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Theoretical Framework

This chapter will provide the reader with an in-depth look into the concepts used within the analysis part of the report. This is where we explain and elaborate on the concepts that are important in our research, using multiple references to validate the concepts we chose. This chapter ends with Competitive Advantage and In-formation Technology.

Competitive Advantage

In order to determine what competitive advantage is for an organization, it is crucial to de-termine the position the organization has within an industry (Porter, 1985). It is crucial be-cause:
“A firm that can position it well may earn high rates of return even though the in-dustry structure is unfavorable…” (Porter, 1985, p. 3)
He goes on arguing for the existence of two basic types of competitive advantages that an organization can have, differentiation or low cost.
The search for competitive advantage is as mentioned crucial to the success organizations have within a particular industry. Without a clear picture on what level organizations com-pete, and how investments located throughout the organization impact the competitive lo-cation of an organization, it is impossible to determine why and how results are achieved or not.
In his article in Harvard Business Review, Porter explains that “In search for competitive advantage, companies often differ in competitive scope – or the breadth of their activities.” (Porter, M. Miller, V 1985 p.151) When looking at different organizations; it is crucial to identify in what scope the organization operates, and to what extent actions that are con-sidered to be of competitive value will affect the organizations position.
Essential to the understanding of competitive advantage is the concept of the value chain. The value chain defines intra-organizational activities, and is a basic tool for diagnosing competitive advantage (Porter, 1985). According to Porter (1985), one important aspect when considering the value chain is that the boundaries within an organization is not bound by the activities, i.e. the activities in the value chain exist within several levels and departments of the organization. With this in mind, it is easier to evaluate the competitive gain from investments/change when you know that investments/change affects one activi-ty rather than just a department.

Differentiation:

According to Porter, differentiation is about a firm’s ability to be unique at something that is valuable to its customers. In his work on Competitive Advantage, Porter argues for a number of drivers for differentiation, as follows (Porter, 1985):
Timing – concerns the ‘when’, and Porter argues that this is one of the crucial drivers for competitive advantage. If a firm is able to push a product at the right time, perhaps before its competitors, this is a step towards creating competitive advantage. He goes on arguing that “… moving late may allow a firm to employ the most modern technology thereby dif-ferentiate.” (Porter, 1985, p.126)
Location – “Uniqueness may stem for location. For example, a retail bank may have the most convenient branch and automatic teller machine locations”. (Porter, 1985, p.126) By using different locations organizations can reach customers in more and better ways than their competitors.
Integration – Porter argues that an organization ’s level of integration into value activities will create competitive advantage. This due to a closer relation between decision-making parts and systems.
Linkages – “Uniqueness often stems from linkages within the value chain or with suppli-ers and channels that a firm exploits. Linkages can lead to uniqueness if the way one activi-ty is performed affects the performance of others.” (Porter, 1985, p 126)
Scale – By broadening their scale, organizations can allow activities that are not possible on smaller scales.
All these drives can in some way contribute towards getting competitive advantage, and is crucial to consider when drawing relations with IT investments and projects.
Porter also argues for the cost of differentiation, in that what would an organization actual-ly give away to receive the competitive advantage. This is also crucial to consider, since the opportunity cost of one thing might be higher than the returned value.
The cost of differentiation is reflected in what is known as cost drivers. Cost drivers and uniqueness is related, according to Porter (1985), in two ways;
• What makes an activity unique can impact cost drivers
• The cost drivers affect the cost of being unique

Cost Advantage

Cost advantage is one of the two advantages organizations can have, and it is closely related with differentiation. In order to gain a competitive advantage based on differentiation, or-ganizations must consider what Porter (1985) calls cost proximity to the organizations competitors.
As well as with differentiation, cost advantage also has its drivers. They are as follows (Por-ter, 1985):
Economies or diseconomies of scale – concerns the ability, when put into a broader or narrower scale, to perform things differently and more effective. It does not only concern the technology being used but also the way the firm operates.
Learning – can lower costs due to changes in layouts, product design changes and better tailoring the product to best fit the needs of those affected in the value chain.
Linkages – “creates the opportunity to lower the total cost of the linked activities” (Porter 1985, p. 75)
Timing – generates cost advantage through either facilitating moving from one phase or another. By generating information enough to have a clear insight into a business, a firm can gain advantage as an early mover into a new market position or with a new type of product.

