Internet as a Complement, Not a Strategy

• The Internet is a tool that can improve operational effectiveness, but does not replace the need for a clear, distinctive strategy.
  
  

• Many companies wrongly believed that Internet technologies alone could give them a sustainable competitive advantage.
  
  

Competition Intensifies Online

• The Internet often increases rivalry among competitors because it lowers barriers to entry, reduces product differentiation, and expands geographic reach.
  
  

• As a result, it erodes industry profitability if not managed strategically.
  
  

Operational Effectiveness vs. Strategic Positioning

• The dot-com boom focused on being the best at performing similar activities (operational effectiveness).
  
  

• Porter stresses the importance of strategic positioning, i.e., performing different activities or similar activities in different ways.
  
  

Five Forces Still Matter

• Porter's Five Forces framework remains essential. The Internet affects all five forces—sometimes weakening profitability unless strategic responses are made.
  
  

  • Example: Increased buyer power and threat of substitutes through online comparison tools.
    
    

Strategic Imperatives in the Internet Age

• Reinforce uniqueness: Use the Internet to strengthen distinctive activities.
  
  

• Integrate channels: Online and offline channels must be cohesive and mutually reinforcing.
  
  

• Sustain trade-offs: Choose what not to do—avoid the trap of trying to serve all customer needs online.
  
  

Avoid the "Internet Fallacy"

• Porter warns against the belief that Internet competition requires abandoning traditional strategy.
  
  

• Success depends on combining Internet capabilities with a unique value proposition and tailored activity systems.