Repositioning and Cost-Cutting: The Impact of Competition on Platform Strategies

40 Pages Posted: 29 Mar 2017

See all articles by Robert Seamans

Robert Seamans

New York University (NYU) - Leonard N. Stern School of Business

Feng Zhu

Harvard University - Harvard Business School

Date Written: March 28, 2017

Abstract

Organizational structures are increasingly complex. In particular, more firms today operate as multi-sided platforms. In this paper, we study how platform firms use repositioning and cost-cutting in response to competition, elucidate external and internal factors that constrain or enable these responses, and examine how the firms’ responses affect their performance. Our empirical context is the US newspaper industry, which has experienced increased competition following the entry of Craigslist, an online provider of classified ads. We find that when Craigslist enters a newspaper’s market, the newspaper repositions itself away from other newspapers by changing its content. This results in greater differentiation between newspapers in a market, but occurs primarily in markets in which reader preferences are heterogeneous. When reader preferences are homogeneous, newspapers are more likely to engage in cost-cutting. Both responses are more pronounced for newspaper firms whose sister firms have already experienced Craigslist’s entry. We also find that failure to design the right response harms competitive viability. These findings offer important implications for many platform firms operating in today’s digital economy.

Keywords: multi-sided markets, platform strategies, repositioning, cost-cutting, intra-firm learning, digitization

JEL Classification: L11, L25, L86

Suggested Citation

Seamans, Robert and Zhu, Feng, Repositioning and Cost-Cutting: The Impact of Competition on Platform Strategies (March 28, 2017). Available at SSRN: https://ssrn.com/abstract=2942511 or http://dx.doi.org/10.2139/ssrn.2942511

Robert Seamans (Contact Author)

New York University (NYU) - Leonard N. Stern School of Business ( email )

44 West 4th Street
Suite 9-160
New York, NY NY 10012
United States

Feng Zhu

Harvard University - Harvard Business School ( email )

Soldiers Field Road
Morgan 431
Boston, MA 02163
United States

HOME PAGE: http://www.hbs.edu/faculty/Pages/profile.aspx?facId=14938

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