Sustainable Competitive Advantage

“There is little doubt that, in a wide variety of circumstances, IT can add value to a firm. However, IT adding value to a firm by reducing costs and/or increasing revenues is not the same as IT being a source of sustained competitive advantage for a firm.” (Fransisco J, Ma-ta. William L, Fuerst. Jay B, Barney 1995, p 489).
Porter defines the concept of competitive sustainable advantage as “the fundamental basis of above average performance in the long run…” (Porter, 1985, p. 20) , and it is crucial to differentiate between the two concepts. Whether an advantage is said to be sustainable or not has major impact on the actions and cost-evaluations being done.
Porter (1985) further explains that sustainability only can be gained when an organization possesses barriers to make imitation difficult. However, he also explains that to stay com-petitive, organizations need to make the target for imitation moving. Furthermore Mata et al. (1995) argues that external relationships need to be built in order to keep the competi-tive advantage sustainable.

Competitive Advantage and Information Technology

What is more interesting is the link that Porter, in his article in Harvard Business Review (Porter & Millian, 1985), draws between the usage of IT and competitive advantage. Here Porter argues for three ways that IT changes the principal rules for competition. The three rules are; (1) advances in IT are changing industry structure; (2) IT works as a lever for competitive advantage; and (3) the information revolution is spawning new businesses.
Luftman (2003) argues that IT can create competitive advantage through efficiency im-provements and other forms of cost reductions, as well as by creating new communication channels, dominating existing channels or through differentiation of products or services. However, there are a number of barriers that, according to Luftman (2003), must be over-come to gain what is called a IT-enabled sustained competitive advantage, as seen in figure 1.3.
In order to make the IT-enabled competitive advantage a sustained advantage, Luftman ar-gues for a number of barriers that slows down imitation and creating a lag.
IT Project Barrier – The first barrier of imitation is the IT Project Barrier and concerns the difficulty to succesfully carry out the same IT project as the firm who is leading the race. Luftman (2003) argues that all IT projects rely on an essential enabling IT core, which has to be set up before taking on a project. There are several different levels on which an IT project barrier stops imitation:
• IT Complexity
• IT Uniqueness
• Visibility
• Implementation Process
• Implementation Process Complexity
• Degree of Process Change
IT Resource and Capability Barrier – concerns the amount of resources and capabilities that are needed to undertake a project, such as human resources and IT resources.
Preemption Barrier – concerns IT Resources (IT Infrastructure and Information Reposi-tories) and IT Capabilities (IT Technical Skills, IT Management Skills and Relationship As-set).
Complementary Resource Barrier – suggest that other, often intangible resources are needed such as interorganizational relationships, structural resources and business process-es

Review of Literature and Conceptual Basis

This chapter will provide readers a good understanding about Web 2., SNS and social networking that will enable readers to identify ideas about or research in matter. This chapter ends with the discussion of blogs.

Web 2.0

In 2004 Web 2.0 was coined at a conference brainstorming session between O’Reilly and MediaLive (O’Reilly, 2007). Web 2.0 is a development of the old stagnant Web 1.0 that is more personalized, user-driven and collaborative, and because of that it is sometimes called the read/write web (Turner, 2007).
Web 2.0 is a platform that gets better the more people are using it, an excellent example of this is the applications BitTorrent and Wikipedia that only gets better if more people are using it.
The philosophy of web 2.0 is that it should be a platform where content and applications are not created and published only by individuals, it should instead be considered as a plat-form that is continuously modified by all users in a collaborative manner with easy-to-use tools that help users to create and develop content in a collaborative nature. (Kaplan & Haenlein, 2010; Sodt & Summey, 2009).
However, the philosophy of web 2.0 is not a new way of thinking. The Internet started out as a giant bulletin board system, which allowed users to exchange data, messages, software and news with each other. So the web 2.0 is an enabler for the current trend of collabora-tive thinking. So this new technology and services are re-transforming the Internet to what it was initially created for; a platform that facilitates the exchange of information between users (Kaplan & Haenlein, 2010).

