A strategy of competitive advantage in digital business



1. Introduction
Technological advances have given birth to new digital economic concepts and created internet and web-based business opportunities, this has a very large impact on the business strategy of a company. The phenomenon of change has conditioned the business to be conducted in a completely new way, although there are still some business people who still consider the importance of pursuing the effectiveness of traditional business strategies.

     Digital Business (Digital Business) is a series of business activities supported by ICT (Information and Communication Technology) infrastructure where digital data is used as a resource in the process of business transactions. Many business institutions today, business processes are highly dependent on the use of digital technology, especially in the effort to add value in order to achieve competitive advantage. The paradigm shift in the business world that originally adhered to the marketplace business area (business processes that emphasize the physical transaction process) into marketspace business areas (business processes that emphasize the electronic transaction process), this phenomenon has affected business people and business institutions competing competition to use internet technology and web-based business applications to maintain their existence and at the same time achieve excellence in business competition.

Taking into account, the four types of competitive advantage sources, namely search activities, evaluation activities, problem solving activities, and transaction activities, are also supported by three elements of web content namely; Customer feedback (Expert feedback), Expertise, and Entertainment programming are expected to be able to boost the proportion of business value through proportional "web-content" touches.

Business models with the support of digital technology are believed by business people, will have the ability to bring new meaning to business strategies, because competitive strategies must be reviewed and reorganized to deal with the competitive pressure caused by the presence of the internet and digital technology. Digital business models can present new ways for business institutions to combine and optimize cost leadership, differentiation, and internet and web-based strategies.

2. Internet phenomenon in business
     The phenomenon of the Internet has created a new climate in business, making business strategies more challenging. The Internet phenomenon has increased the need for effective strategic management, because the success of a digital business process requires a new strategic business perspective. This is certainly caused by the availability of various facilities for the support of information and communication technology, as well as the ease of business people in carrying out their business practices through Internet connectivity, so that they can change business procedures and their operations.

Changes to the paradigm of internet and web-based businesses have proceeded so fast, turbolence of competitive disruption in global business has made an important lesson and directly impacted business strategies. It could be that the internet and digital technology are only an actual trend of technology utilization in business, because in essence the occurrence of profitable business transactions is not only determined by the technological aspects, but on matters of fundamental business strategy of the business institution itself. Even though the internet is a technology that can create various possibilities in conducting various types of new transactions, besides that the internet has increased the capability of business people to interact effectively with all stakeholders and consumers, as well as increasing the capability to interact with suppliers, employees, shareholders , competitors and others. So thus, the internet has presented a new strategic challenge, namely how to use new technology properly, without losing sight of the importance of business fundamentals.

3. Digital Business and Value Added
     The fundamental question is how companies can utilize digital technology to add value and create competitive advantage. The use of digital technology in business processes will be considered strategically significant, if only when its application can practically create new value. Businesses that are conducted online with the help of digital technology, aim to streamline business operations. The internet can help business institutions create new value in business, through several interrelated business activities carried out on the internet in order to add business value


3.1 Evaluation Activity
         Evaluation activities are more directed at the process of selecting alternatives in considering and comparing costs, including opportunity benefits from various business choices. Online alternative selection service is a very effective facility in the comparison process of business transactions. Where through the internet, consumers can do a product review and evaluation of a business catalog first, before a business transaction occurs. For example, www.BizRate.com offers product rating ratings that are equipped with images and product prices, so that it can help consumers evaluate various products in the form of catalogs or on-line brochures. Opinion-based sites, such as www.ePinions.com and PlanetFeedback.com, provide various consumer experience reports with several suppliers.

       According to experts, an internet or web-based business can improve business performance, that is by working hard to help buyers evaluate purchases. Another example made by the manager of the site www.mobilku.com, the site acts as an aggregator that brings together sellers and buyers in the automotive field, consumers are given the opportunity to evaluate the product by comparing the types and prices of cars. However, only certain types of products that can be evaluated online, especially for products that prioritize the appeal of "single sense", but for products that appeal in the form of "multiple sense" will certainly be even more difficult to evaluate online. This explains why products such as furniture and fashion that are sold online have never been successful. That is because the consumer is not only enough to just look or look at a leather sofa, but he cannot try to sit on it, touch it, and the consumer is impossible to smell the scent of his skin online.

Therefore, deficiencies in evaluation activities can be backed up, in problem solving activities and other on-line features.

3.2 Problem-Solving Activities
            Problem solving activities refer to the process of identifying problems, the need for idea development and action plans in digital business transactions. Problem Solving is generally used in the context of services whose appeal is "multiple sense". Consumers usually have unique problems, therefore the handling can be done specifically one by one and this will be difficult to do if the process is not done online. For example, on-line travel services can help its customers to choose and even design a travel package from a number of choices. This method allows business service providers to respond to "customer needs" immediately. Many products use a linkage approach between services and products, therefore problem solving and evaluation are both very closely related.

