Strategy and the Internet

            In Michael Porter’s “Strategy and the Internet,” he dives into how the Internet has and hasn’t changed businesses and strategy in the economic world. The Internet should not replace or take over a company’s strategy and services, it should complement it. There is no way a company would still be able to survive if they relied solely on the Internet and got rid of their conventional methods of running their organization. As Porter says, “the companies that succeed will be ones that use the Internet as a complement to traditional ways of competing” (p. 3).  Because the Internet is rapidly growing, companies think that their best way to succeed and make even more profit is to rely on the technology of the Internet. However, although the Internet has enough power to expand distance learning, it did not create the company or industry in the first place (p.5). The Internet changes the way these businesses see profitability and the front end process, but does not take away from traditional means.

            Overall, the Internet’s technology will eventually erode profitability because it is now putting the power in the customer’s hands as opposed to the companies. Customers can now directly deal with all of their needs for buying something online without needing an intermediary (p.10). The Internet, over time, will not replace conventional ways of running and taking part in a business because the Internet complements the company rather than dismantles it. Porter states that, “Internet application and a traditional method benefit each other” (p.17).

Key Issues:

• Since the Internet has a never ending supply of information, it is easy for buyers to do their research. This technology provides customers access to information about certain products they are going to buy or about companies they are going to buy from, therefore strengthening their bargaining power.
• The formation of the Internet will put a lot of pressure on a company’s profitability. Many companies are becoming or already are extremely familiar with how Internet technology works, thus online applications and sites are rapidly growing, making competition for all companies extremely brutal. 
• Just as businesses are becoming accustomed to how the Internet works, so are the customers. Like mentioned above, customers have access to all sorts of information, but that’s not the only thing. The Internet makes switching from company to company extremely easy at a low cost. Buyer’s loyalty to certain companies is declining because of this low cost and efficient way of switching.

Solutions:

• In order for companies to stay on top, they need to gain the advantage. By doing so, they need to achieve and keep “higher levels of operational effectiveness” than that of their competitors (p.11).
• Companies and industries need to operate at a lower cost or command a premium price, or do both. They can accomplish these things by doing the same thing as their competitors, only better, or they could do things differently than their competitors that will ensure delivering the customer a unique value.
• Point blank, the Internet cannot do everything. While using the Internet for business, customers lack the ability to examine and test out the product, they cannot talk directly with company personnel, and there are extra costs when doing business from your computer. In order for companies to stay afloat, they need not rely completely on the technology that the Internet has provided because although it can do a lot, it cannot do everything that traditional methods of running a business can.