Social networking sites

Social media are medias that allows users to interact more socially and that moves away from the one-to-many media towards a many-to-many media. Examples of social media in-clude services such as; wikis, social networking sites, blogs, micro-blogs, video sharing, mu-sic sharing and virtual worlds to mention some of them (Poynter, 2010).
Furthermore according to Kaplan & Haenlein “Social media is a group of internet-based applications that build on the ideological and technological foundations of web 2.0” (Kaplan & Haenlein, 2010, p. 61).
First we have to make a distinction between Social networking and social networking sites (SNS).
However, It is easiest to start by defining a group of people and what a social network is.
A group of people are people that can be defined by a certain feature (for example; women, Volvo-owners, Hockey players).
A social network is also a group of people, but that what are separating them from a group of people are the connections and relations between the people in the group. The relations between them are often more important than the individual themselves. And these social networks are developed organically from every person’s tendency to seek new friends, form a family and working on different places of work (Christakis & Fowler, 2010).
Furthermore, according to Valente (2010), social networks are measured and defined as connections among people, political entities, organizations and other units. People creates and reshapes his/her social network, and this is done consciously or unconsciously to peo-ple that resemble ourselves, share our interests, our background and that share our dreams; this is called homosociality (Valente, 2010).
Social networking (not social network) is the practice of making contacts with other individ-uals with similar interests. Now, with the help of new technology and services, such as SNS; it is now possible to communicate with others anytime and anywhere (Gunawardena, Hermans, Sanchez, Richmond, Bohley & Tuttle, 2009).
According to Christakis & Fowler (2010), their research shows that all we say and do af-fects our friends, our friends friends and our friend’s friends friend; this is called the three-step rule, after three steps, our influence decreases (Christakis & Fowler, 2010). With the new technology now available, such as Twitter and Facebook it is easier to get more con-tacts and because of this we are getting affected by more people, their opinions and rec-ommendations.
Even before the SNS such as Twitter and Facebook we had access to a huge network of people; for example if you personally have 20 friends (co-workers, family and friends) and they in turn have 20 friends of their own (assume their contacts are not the same as yours). This means that from two steps you have access to 400 people and if those people in turn have 20 friends each; this means that you have an indirect network of people consisting of 8,000 people (20 x 20 x 20) that are three steps from you.
This is an important aspect to think about when an organization decides to participate on these social networks, such as Twitter and Facebook.
Facebook is a pure SNS; Boyd & Ellison defines SNS as “web-based services that allow in-dividuals to:
1. Construct a public or semi-public profile within a bounded system.
2. Articulate a list of other users with whom they share a connection, and
3. View and traverse their list of connections and those made by others within the system” (Boyd & Ellison, 2008, p. 211).
Poynter (2010) adds two more characteristics to that help distinguish if it is a SNS;
A. ‘Posting’ – a user should be able to post something (pictures, comments and such-like) to other users, and
B. ‘An administrator role’ – the social networking site is owned by someone (a per-son, an organization or a group of people) and that someone has administrator power that normal users don’t have.
Similarly Gunawardena et al. (2009), classified SNS’s as an online spaces that can be cus-tomized by their users, creating personal profiles and those users can make connections with others. Facebook and Twitter are the SNS’s that we are going to focus on; these are by far the most popular SNS’s that had more than 500 users worldwide (Facebook, 2011).

