introduction and network effects

Question 1

Distinguish between Autarky and Synchronisation benefits

Answer 1

1. Autarky Benefits: are benefits of sole ownership (ex; don’t get more value from others eating a cheese burger)
2. Synchronisation benefit: benefits from others having the product (ex; Skype)

as the market share goes up, synchronisation and the total value increases, whilst autarky benefits remain the same.

Question 2

What is Metcalfs Law?

Answer 2

The value of network is the square sum of its members of users. when one network gets a small advantage in terms of users, then its net value increases significantly, giving it a competitive advantage

Question 3

What are the different type of buyers and sellers?

Answer 3

• B2B
• C2C
• C2B
• B2C

Question 4

What are the drivers of growth for digital marketing? (BICEP LIT(D))

Answer 4

• Broad and and rich media
• increased confidence and casualness
• Choice and value
• easy product research
• personalisation
• low start up costs
• increasing awareness and trust
• tablets and smartphones
• delivery options/free delivery, quick

Question 5

How do you enter markets with network effects?

HELP BM VC

Answer 5

3. HIGH SWITCHING COSTS: (Like eBay vs. Groupon)
4. ENVELOPMENT: existing network effects are moved
5. LIQUID MARKET: early stage firm is not established and is vulnerable to better propositions but with liquid market= high lock in. from one market to another (Linked-in)
6. PRICING: two sided market, consider whether they can be (one side), subsidised or incentivised.
7. BRAND CREDIBILITY: amazon entering marketplace in competition with eBay
8. MAJOR CUSTOMERS for B2B markets: scale of a firm can provide network effects
9. VALUE PROPOSITION: (not first, focus creating liquid market + enough participants) e.g. Bet fair
10. COALITIONS: if lack network effects, work with others (bet fair moving from own platform into shared one)

Question 6

What are network effects?

Answer 6

Occurs when value is generated through more users ex: eBay

Question 7

What are the existing types of network effects?

Answer 7

1. Direct network effects: an increase in usage leads to direct benefits to other users such as; Skype. WhatsApp
2. indirect network effects: it is a two sided effect or multi-sided.
   - distinct group is attracted by the presence of the other side. wide phenomenon in business
   - provider is known as the platform
   - development of complementary products due to network product

Question 8

What is disintermediation?

Answer 8

• Reduction in the use of intermediaries between producers and consumers, for ex; by investing directly in the securities market rather than through a bank.
• many websites fulfil multiple roles
• new types of intermediaries provide value to the end consumer
• can fulfil multiple roles

Question 9

What is E-commerce seen as?

Answer 9

trading over electronic networks, specifically internet based. We also have older historical networks.

Question 10

What is E-business seen as?

Answer 10

E-commerce + wider activities such as:

• supply chain
• branding
• PR

Question 11

What are Dot Coms?

Answer 11

” A company that conducts its business over the internet”

• operates through online channel only
• boom was in the late 1990 funded by venture capital investments (cash for equity)
• crash of 2000
• today: many dot comes (ASOS, AO)

Question 12

What are multi-channels?

Answer 12

• the term “channel” defines how products gets to the final customer
• multichannel operates offline and online (known as omni channel)
• huge tail of small operators