Assembling Platforms: Strategy and Competition

15 Pages Posted: 20 Jan 2014

See all articles by Eric Brousseau

Eric Brousseau

Université Paris X Nanterre - Department of Economics

Thierry Pénard

Université de Rennes 1 - Faculte de Sciences Economiques; Armorican Mole for Research on the Information Society and Uses of the Internet; Centre de Recherche en Économie et Management (CREM)

Date Written: November 2, 2008

Abstract

Strategic behaviour in digital markets is difficult to interpret as these industries compete via alternative business models, rather than competing via an accepted business format. Digital market strategies are also more sophisticated and dynamic along product positioning and pricing, alliance, merger and acquisition, and innovation activity dimensions.

This paper analyses key variables to be considered in the design of digital business models. First, the trade-offs specific to matching, assembling and knowledge management are presented. Then, the strategic interdependency among these dimensions is related to the main features characterising demand: heterogeneity in users preferences, willingness to pay for quality, and organised solidarity among users. Furthermore, the firm’s challenge is not only to establish a market niche or to obtain a gatekeeper position, since in an industry characterised by permanent innovation and a ‘winner-takes-all’ race firms must add new functions to their portfolios in an ongoing manner. Such ‘agility’ or adaptability is required to preserve competitive advantage. The inherent difficulty in managing innovative capability and commercial image, when the supply of services is continually being extended to new domains (that require new capabilities and the evolution of commercial practice) are also underlined. The framework attempts to identify the principal trade-offs among alternative digital strategies. The analysis also stresses the importance of uncertainty regarding digital market competition due to the threat of market invasion by rivals. Rivalry can spoil market positioning because of interdependency among business models due to direct network externalities and competitors’ indirect revenues.

Keywords: digital economy, digital business models, digital strategy

JEL Classification: L10, L86

Suggested Citation

Brousseau, Eric and Pénard, Thierry, Assembling Platforms: Strategy and Competition (November 2, 2008). Available at SSRN: https://ssrn.com/abstract=1498507 or http://dx.doi.org/10.2139/ssrn.1498507

Eric Brousseau

Université Paris X Nanterre - Department of Economics ( email )

Nanterre Cedex, 92001
France
+33140975922 (Phone)
+33140975907 (Fax)

HOME PAGE: http://economix.u-paris10.fr/

Thierry Pénard (Contact Author)

Université de Rennes 1 - Faculte de Sciences Economiques ( email )

7, Place Hoche
35000 Rennes
France

Armorican Mole for Research on the Information Society and Uses of the Internet ( email )

France

Centre de Recherche en Économie et Management (CREM) ( email )

7 place Hoche
Rennes, Bretagne 35065
France

Register to save articles to
your library

Register

Paper statistics

Downloads
55
rank
365,740
Abstract Views
304
PlumX Metrics
!

Under construction: SSRN citations will be offline until July when we will launch a brand new and improved citations service, check here for more details.

For more information