Blog

A blog (weblog) is basically a website that allows a user to post messages, opinions, videos, pictures on their personal home page in a diary format in a chronological order and there are also the possibility for other users to leave comments and opinions (Poynter, 2010; Kaplan & Haenlein, 2010; O’Reilly, 2007).
Twitter is normally classified as a microblog. Twitter allow users to post short messages (140 characters) to the prompt ‘what’s happening’ and users can follow other users by fol-lowing them (Poynter, 2010; Fox, 2007). It could be your favourite entrepreneur, your sis-ter who lives in a foreign country or maybe your favourite clothing brand. Furthermore, Twitter allows us to interact with other people in a social way, so it is not a pure blog, it is a light SNS; does not have all the attributes of a SNS but the main principle is to network so-cially.
More people are using social media now days, and for so many different reasons, for ex-ample Barack Obama used different types of social media intensively compared to his op-ponent John McCain in the 2008 president election. Obama had 844,927 friends on MySpace compared to McCain’s 219,404. Furthermore on Twitter, Obama had a total of 118,107 followers compared to McCain’s 4942 followers (Lardinois, 2008).
And more recently you could follow Charlie Sheen during his personal meltdown (or stroke of genius?) on Twitter and YouTube (another web 2.0 media) where he gained over a mil-lion followers on just a couple of days.
« While there are so many technologies at this time that isolate us from our fellow beings, social networking tools have shown their ability once again to unify us as human beings, and to bring out what is most altruis-tic and empathetic in our natures, » Brad Shimmin, an analyst at Current analysis said about the earthquake in Japan and the consequences social media had (Huffpost impact, 2011).
SNT’s could be considered a tool within the IT model for organizations. They are free to use and facilitates communication and data collection from customers. This is only valid for organizations doing B2C business.

Case Findings

In this part, findings from the interviews with Jönköping University, Moderskeppet and Bolt are presented.
The quotes used are the ones we considered to be most important and strongly related to our research.

Case I: Moderskeppet

Moderskeppet was created in 2003 and is the largest Swedish website for image processing with Adobe Photoshop. They are located in Jönköping and have seven employees. Mod-erskeppet offers video courses on DVD, distance courses that they do in collaboration with Jönköping University, WebTV and several blogs that share information about Photoshop. For example they offer a beginner course on their webpage that you can watch online or download on your computer/IPhone for free or buy it on a disc (Moderskeppet, 2011).
In 2008, Moderskeppet created their Facebook page where they share information, upload videos, create events and have a wall where users share their thoughts and opinions. Their Facebook page currently has 12,174 ‘likes’.
On Twitter they have 1,671 followers. On their Twitter they posts news, suggestions in the form of text and links to pictures and videos.
Following is the interview with Chrille Petterson at Moderskeppet

