End Of Competition, The: The Impact Of The Network Economy. C N A Molenaar
look at whether there is an opportunity for collaboration and creating value in a network. Instead of only looking at the extent and strength of the competitors, it is better to keep an eye on their willingness to work together. And to see if there are any traditional relationships that can be used, any historical behaviour with regard to working together. Collaborative partnerships, resulting in complete supply chain ecosystems are the central element of modern supply chains. In actual fact, the basis of competition is not to defeat the competition but to motivate customers (Table 1).
So What is the New Supply Chain Then?
The traditional supply chain involved a linear process, where successive links added value. Each link was independent, and had its own revenue model and position. The totality of these independent links was the supply chain. Information was passed on from link to link. As a result, factories had limited information regarding customers, buying processes and buying motives. The customers of a manufacturer were the companies of the next link in the chain, not the end customer. This was typical for the traditional analogue approach, but was a major limitation if you needed to respond to a dynamic market.
Table 1. Overview of value creation, old and new.
| Porter’s Five Forces Model | Traditional | Network Based |
| Substitute of products | Competing on the basis of quality and experience. | Ensuring there is a powerful network with complementary products and suppliers. |
| Entrants | Erecting barriers based on local position, price, speedy deliveries, distribution and presence. | Ensuring there is added value and possible balloting for new entrants. Providing customer loyalty. |
| Negotiating power of supplier | Limited number of providers, with attention on the competitors and a distinctive supply. | Choices based on needs and wishes. Price is only one component. |
| Negotiating power of customers | Ensuring there is a unique product, effective distribution channel with limited negotiation freedom (for example, prices). | Based on needs and wishes. Customer provides a basis for matching. |
| Rivalry in the market | Market position and market share form the basis. A clear focus on other providers/competitors. | Via the network but based on the filtering in the matching module. |
By using networks, platforms, a totally different model arises: the supply chain ecosystem. Here, all parties work together in a network that forms dynamically. Each collaboration is different, but in all cases the information is shared. This is typical for a platform where a match develops between providers and consumers. There is a much greater understanding of the buying motives and customer preferences. Certain links in the chain even become redundant as the function is taken over by other parties. Are shops still needed if manufacturers and wholesalers can supply customers directly? Platforms and networks lead to a disintermediation, or implosion, of a supply chain. Each party has to determine its added value in the ecosystem all over again. Information leads to transparency, so there is a better response to the demand. As a result of this transparency, as well as the direct relationship, customers are better able to gear the demand to the supply. In addition, the costs associated with an ecosystem, the network, will be lower than in a linear supply chain. There are, after all, fewer parties involved, and therefore fewer costs and lucrative links. The final price will consequently be lower or better attuned to the dynamics in the market. Dynamic pricing is an example of this: a price that depends on customer demand.
Should You be Afraid of Newcomers?
If the basic principles of rivalry change then the fear for newcomers will also change. The true competitive strength lies in the power of one’s own network: the providers, the customers and knowledge of the search and buying processes. In addition, a high degree of engagement also leads to a decreasing switch behaviour. Newcomers should be assessed on the basis of added value. Collaboration could lead to a reinforcement of the network and the pushing back of boundaries both physical and in terms of the supply and other forms of collaboration. In this way, the threat is turned into an opportunity for collaboration and cross-industrial partnerships, with a view to creating an ecosystem (network) and an accurate picture of the appeal and possibilities of new market conditions. We see this in, for example, the automobile industry, where sometimes more than 20 manufacturers collaborate in the production of a single car. This collaboration can also be seen in the platform economy where various parties work together towards the final product or for the end consumer; also in logistics, production, as well as distributors and possibly other suppliers offering add-on products. Competition no longer takes place on the basis of product features, but on customer bonding, the community. New entrants therefore have to win over customers from a traditional community to their own community. The greater the bonding with customers and the stronger the relationship with them, the harder it is for newcomers to prise customers away from the current providers. The competitive strength is therefore determined by the strength of the network.
Can Existing Products be Threatened by Replacement Products or Services?
Increasingly, more providers changed their products on the basis of the wishes of the user, thereby creating new products and services that competed with the old products and services. Examples include Nokia, which allowed its mobile phone to remain solely a telephone, while Apple turned its phone into a computer with Internet access. Restaurants offered meals in the restaurant itself or as a takeaway option, while Thuisbezorgd offered to bring meals to the home. Webshops enabled customers to order online and try out the product at home, while the shops on the high street clung onto their physical locations and limited opening hours. E-Bikes changed the options people had regarding bicycles, thereby offering possibilities to new entrants such as Stella. Traditional providers remained sluggish and were slow to make changes to their distribution model (via dealers), while customers started to buy more online (fietsenwinkel.nl), or the shop actually came to the customers (as with Stella). In many cases, traditional providers were too late in identifying the threat posed by substitute products and services. In the old sales model too little account is taken of the buying elements of the product (sales arguments must change to purchase arguments).
These buying arguments comprise the physical product, the services and perception. This used to be regarded as a single entity, whereby one party (the manufacturer) supplied the product and usually ensured there was a positive perception with a product guarantee and advertising for the product (brands). The shop/dealer took care of the delivery, along with some extra services. This is the strength of a dealer/shop in the linear supply chain. Due to the role of the Internet in the buying process (both with webshops and platforms as well as through searches) these days it provides the information that allows customers to become more assertive, while webshops offer services that regular shops cannot provide. As a result, a shop has become merely a distribution point for products. The costs of the physical location, however, are too high. This creates unequal competition with on the one hand manufacturers, who started to supply directly (via a platform, an aggregator, such as Bol.com or Aamazon.com or a Multisided platform, an MSP platform), and with webshops on the other hand, which due to the possibility of direct communication have more information on the customers and their buying motives. The physical sales outlets have to figure out their role anew or will disappear.1
How will the negotiating power of suppliers change?
In