Porter and the Internet: An Empirical Assessment of Porter's Strategic Thinking as Applied to Online Strategies for Pet Supply Stores in the San Diego, CA Metropolitan Area

Journal of Applied Management and Entrepreneurship, Jul 2003 by Stretch, Robert T "Bob"

Various "Non-Porter" Models of Internet "Strategy"

Before examining Porter's (2001) assessment of the strategic importance of the Internet on business, it is necessary to first examine the current state of "non-Porter" thinking on the unique strategies necessary for the Internet. In most cases, these are not true strategic models but tactical frameworks typically coming out of a particular branch of study. However, they are referred to as "strategies" by their authors and therefore need to be addressed to examine how other thinkers view this new business modality.

Kinder (2002) describes Timmers' (1998) collection of eleven generic e-commerce models that are compiled in terms of functional integration and innovation. While this empirical set of descriptions is broad, from e-shopping through value chain integration, they don't appear to be all encompassing. Kinder himself uses three methodological dimensions of e-commerce: interactivity, connectivity, and agility, to explore various models of Internet businesses. However, the work still appears to be focused on explaining what already empirically exists, rather than making decisions on where a company should go: it is descriptive, not strategic in nature.

A number of authors use similar schemes to classify behaviors they have observed on the Internet. Evans and Wurster (1999) used reach, affiliation, and richness. Coming from a relationship-building marketing sales model, Wang, Head, and Archer (2000) used three components: database, interaction, and network. None of these appear to be robust enough for strategic use.

While some researchers like Merrilees (2001) do accept more traditional (i.e., deriving from Porter (1980)) strategic thinking, they also tend to make some adjustments for the Internet environment. Alien and Fjermestad (2001) and Baourakis and Kourgiantakis (2002) try to identify some sources of competitive advantage, but their marketing-dominated perspective limits their contributions.

A different approach is to attempt to identify the Critical Success Factors (CSFs) for viable Internet-using firms. Duffy and Dale (2002) found ten critical processes while Damanpour (2001) came up with three and Jeffcoate, Chappell, and Feindt (2002) identified eleven. All of these CSFs focus primarily on the purchasing and order fulfillment aspects of e-commerce and thus exclude many Internet activities that do not directly produce, or contribute to, revenue generation. Like Lee (2001), the focus is on the business model used, not the strategy that is being fulfilled.

To further complicate matters, reporting revenue and costs are "fuzzy" with capital formation being bled through into the revenue stream (Porter, 2001) and metrics such as stickiness, conversion ratios, and click-throughs dominating the discussion (Kinder, 2002).

Supremacy of Price or Service on the Internet

There is a major divergence in the literature on whether the Internet provides a vehicle for far greater spans of customer service or if it commoditizes all products thereby reducing overall industry profits.