectiveness•Reducing cost and/or increasing revenues•OE enhancement through:–Improved processes–Customized products–Innovative technology–Reengineered tasks •OE provides a temporary advantage–determined by the time it takes the competitors to imitate the changes•Digital technology makes it harder to sustain operational effectivenessStrategic Positioning•Determined by a set of differentiations that reinforce one another–Set of attributes–New services or old services packaged differently–Market segments•Digital technology is ideal for achieving hard to imitate strategic positioning–Can reconfigure its supply chain, distribution, and outsourcing that are unique to its business practice–Competitors must replicate the whole set–Imitating only a few features would involve painful tradeoffsPublic E-marketplace•Operational effectiveness–low transaction costs–easy access to information–aggregation benefits–low selling cost–access to wider markets. •No competitive advantage–Others start imitating it by providing identical services•Competitive disadvantages –The “one size fits all” may hamper innovative approaches of value creation•Niche positioning–Create entry barriers: EBay, and ExpediaPrivate E-marketplace•Operational effectiveness–Can create collaborations through process integration–Can protect the unique nature of productor process by limiting visibility•WalMart would loose its unique buying advantage in a public e-marketplace–Can leverage unique delivery or manufacturing capabilities (such as FMS)•Strategic positioning–Can design business processes and rules to its advantage•Dell Computer leverages its DTC model–Can leverage its market power for product differentiation and process distinctiveness–Proprietary relationships with suppliers and buyers–Set of processes, technology, and relationship are hard to imitateParticipation Strategy•When to join (or create) an e-marketplace•Proportion of sales through e-marketplaces and through other sales channels (portfolio)•Proportion of purchases from e-marketplaces and from other channels (portfolio)•Catalog purchasing, long term contracts or auctions•When to buy/sell through a public, private, or consortium e-marketplace•Marketplace's orientation•Marketplace's long-term viability •Marketplace's options for privacy •Critical mass of buyers and sellers•How does it select sellers and buyers•How does the marketplace make money •Notification process for buyers and sellers •Information disclosures in a transaction •Training provided to new users•Additional services provided Participation ConsiderationsDow Chemicals Portfolio•Opportunity to improve operational efficiency of complex processes•Complex products, not easy to trade•Customer solution focus•Able to drive participation from other players•Opportunity to create an effective revenue model•Risks in market Creation–Integrating legacy systems, and new infrastructures–Working with competitors•Conflict of interest•Multiple standards•Antitrust regulationsMarket Creation ScenariosStrategy Analysis•Competitive behavior –Products, suppliers, buyers, marketplaces•Participation analysis–Supplier or buyer base, market segments•Revenue streams and equity•E-marketplace functionality–Business processes, privacy, cost, collaboration benefits, aggregation, business rules, transparency, coordinationMarket Making Postulates•Companies, with resources and market power to build a consortium e-marketplace,exist in consolidated industries•Simple products can generate trading volumes in to support e-marketplaces with limited functionality•Complex products are easy to trade through platforms that provide more complex functionalityStrategic Fit•A fragmented industry with simple products would be the ideal niche for public e-marketplaces•In a fragmented industry with complex products public e-marketplaces will loose out to private marketplaces or collaboration platforms•In a consolidated industry with simple products public e-marketplaces will likely loose out to consortia•In a consolidated industry with complex products large companies would use private e-marketplaces to obtain coordination value by integrating with their supply chain partners Market Making Strategy•Industry consolidation•Product complexityCreating Competitive Advantages•Access and information transparency•Aggregation (Collective purchasing)•Network effects•Integration •Exclusionary rules Pro and anti competitive issues (within)•Information transparency–Efficiencies in planning and transactions–Can lead to price fixing•Aggregation–Benefits of aggregation –Specialized suppliers can get crushed by large aggregatesPro and Anti (between)•Network effect–Winner take all –When an e-marketplace reaches the “tipping point” it would be impossible for others to compete•Exclusionary rules–Drives business to the e-marketplace and avoids the “free rider” problem–Limits the freedom of buyers and sellersAntitrust AuthorityAntitrust authorities ensure overall market competition by•Preventing conditions and practices that foster anti competitive behavior–Evaluation of mergers and acquisitions•Correcting through civil and criminal actions all anti competitive practices detected–Creation and enforcement of antitrust lawsEmerging Issues (within)•Control of aggregated transaction databases, as they become incredibly valuable in industry and market level analyses in future•Addressing the economic/legal implications of transaction information, particularly as they relate to privacy and security•Antitrust agency’s ability to distinguish between good consortium (oligopoly) and bad consortium (collusion) will be crucialEmerging Issues (between)•Assessing the tradeoffs between the value of network effects and the market-power threat of industry specific e-marketplaces•Should e-marketplaces, operating efficiently as natural monopolies, be subjected to some form of government rate-of-return regulation to assure reasonable prices and quality?•Should e-marketplaces with exclusionary rules be forced to grant access to all interested parties, by designating them as “essential facilities”? Market and Antitrust DynamicsMonitoring/Enforcing Authorities•United States–Federal•Federal Trade Commission•Anti-trust division, Department of Justice–State •State Attorney General•Europe–Competition Commissioner of European Commission