360° Coverage : A Big Strategic Mistake Fast Growing Companies Make

2 Updates

A Big Strategic Mistake Fast Growing Companies Make

Apr 11 2014, 1:55pm CDT | by

Disclosure: I own EBAY shares Fast growing companies make a big strategic mistake — treating all customers alike — according to an article Hana Halaburda and Felix Oberholzer published in the April...

Filed under: news

 
 
 

20 weeks ago

A Big Strategic Mistake Fast Growing Companies Make

Apr 11 2014, 1:55pm CDT | by

Disclosure: I own EBAY shares

Fast growing companies make a big strategic mistake — treating all customers alike — according to an article Hana Halaburda and Felix Oberholzer published in the April issue of the Harvard Business Review.

They rely heavily on “network effects,” the benefits associated with a larger and larger number of people joining the network. The larger the number of people using a product or service, the more valuable the product or service is to every user.

Network effects arise on the demand side of the market and allow companies to quickly reach a critical mass of consumers—the early majority—and cross the “tipping point.”

The problem is, however, that as networks grow in size, the distribution of benefits across members may be unequal, according to the authors. Some members may benefit a great deal while others very little or not at all. Worse, the network may be fractionalized, divided up in groups that benefit only if the network moves in a certain direction.

This means that a larger network may not necessarily bring higher benefits to each network group. And that may provide an opening to upstarts to grab a piece of the market from early movers who have been building a network in an emerging industry.

That was the case with eBay (NASDAQ:EBAY) and Taobao in China.

“When eBay first entered the Chinese market, e-commerce was in its infancy,” write the authors. “Thanks to strong network effects, eBay’s platform became an increasingly attractive place to buy tech products.”

“Taobao’s Chinese executives recognized that the company couldn’t compete head-on with e-Bay in the existing market. So instead they focused on an emerging segment of online auction customers—people on the hunt for clothing and consumer products. Although eBay had a leading position in terms of overall market share, its share of the new segment—which could come to dominate e-commerce in  China—was far less imposing. What’s more, eBay’s strong position with techies was no help at all in attracting fashion-focused customers, who were more interested in whether other fashionistas used the site.”

The bottom line: Focusing too much on growth can undermine the advantage you strive to achieve. That’s why you should try to better understand the differences across customers who drive your growth.

 
Update
2

4 days ago

Khazanah throws MAS RM6b lifeline

Aug 29 2014 5:01pm CDT | Source: Business Times Singapore

August 30, 2014 1:15 AMKHAZANAH Nasional will inject RM6 billion (SS$2.4 billion) over three years to resuscitate loss-making Malaysia Airlines (MAS) under a recovery plan that includes even an Act of Parliament. Other key moves are migrating its operations, assets and liabilities to a new company (NewCo) and slashing the wo ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 
Update
1

5 days ago

MAS posts loss of RM307m for Q2

Aug 28 2014 5:00pm CDT | Source: Business Times Singapore

August 29, 2014 1:13 AMMALAYSIA Airlines (MAS) registered a loss of RM307 million (S$122 million) for the second quarter to end-June, but warned of worse to come in the second half when the "full financial impact of the double traged ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

Indian-born scientist wins prestigious US award
Washington, Sep 3 (IANS) India-born scientist Dr Thomas John Colacot has won the American Chemical Society's ACS Award in Industrial Chemistry, one of the top honours in the field.
 
 
Beheading of second journalist shocks US; White House in crisis mode
Washington, Sep 3 (IANS) As the beheading of a second American journalist by the Islamic State (IS) terror group sent shock waves through the nation, US President Barack Obama authorised 350 additional troops be deployed to Iraq
 
 
China's yuan weakens
Beijing, Sep 3 (IANS) The value of the Chinese currency renminbi, or the yuan, retreated 13 basis points to 6.1697 against the US dollar in its central parity Wednesday, authorities said.
 
 
No link between Ebola outbreaks in West Africa, DRC : WHO
Geneva, Sep 3 (IANS) The World Health Organisation Tuesday said the outbreak in Democratic Republic of Congo (DRC) is "a distinct and independent event", with no relationship to the epidemic in West Africa.
 
 
 

Latest from the Network

PM Modi wraps up Japan visit, flies home
Tokyo, Sep 3 (IANS) Prime Minister Narendra Modi wrapped up his five-day visit to Japan Wednesday and flew home. He is expected to arrive at New Delhi in the evening. During his visit, Japan promised to give $35...
Read more on Politics Balla
 
Indian-born scientist wins prestigious US award
Washington, Sep 3 (IANS) India-born scientist Dr Thomas John Colacot has won the American Chemical Society's ACS Award in Industrial Chemistry, one of the top honours in the field. Colacot, who studied at St Berchman'...
Read more on Apple Balla
 
Beheading of second journalist shocks US; White House in crisis mode
Washington, Sep 3 (IANS) As the beheading of a second American journalist by the Islamic State (IS) terror group sent shock waves through the nation, US President Barack Obama authorised 350 additional troops be...
Read more on Ad Balla
 
Suge Knight knows who shot him
Suge Knight says he knows who shot him at Chris Brown's party last month. The 49-year-old music producer, who was shot six times at the 'Loyal' hitmaker's pre-bash for the MTV Video Music Awards (VMAs) at 1Oak nightclub...
Read more on Celebrity Balla
 
Claire Danes says motherhood is challenging
Claire Danes admits she sometimes resents being a mother. The 'Homeland' actress, who has a 21-month-old son, Cyrus, with husband Hugh Dancy, also says marriage is hard, but insists she is besotted with both of the men...
Read more on Celebrity Balla
 
China's yuan weakens
Beijing, Sep 3 (IANS) The value of the Chinese currency renminbi, or the yuan, retreated 13 basis points to 6.1697 against the US dollar in its central parity Wednesday, authorities said. In China's foreign exchange...
Read more on Business Balla
 
Miltos Yerolemou joins 'Star Wars Episode VII' cast
Los Angeles, Sep 3 (IANS) Miltos Yerolemou, who was seen as swordsman Syrio Forel in TV show "Game of Thrones", joins the cast of "Star Wars Episode VII". Harrison Ford, Carrie Fisher and Mark Hamill return as Han...
Read more on Celebrity Balla
 
No link between Ebola outbreaks in West Africa, DRC : WHO
Geneva, Sep 3 (IANS) The World Health Organisation Tuesday said the outbreak in Democratic Republic of Congo (DRC) is "a distinct and independent event", with no relationship to the epidemic in West Africa. Based on...
Read more on Business Balla
 
US warplanes drop leaflets on Iraqi city
Baghdad, Sep 3 (IANS/EFE) US warplanes Tuesday dropped thousands of leaflets on the northern Iraqi city of Mosul, urging residents to keep clear of places occupied by the Islamic State (IS) extremist group that overran...
Read more on Politics Balla
 
US CDC calls for global response against Ebola
Washington, Sep 3 (IANS/EFE) The head of US Centers for Disease Control and Prevention (CDC) Tuesday warned of the risk that the Ebola outbreak could get out of control without a greater worldwide response. "This is...
Read more on Business Balla