Dell Computer's is an example of a business institution that has combined the benefits of both the combination of problem solving and evaluation. On this site considering individual computer customization, they show a unique concern for their customers "one computer at a time." But on the site there are also features in the form of a good evaluation component, where customers are allowed to compare the costs and features of various choice: Customers can compare in advance according to their choice, an update from Dell Computer's by providing a low price on an ongoing basis.

3.3 Transaction Activity
            Transaction activity is the completeness of the sales process, including negotiating and approving by contract agreement, payment process and delivery receipt process. Many types of activities provided by the internet can significantly contribute to reducing transaction costs. Example On the eBay site, various ways are available to streamline the auction process and facilitate the mutually beneficial process of price agreements. The "One-Click" technology promoted by the Amazon.com site has facilities that speed up consumers in considering purchases, and Amazon.com as a whole has advantages in managing orders, and the transaction process can be trusted and fast.


4. Digital Business Model
The internet provides a unique platform for digital business activities, such as the formation of a "new marketplace". The problem is how do business institutions carry out their activities in this new arena ?. Of course, to answer these questions we need to understand how business models are developed in digital business. The business model is a method and set of assumptions that explain how a business can create value and gain benefits in a competitive environment. In the following, seven digital business models will be described, the majority of which lead to the breadth of business carried out on-line on the internet.


4.1. Commission-based models are used by businesses to provide services in the form of rewards. The business usually positions itself as an intermediary or aggregator and commissions are usually charged to the size of the transaction. The most common types are brokerage services, such as brokers (for example; Schwab.com), real-estate brokers (example: eraindonesia.com), or transaction brokers (for example; Paypal.com). This category also includes auction companies such as eBay or www.Balindo.com.


4.2. Advertising-based models are used by companies that offer "content" and services to site visitors and offer advertisements to business people who want to reach site visitors. This is similar to the television broadcast model, where viewers enjoy TV shows that are aired thanks to the results of advertising costs. The key difference between on-line visitors on the internet is that they can interact both with advertisers and with "content" fillers. Large portals such as Yahoo.com are good portal categories in ad-based sites. Another example is the news site www.detik.com which is ultimately very effective as an ad-based site.


4.3. Markup-Base Model, used by businesspeople to add value in marketing and selling products. After obtaining the product then add the price to the perunit, and then resell it so they can profit. This method is known as the "merchant model", it uses two functions both as a wholesaler and retailer. The site www.amazon.com is a famous example in this category. also includes companies such as Wal-Mart, which have successful online operations, and there are also suppliers whose products are both digital in nature like www.fonts.com, which sells fonts and photos that can be downloaded online. 


4.4. Production-based models are used by companies that add value in the production process by changing raw materials into products that have added value. So thus, this is also known as "manufacturing model" (manufacturing model). The internet adds value to this model in two ways, namely; First, reduce marketing costs by opening opportunities for direct contact with end users. Second, direct contact like that is used to facilitate customization and problem solving. Examples of Dell's online ordering systems that are supported by state-of-the-art are customized in the manufacturing process. Travelocity uses a complete database of various travel options and consumer profiles to identify results, and the uniqueness of shipping.

4.5. Referral-based models are used by business institutions to direct their customers to other companies, in order to get a reward. One type is the Affiliate Model, where a supplier company will pay one affiliate each time a visitor clicks on the affiliate's website and purchases the product from that supplier. Many branded companies use affiliate programs. For example, WeddingChannel.com, which provides marriage registration, where wedding reception guests can buy gifts / gifts from companies such as Tiffany's, Macy's, or Crate & Barrel. WeddingChannel.com will receive a reward every time a sale is made through its Website. Another example of a submission based model is www.yesmail.com, which produces delivery using the concept of e-mail marketing.

4.6. Subscription-based models are used by business institutions in establishing a fee regarding the provision of various proprietary content services. This type of digital business is widely practiced by internet providers to serve its consumers.
As an example of this model; Companies such as America Online and Earthlink provide internet connections where rewards will be charged, only if consumers use their internet access services. It can also be fixed charges as imposed by the internet provider company Speedy from Telkom, where consumers agree in advance about the cost that must be borne, whether based on time-base (number of hours of access) or volume-base (amount of data downloaded / upload). This approval based model is also used by content creators such as the Economist or the New York Times. Although they are known to often provide free content, but in fact only a few small parts are provided freely (free), so if the customer wants full content then it is agreed by the customer to pay an annual member fee.

4.7. Fee-for-service-based models, used by companies that provide services on an ongoing basis, similar to utility companies. Unlike the commission-based model, the fee-for-service model involves a pay-as-you-go system. Whose activities are measurable and the company pays only for the amount of service used. Providers who provide services like this. For example, eProject.com provides virtual work space for people who are physically different locations, but can collaborate online. Users are very interested in renting space on the internet and it becomes a "host" as a tool that makes it easy to interact. The rewards are adjusted based on the amount of space used by them. Another example is the rental business renting hosting on the internet for the purposes of storing a web server database or e-mail server.

