A R T I C L E www.hbr.org Strategy and the Internet by Michael E. Porter

Included with this full-text Harvard Business Review article: 1 Article Summary The Idea in Brief—the core idea The Idea in Practice—putting the idea to work 2 Strategy and the Internet 20 Further Reading A list of related materials, with annotations to guide further exploration of the article’s ideas and applications

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Strategy and the Internet

The Idea in Brief
Does the Internet render established rules about strategy obsolete? To the contrary, it makes them more vital than ever. Why? The Internet weakens industries’ profitability, as rivals compete on price alone. And it no longer provides proprietary advantages, as virtually all companies now use the Web. The Internet is no more than a tool—albeit a powerful one—that can support or damage your firm’s strategic positioning. The key to using it most effectively? Integrate Internet initiatives into your company’s overall strategy and operations so that they 1) complement, rather than cannibalize, your established competitive approaches and 2) create systemic advantages that your competitors can’t copy. Integrating Internet initiatives enhances your company’s ability to develop unique products, proprietary content, distinctive processes, and strong personal service—all the things that create true value, and that have always defined competitive advantage.

The Idea in Practice
THE INTERNET’S INFLUENCE The Internet powerfully influences industry structure and sustainable competitive advantage. Industry structure derives from the basic forces of competition: competitor rivalry; entry barriers for new competitors; the threat of substitute offerings; and the bargaining power of suppliers, channels, and buyers. How does the Internet affect these forces? • It’s an open system whose technological advances level most