The adoption of web 2.0 technologies and being social

In 2004 Moderskeppet started the process of adopting the early web 2.0 technologies. It was around that time that these technologies started to emerge with blogs as the first ones.
“We started as a blog 2004 and as a corporation in 2007/2008…”
Chrille explains that an organization on the web never sleeps, especially if the organization has customers all over the world. At Moderskeppet; the web 2.0 technologies are a big part of their job and also they make sure to always keep their information updated on all the tools they use:
“…we spend approximately 20 hours a week, between 20-40 hours a week, depending on several of things.”
“…These tools are also a part of our lives, still if I have time off, I still spend time on Facebook and Twitter, both privately and job related. But this is not a requirement. An organization on the web is alive around the clock, we may not answer a support mail in the evening, but we may be aware of it, because if something happens you must be able to fix it quickly. That’s a thing I have learned, a organization breathes all the time, and especially if you are on an international market, this is even more important because even if you sit in Sweden, you still have a market in the U.S for example that that are in a different time zone.”
“Furthermore, we always maintain our web based information that we have on Facebook, YouTube, blogs, twitter and web-TV to mention some of them…”
As mentioned before, the philosophy of web 2.0 is that it should be considered as a plat-form that is continuously modified by all users in a collaborative manner. Moderskeppet explains what the most important factors are on the social networks. They also talked about the organizations that had succeeded. Chrille elaborates on what he thinks made that possible:
“They think before they do anything. Have a strategy of why you do certain things and keep that. The technical part is not important…”
“…You should create commitment and involvement. This involvement takes long time to build. There must be a committed person who does this. You also need to be consistent and not stop after 3 weeks.”
“There is a difference between TV/radio ads when you need to be seen much and loud; on Face-book and Twitter the key is to be heard at the right time with the right message.”
The buying process is changing for people, a purchase is now a longer process compared to before, and Moderskeppet explains their view of it:
“A purchase now is going on for a longer time now with Facebook and Twitter; you share to oth-ers that you are planning to buy it, and then buy it, may take a photo of it, and share to others what you think of it.”
“…Example with a concert, you tell others that you are planning to go, then other friends may tell you that they are going as well, and then at the concert you perhaps check-in there, and afterwards share to others what you thought of it, this is a new phenomenon.”
In the real world, you cannot teach people to be social, some people have more friends than others and often there is some specific reason for it. A person often has to be interest-ing, polite, kind, happy and even honest to make sure that he/she is likeable. And this is the same for the relationships we have on the web; Moderskeppet knows this and has a certain image that they have created. Moderskeppet explains how they interact on the web and also, how professional they are on the social networks:
“We don’t have document describing this in any way, just have a plan what we should have done, but not what and how we are going to say it. It’s more of a gut feeling and instinctive feel.”
“We have common understanding of this, like a corporate culture, Moderskeppet sounds in a cer-tain way, breaths in a certain way. We have sometimes put out “non-serious” information, where we just do fun things, and it is sometimes those who generate most comments, for example when we were in London and shared this, people got excited and commented about the place to go for lunch for example.”
“If we are pure academic and present the new product in a strict way, people can’t really relate to it, and that it’s a fact.”
“When someone here has a birthday, we may post some pictures of it, we sometimes get greetings from 50+ people we don’t know, that’s a weird feeling, but it works. It creates commitment and engagement, Facebook has made this possible. Facebook have made it possible for us to push news, pictures and such to people’s news feed every day. And people want it; we can see if people choose to “unfollow” us, but the increase is greater.” Moderskeppet states the importance of being honest to their customers, and they are not afraid to tell their customers if there is something they do not like. Moderskeppet told us about the example they had with their ‘supplier’ Adobe:
“Adobe is very concerned that we are satisfied because we market and sell their products. We re-ceive provision when we conduct businesses. And sometimes we do activities with them, for example: we were at the photo-fair in Norway and we have a good relationship with them, however, they don’t control us in any way. If some updates or anything isn’t so good we can mediate this on the web. But we write both good and bad things about the products/services”
Moderskeppet explains which one of the two tools they prefer, and why:
“Twitter and Facebook are different, Facebook is built up only around love and positive energy, you can only ‘like’ things, of course you can comment bad things but still people don’t do it, it is a positive environment…”
“Twitter is a balance of hate and love. So Facebook suits us better, we want the positive feeling” Moderskeppet has a special relationship to their customers; it even happens that people recognize them out in the real world:
“…we are not such a big organization; we are more as a family. The people that work here are recognizable because of the way we market ourselves.”
“…We have a special relationship with our customers, a good relationship. “

Table of Content
1 Introduction
1.1 Background
1.2 Problem Description
1.3 Purpose
1.4 Research Question
1.5 Delimitations
2 Methodology
2.1 Philosophy
2.2 Research approach
2.3 Exploratory research
2.4 Qualitative research
2.5 Case study strategy
2.6 Method of choice
2.7 Sampling
2.8 Data Collection
2.9 Time horizon
2.10 Data analysis
2.11 Reliability and Validity
3 Theoretical Framework
3.1 Competitive Advantage
3.2 Sustainable Competitive Advantage
3.3 Competitive Advantage and Information Technology
4 Review of Literature and Conceptual Basis
4.1 Web 2.0
4.2 Social networking sites
5 Case Findings
5.1 Case I: Moderskeppet
5.2 Case II: Jönköping University
5.3 Case III: Bolt
6 Analysis
6.1 Competitive Advantage and Information Technology
6.2 Differentiation
6.3 Cost Advantage
6.4 Sustainable Competitive Advantage
6.5 Barriers of Imitation
6.6 Overview
7 Conclusion
8 Reflections
9 References
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