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Lecture 3

MIS 302F Lecture Notes - Lecture 3: Network Effect, Barcode, InditexPremium

5 pages64 viewsSpring 2019

Department
Management Information Systems
Course Code
MIS 302F
Professor
S Provost
Lecture
3

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Notes 02.04.19
Switching Costs
The cost a consumer incurs when moving from one product to another
It can involve actual money spent (e.g. buying a new product) as well as investments in time, any
data loss, and so forth
Switching Costs and Data*
Learning costs
Switching technologies may require an investment in learning a new interface and
commands
Information and data
Users may have to reenter data, convert files or databases, or even lose earlier
contributions on incompatible systems
Financial commitment
Can include investments in new equipment, the cost to acquire any new software,
consulting, or expertise, and the devaluation of any investment in prior technologies no
longer used
Contractual commitments
Breaking contracts can lead to compensatory damages and harm an organization’s
reputation as a reliable partner
Search costs
Finding and evaluating a new alternative costs time and money
Loyalty programs
Switching can cause customers to lose out on program benefits. Think frequent
purchaser programs that offer “miles” or “points” (all enabled and driven by software)
Differentiation
Commodity
A basic good that can be interchanged with nearly identical offerings by others- think
milk, coal, orange juice, or to a lesser extent, Windows PCs and Android phones
The more commoditized an offering, the greater the likelihood that competition will be
based on price
Network Effects
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Also known as Metcalfe’s Law, or network externalities. When the value of a product or service
increases as its number of users expand.
Create value by making a market more efficient
Network effects increase exponentially, so winners can enjoy near-monopoly holds on a market
Two-sided market: e.g. diners are attracted to a reservations service with the most participating
restaurants, and vice versa
Distribution Channels
The path through which products or services get to customers
Distribute products by bundling them with existing offerings
Affiliates
Third parties that promote a product or service, typically in exchange for a cut of any
sales
APIs (application programming interface)
Turn your product into a platform
Programming hooks or guidelines, published by firms that tell other programs how to
get a service to perform a task such as send or receive data
For example, Amazon provides APIs to let developers write their own applications and
websites that can send the firm orders
Patents
Firms that receive patents have some degree of protection for approximately 20 years
Because of high costs associated with litigation, the patent system is often considered to be
unfairly stacked against start-ups
Intellectual property protections can be granted to innovations deemed to be useful, novel, and
nonobvious
Non-practicing entities
Commonly known as patent trolls, these firms make money by acquiring and asserting
patents, rather than bringing products and services to the market
Inditex
Zara’s parent company, founded by Amancio Ortega
Leveraged a technology-enabled strategy to become the world’s largest fashion retailer
Logistics
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