Technological Changes – The Internet
The incorporation of new technological advances into society may appear to increase with each generation. Moschella (2015) discussed the use of the accepted measurement by economic historians for technology adoption of 50% use in households in the United States. Moschella (2015) emphasized that to reach the 50% use level, the radio took 8 years (1922- 1930), the telephone took 26 years (1920-1946), and the black and white television took 9 years (1939-1948). The more modern technology devices such as the personal computer took 17 years (1976-1993); the use of the Internet took 9 years (1993-2002), and between 1980 and 1995, mobile phones took 15 years to achieve the 50% use level (Moschella, 2015). The popularity and growth of companies such as Google, Facebook, and Amazon are not advances in technology, but instead, services that use applications already in use (Moschella, 2015). Moschella (2015) explains that technology advances are not accelerating but diversifying as into by-products of the existing technology foundations (e.g., home robots, smartwatches, and 3D consumer printers). The diversification of technological advances means more opportunities for users to acquire their respective desires (i.e., there are more means of communicating information between people).
The traditional print format of the newspaper industry was limited to growth options in the face of new technology. Between 1950 and 1999, the revenue of the newspaper industry grew at a rate of 7% a year, but between 2000 and 2006, the growth was only 0.35% (Pew Research Center, 2006). As the Internet reached 50% public usage level in 2002 (Moschella, 2015), the revenue generated in the newspaper industry had dropped to 0.35% (Pew Research Center, 2006). Since advertisers seek to promote and sell their product to the public, the radio has inherent advantages over the newspaper, such as frequent commercials and targeted commercial spots. The newspaper is limited to a single-use form of marketing to reach potential customers. The radio also became a free form of communication through handheld devices and vehicles.
The newspaper industry must alter the traditional business structure and operational dynamic to remain a viable business interest (Pew Research Center, 2006). While online information services have immediate updates and a variety of distribution outlets, the traditional news media is more professional and established (Pew Research Center, 2006). The reputation of trusted journalism is one of the most significant values associated with newspapers; this is the sort of value to consider when developing competitive strategies. The current online distribution of news is complicated because it is not always clear if the source of the article is reputable. Online news can come from anyone, regardless of professionalism and integrity.
Porter’s Analysis Model
Organizations are complex systems that require in-depth analysis to understand the factors that lead to enhanced performance and profits. Jurevicius (2013) described Porter's value chain analysis (VCA) model as the identification and examination of the internal processes that lead to an understanding of the organizational functions that influence efficiencies and profits. The model consists of analyzing the dichotomy of primary (e.g., incoming supply chain, production, outgoing supply chain, marketing, customer service) and support functions (e.g., human resources, physical infrastructure, technology functions, strategic sourcing) within an organization (Jurevicius, 2013; Grant, 2016).
The primary functions are likely to change according to the type of organization and the specifics of the operation. The support functions may also vary according to the organization. Patterson (1995) described the VCA as a means to separate the components of an organization and identify the critical information that explains the cost or the differentiation of the customer's perspective of value. The importance of the analysis tool rests in the focus of the systemic parts of the organization associated with the product or sendee (Patterson, 1995). Understanding the system and its parts is necessary during any attempt to understand a product or service.
Jurevicius (2013) emphasized that cost and differentiation are the two competitive advantages of the tool leading to strategic development. The cost advantage applies to the cost of making a product or service and focuses on finding efficiencies within the organization to lower cost and increase competitiveness (Jurevicius, 2013). Differentiation involves the development of improved or superior product advantages (Jurevicius, 2013). For instance, a news agency that embraces technology and creates a significant web presence reduces the physical dependence on printing papers and increases access to a broader audience. The larger the audience, the more interest advertisers will take in promoting the news site. The differentiation of sources to communicate the news will increase the benefit to both audience and organization; the greater the benefit, the greater the interest in the site.
The VCA identifies the factors within the organization, explaining the costs of production is vital to understanding how to maximize efficiencies leading to reduced costs. Jurevicius (2013) indicated that the cost advantage approach consists of these five steps:
- • Determine the primary and support activities;
- • Determine the cost for each activity about the total cost of the product;
- • Determine the factors that explain the cost of each activity;
- • Determine the interrelatedness or linkages between the activities; and
- • Determine ways to reduce costs.
The five steps are standard decision-making approaches to looking at an issue, understanding the full extent of the issue, and seeking opportunities to affect the issue. An analysis of the cost components of a product is useful when attempting to enhance the functions and achieve efficiency, thereby reducing the cost of production.
Decreasing the cost of a product makes the product more attractive to the customer and, therefore, more competitive for the company. Reducing the cost of production will reach a point where quality cannot remain at the current level, and this becomes a strategic issue of quality and cost. If high quality is critical to the success of the product, the cost will have to remain at the tipping point between quality and value. Knowing the point at which quality and cost becomes an issue rests with a thorough analysis of a broad spectrum of the organization. A company can make a strategic decision to maintain high quality and lower the retail price (i.e., reduce profits) in a bid to achieve a competitive advantage.
The Porter tool allows for another necessary type of analysis. The determination of the differentiation advantage of the product is just as crucial in viewing the full spectrum of the product as the cost. According to Jurevicius (2013), the three differentiation advantage steps consist of determining the activities that the customers view as value-adds, determine and evaluate the approaches that lead to enhancing customer value in the product; and determine the optimally sustainable differentiation. The differentiation advantage approach is another practical method for assessing the value of a company's product or service. The differentiation analysis focuses on the unique qualities of a product that are valuable to the consumer, the things the customer views as separating the product from other products on a value scale. Any analysis involving customer opinions of value is likely going to require frequent checks because of the fickle nature of people and trends.