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Has Internet Rendered Strategy Obsolete?
Before tackling the question at hand we must first understand what is meant by strategy. According to Johnson and Scholes (1993):
“Strategy is the direction and scope of an organisation over the long term: ideally, which matches its resources to its changing environment, and in particular its markets, customers or clients so as to meet stakeholders expectations.”
The advent of the internet has led to the development of new organisational structures which require new strategic thinking.
Organisations may now come as:
• Physical Organisations: organisations with purely physical market places, serving as the primary point of contact between the organisation and the customer, fixed in a particular geographical location. The main physical, U.K. based, chain of DVD rental stores is ChoicesUK. The organisation does have an online presence, however the online marketplace is currently only being used to sell DVD’s and not to rent them.
• Virtual Organisations: organisations which exist exclusively on the internet and use this medium as their sole point of sale and communication with the customer. The online DVD rental market leader in the U.K. is Lovefilm.com. The company has a majority market share, though other virtual service providers exist, these often specialise in a variety of services; these include
Amazon.co.uk, WH Smith, Toys R Us, Tesco and CDWoW.
• Hybrid organisations: organisations which have both physical outlets as a point of contact with the customer and also exist in the internet marketplace. As the DVD rental market leader previous to the move to online rental, Blockbuster Ltd remains the leading hybrid firm, offering both online rental and rental from over 720 stores nationwide.
The internet has clearly affected business practice in a number of ways (Goode & Stevens, 2000, Dutta & Segev, 1999, Mahadevan, 2000), and seen the birth of new academic disciplines (Sheth & Sharma, 2005, Shen 2002, Dav & Kauffman, 2002). However, though much research has discussed ways in which the internet has changed business practice, research regarding its effect on business strategy remains limited.
Porter (2001) believes that the rise of the internet has led to a greater need for effective business strategy. Through the exploration of his 5 forces model (Porter 1980) he investigates the effect of the internet on each competitive force, and concludes that though a more accessible global marketplace means potential growth is increased, the increase in global competition is such that this is harder to achieve, and consequently more emphasis must be placed on business strategy. His findings have been supported by resultant studies (Turban et al 2002, McGrath and Heiens’s 2003, Filson 2004).
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