5. "Web-Contain" And Competitive Advantage
There are other factors which can be important sources of competitive advantage. One of them which is very important is "web content". The internet has enabled us to "capture" a number of "content" at a very low cost. Content will add value only if it has an overall role in the proportion of values.
There are three types of "Content" that can improve the value proportion of a Web-site, namely Customer feedback, Expertise, and Entertainment programming.

5.1. Customer feedback. Buyers often believe what other buyers say, just a company promise. One type of content that can improve a web-site is a testimonial for consumers. As in the previous example of leather sofas, even though we cannot feel and smell the scent of leather sofas online, testimonials from previous buyers can build confidence and strengthen the "chances" of potential buyers to buy online, even if not by looking directly. This is one way "content" can be used as a source of competitive advantage.

5.2. Expertise, the Internet has emerged as a very important learning media. One reason for internet users to access the web is to gain expertise. Web-sites provide new knowledge or information that is very valuable, as is currently being developed through a blog site. In addition, the problem solving function is often used as an option in educating consumers and their implications for various choices. Furthermore, the expertise function is not limited to sites intended for consumers. In the case of business to business (B2B), the Web-site will facilitate expert knowledge to help build a "sense of community" in industry or professional groups. With the incessant penetration of the internet as a gateway of knowledge that will shape one's expertise, this can be a source of competitive advantage.

5.3. Entertainment programming (Program Entertainment / Entertainment). With technology such as streaming media, which allows the internet to send images and sound like television, computers can provide news, video games to movies online. A study conducted by the Pew Internet and the American Life Project indicates, with speed broadband services that have increased internet users to watch TV and their online activities. One reason is because the technology is interactive, meaning that viewers are not only passive, but they use the web to create art and play games online. Business people have noted this trend, of course, making web content like this is not only informative, but also entertaining. More and more people are using the internet as a medium of entertainment, so it is a market opportunity for digital businesses and can be used as a source of competitive advantage.
These three types of web content from customer feedback, Expertise, and Entertainment programming are potential sources of competitive advantage in digital business, where with the support of web content, digital business will be able to create benefits through the value creation process.

6. Digital Business and Competitive Strategy

As we already know, digital business has influenced the way business is run. Thus, in order for digital businesses to remain competitive, companies must renew their business strategies by reflecting new possibilities and obstacles, as a representation of phenomena that occur. The main impact of the existence of the internet in digital business, namely the reduction in transaction costs and opportunities for mass customization. But in every step of the strategy there will also be pitfalls (pitfalls) relating to the use of new technology to achieve competitive advantage. As we know there are three competitive strategies, namely Cost Leadership, Cost Differentiation, and Focus.

6.1 Cost Leadership
In the price leadership strategy or low-cost leadership requires cost management in each of the value chain activities of the company, so that the company can offer products without further ado except "value", which is the most attractive price. Digital businesses with internet support will be able to provide even more opportunities to manage costs for the achievement of greater efficiency, because digital business takes place in cyberspace and is carried out online, so as to reduce the costs of business transactions. In general, it can be said, that transaction costs will refer to various costs associated with conducting business. Not only applied to "buy / sell" transactions, but also to the costs resulting from the interaction between parts in a company's value chain, both inside and outside the company. Like the process of recruiting new employees, meeting with customers, ordering supplies and directing the government regarding various regulations.
Because digital business can be organized in different ways on the internet, it is a new way of saving money as a way to change the competitive outlook. However, on the one hand, the company must pay attention to the low-cost leaders are pitfalls and potential threats from competitors, namely imitation practices carried out by competitors. Digital business information systems are technically easy to copy, therefore it is necessary to prepare a layered protection system so that digital business applications that are built are not easily duplicated by unauthorized parties.

6.2 Differentiation
The differentiation strategy is the company's effort to provide unique and high-quality products and services, so as to promote a good reputation and a strong brand identity, usually followed by a premium price. Digital business is very possible to produce different products and services, because the touch of digital technology will always spur business people to innovate continuously. This can create new ways of business in achieving competitive advantage. A new way that is mostly done in digital business processes is the product or service customization facility, so that consumers will get more specific and different products or services. This is what makes a product or service that has a unique customer value, this will automatically drive the company to have competitive advantage. For example, Dell’s Computer company strengthens its leadership position by providing a system that facilitates its customers to choose the computer hardware specifications they order. Nike's biggest shoe company, invites its customers to choose a color or add a personal name or nickname to the shoes they order through the NIKEid program, customers can browse through the shoes they are interested in on the nike.com website, before ordering.
Mass customization methods have changed the way companies sell their products, and that has proven that such a method is an effective differentiation technique. It could be traditionally, a company reaching customers is done in various ways, such as; updating catalogs, exhibition halls, personal sales calls, and using many more ways to make product packaging more attractive and prestige, celebrity endorsements, sponsorship of charitable activities, all of which are ways that are still feasible and are considered effective, depends on a company's competitive environment. But now many consumers judge the quality and uniqueness of a product or service based on the company's ability to engage its customers in the product planning and design process, which is combined with the speed and reliability of the process in delivering the products they order. Digital business has been able to change the way differentiators make products

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