Discussion Papers

Peter Stamm, Franz Büllingen

Das Internet als Treiber konvergenter Entwicklungen - Relevanz und Perspektiven für die strategische Positionierung der TIME-Player
Nr. 198 / Dezember 1999


The aim of this paper is to analyse the phenomena of convergence which can be observed within the TIME-industries for the last years. The driving forces for mergers, business alliances and enlargements of operation areas are identified and statements about their stability are made.

The paper starts with the definition of the phenomena of convergence and analyses their emergence, describes different levels and specific features. Most of the phenomena of convergence come along with the development of the internet. The internet turns out to be a medium as well as a driving force for convergence. The analysis of the effects of convergence on business enterprises is therefore focused on the internet value chain.

In order to develop business strategies it is crucial to distinguish between convergence in substitutes (interchangeability) and convergence in complements (use in concert). While convergence in substitutes generally strengthens competition, convergence in complements refers to new markets and business areas. It becomes obvious that this distinction determines the enterprises’ decisions for either horizontal or vertical integration.

Applying the resource-based paradigm, sustainable competitive advantages are identified. Short-time phenomena are excluded by focusing on the fundamental economics and their effects on business enterprises within the internet value chain. It is shown that these are in particular the economic characteristics of content, the cost structure of telecommunications networks and the network features of interface software. Along with convergence, an overall trend towards horizontal integration is observed.

As a major result of this analysis, forces towards vertical integration are identified, which are stronger than this overall trend. The elements of the value chain where these forces are mainly concentrated are ‘packaging / navigation‘ and ‘content‘. At the same time, the players on these particular elements own the most precious resources of the internet value chain. These resources are characterised by the fact that they are needed for the production of the goods and services which are demanded in the internet economy. For competitors it is difficult to imitate or substitute them and they are not available on commodity markets. The access to the internet customers and high quality content are resources which qualify for this category.

Fitted with these resources, content suppliers and packagers / navigators have a crucial influence an the speed and extent of future developments of convergence. Taken Bertelsmann as an example, it is shown that the owners of the most precious resources are well aware of their central position within the process of convergence and that they are trying to upgrade their resources by following an active strategy of convergence.

Only German language version available.

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