Strategic Computing and

Communications Technolgy
Course web page
http://www.ischool.berkeley.edu/~hal/Courses/StratTech09
Syllabus, schedule, lectures, readings will be updated

Requirements
Individuals
Submit 4 relevant news items + 2 or 3 paragraph
analysis of each over semester
Participate in class discussions

Group projects
I appoint mixed groups
Technology assessment presentations at end
SIMS

Strategy Overview
Hal R. Varian

SIMS

What is strategy?
Definitions
A course of action to achieve targets
A plan or method employed in order to
achieve a goal or objective
In practice: often a checklist of things to pay
attention to and watch out for

External and internal

Planning v strategic interaction
SIMS

3 approaches to business
strategy
Education
Michael Porter, Competitive Strategy

Executive
Jack Welch, Winning

Economics
Shapiro and Varian, Information Rules
Brandenberger and Nalebuff, Co-opetition
Dixit and Nalebuff, The Art of Strategy
SIMS

Michael Porters Five Forces

Porter, Michael E., Competitive Strategy, Free Press, 1998

SIMS

Supplier power
Importance of costs
Impact of inputs on your
product cost or design

Competitive environment
Supplier concentration,
bargaining power
Presence of substitute
inputs
Importance of volume to
supplier
Switching costs of suppliers
Threat of forward integration
SIMS

Barriers to entry
Costs
Absolute cost
advantages
Economies of scale
Capital requirements

Scarcity
Access to
distribution
Proprietary learning
curve
Access to inputs (IP)
Proprietary products
Brand identity
SIMS

Other
Customer switching
costs
Expected retaliation
(I.e., capacity threat)
Government policy

Buyer power
Competitive
environment

Buyer concentration
Bargaining power
Substitutes available
Product
differentiation
Price sensitivity
Buyers' switching
costs
Brand identity
Buyer volume
Threat of backward
integration
SIMS

Threat of substitutes
Customer switching costs
Buyer inclination to substitute
Price-performance trade-off of
substitutes

SIMS

Internal rivalry
Economic factors

Industry concentration
Fixed costs, scale requirements
Exit barriers
Intermittent overcapacity
Industry growth

Customer perceptions

Product differences
Switching costs
Brand identity
Diversity of rivals
SIMS

Critique of Porter
Product of its times (1980s)
Relatively stable environment
Manufacturing model

Not a very clear taxonomy

Competitors: actual and potential?
Substitutes: internal or external?

Not much emphasis on technology and

innovation
SIMS

Jack Welch (ex-CEO of GE)

Winning, Harper Business 2005
Three steps
Find a smart, realistic, fast way to gain substantial
competitive advantage
Put the right people in the right place to drive this
forward
Seek out best practices, adapt them, and continue
to improve them

GE initiative: Be No 1 or No 2 in each market

and fix, sell, or close deal to be there.
5 Slides
SIMS

1. What playing field looks like

Who are your competitors?
What has what share globally and in each
market?
Is your business a commodity or high value,
long cycle or short, where on growth curve?
What are drivers of profitability?
What are strengths and weaknesses of each
competitor? How good are its products? How
much does each one spend on R&D? How big
is its sales force?
Who are your customers and how do they
buy?
SIMS

2. What the competition is

doing?
What has each competitor done in past
year to change the playing field?
Has anyone introduced game-changing
new products, technologies, or new
channel?
Are there new entrants, and what have
they been doing?
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3. What have you been doing?

What have you done to change the playing
field?
Have you bought a company, introduced a
new product, taken a competitors
salesperson, licensed a new technology?
Have you lost competitive advantages you
once had: a salesperson, special product,
proprietary technology?
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4. Whats around the corner?

What scares you the most in the year
ahead? What could a competitor do to
nail you?
What new products or technologies
could your competitor launch that might
change the game?
What mergers/acquisitions would knock
you off your feet?
SIMS

5. What is your winning

move?
What can you do now to change the
playing field? New acquisition, new
product, new market?
What can you do to make customers
stick to you?

SIMS

Critique of Welch
Very action oriented, not so analytic
Good for CEO, not for industry analyst
Strategy and tactics intermingled
Doesnt emphasize specific industry forces
Good meeting agenda, may not lead to
deepest insights...

SIMS

Brandenberger and Nalebuff

Value Net
Customers
Actual and potential
companies and products

Competitors

Company

Suppliers

SIMS

Complementors

Whats this?

Co-opetition and complements

Customers value entire system
Hardware+software, DVD player+disks

Sometimes you compete, sometimes you cooperate

Think of Intel and Microsoft, IBM and Oracle
Not a zero sum game!

Complementors can be critical to your

business, particularly in technology
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Google

Customers
Competitors
Complementors
Suppliers
[Users?]

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Google
Customers
advertisers
Competitors
Yahoo, Microsoft, other ad media
Complementors
ISPs, publishers,content providers, phone carriers
Suppliers
Hardware, software, publishers
[Users?]
[Regulators?]
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Shapiro and Varian

Forces important for info tech industries
Differentiation of products and prices
Intellectual property (copyright + patents)
Switching costs and lock-in
Network effects
Standards and interconnection
Systems effects and complementors
SIMS

Example: Apple Ipod story

Price of songs (differentiation of prices)

Competition (free songs, other players)
Government policy (copyright)
Complementors (players + content)
Channel conflict (online + offline)
Standardization (interoperability, DRM)
New entrants (mobile phones)
SIMS