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DATE
PROGRAMME
COURSE
PAGES
CHARACTERS
STUDENTS
COPENHAGEN BUSINESS SCHOOL
2017
Case: Amazon, Apple, Facebook, and Google
BENJAMIN NØRBY
CHRISTOFFER STILBO
DANIEL BRODERSEN
KALLE MÅNSSON
020894-1895
270793-1569
261284-1139
890903-4194
[email protected]
[email protected]
[email protected]
[email protected]
1 DECEMBER 2017
MSC IN BUSINESS ADMINISTRATION AND E-BUSINESS
STRATEGIC AND TACTICAL TOOLS FOR E-BUSINESS (CBUSO1100C)
8
18,157
1
QUESTION 1: Define the contested boundaries among
Amazon, Apple, Facebook and Google
Author: Daniel Brodersen
First, we will look at and define the contested boundaries among Amazon, Apple, Facebook and
Google – Also known as the Big Four.
To define the contested boundaries between the Big Four, we had to get a closer look at the
companies’ initial core areas. As we understood the original core areas of each company, we
considered the boundaries and then studied which of those boundaries that we found was being
contested. Below is an overview of the original core areas:
Core Area Boundary
Amazon Online Retailer Selling books
Apple Interface Devices Selling PCs and hardware
Facebook Community Provider Social media platform only
Google Online Advertisement/Portal Search Engine
We found that all the Big four have, since the article was published, changed their core areas to
cover approximately the same market – which means that the contested boundaries for these
companies have since changed quite significantly. In question 2 we will go in depth with how
this have since played out. Below we have listed what we see as being the most important
contested boundaries for each area1.
Contested Boundaries across the Big four
Interface devices: Apple (iOS) vs. Google (Android)
Both Apple and Google are big players on the mobile OS market. Android devices has the
majority of the market, but when talking revenue and downloads, Apple is on top. Google
started out with only having the Android OS, but later got into the hardware market, thereby
contesting Apple on that market as well.
1 See appendix for specific numbers related to each contested boundary
2
Social engagement: Facebook vs. Google (Google+)
Google tried to enter the social networking area, but with only about 20% unique monthly visits
and very low retention rate compared to Facebook. Facebook on the other hand, accounted for
about 70% of the market for social networks. Google never gained on Facebook and we believe
that Facebook’s success was partly based on the first mover advantage.
Online advertising: Facebook vs. Google
We found that in the online advertisement segment, Facebook challenged Google, but was less
focused on advertisement than Google. Facebook used a more personal-based advertisement
strategy, based on profile-data from the Facebook network. Google was more focused on
enterprise and commercial advertisements, such as promoting commercial products based on
search results on their own platform, rather than personal “likes” as Facebook. This means they
were in the same market, but they presented different ads for different needs.
Online retailing: Apple vs. Google vs. Amazon
Amazon was one of the first online retailers on the internet, but as mobile devices began
providing easier access to online stores, such as Google Play and Apple App Store, Amazon
mostly lost its chance of great exposure on the mobile market. Apple is dominant in terms of
profit and revenue, but since Android is a free operating software and provides other companies
with an opportunity to customize and provide, drastically increases Android’s exposure and
strengthens their brand, which in the long term gives Google the upper hand in online retailing.
All major manufacturers of mobile phones and tablets (except Apple) use Android to power
their devices. Looking forward, some underdeveloped economies around the world are yet to
be exposed to these devices. As it is unlikely for people in underdeveloped economies to afford
premium devices running iOS or Android (iPhone, iPad, Samsung Galaxy, Samsung Note etc.),
an access to cheap Android powered devices will increase Google’s exposure and possibly
establish Android as a de facto standard in the regions. The network effect of this, and the fact
that others are using an Android device, could increase the value for a new user to do the same.
QUESTION 2: For each contested boundary that you have
identified, how is the contest likely to play out?
Author: Benjamin Nørby
As mentioned above we’ve identified 4 contested boundaries; interface devices, social
engagement, online advertising and online retailing. Based on the information found in the case
3
and information gathered online, we have tried to argue for how we believe the contest is likely
to play out from today.
Interface devices is heavily dominated by Google and Apple. The contest between Google and
Apple, in terms of, interface devices is a particular popular topic for obvious reasons. The
contest between the two is extremely interesting, as Google/Android actually has 85 % of the
total market share opposed to Apple’s share of only 14,7 %. This means that Google currently
has the advantage in terms of exposure, but Apple is actually “winning” in terms of revenue and
profit. However, we do believe that Google and their immense exposure will “win” this contest
in the long run. We believe Apple is the less innovative company of the two and that they rely
too heavily on their high-end customer segment. Google however is more diverse and have
phones of all the different tiers. Apple recently also got rid of their “low” GB phone forcing
everyone that wanted a new iPhone to pay a bigger price and therefore address the high-end
segment even further. We do not find that to be the most reliable strategy, especially when
looking at the possible new segments to the market. With most people having phones, the new
segments are likely not to be part of the high-end segment.
When looking at the contested boundary Social engagement we are mostly looking at Google
and Facebook. It’s an interesting topic, as both Google and Facebook are contesting in similar
ways and try to “steal” each other’s way of doing Social engagement. Facebook has 2 billion
monthly active users in 2017, which is an increase by a factor of 13x since September of 2012.
Google + on the other hand accounts for an insignificant amount. YouTube though, is also
owned by Google, and should be counted as part of the Google social platform. Google forced
their users to create a google plus account in order to create a YouTube account and therefore
combined the two. In terms of social engagement, it is very interesting to see the two actually
be quite similar. Facebook however is the much more personalized of the two. Facebook provide
a lot more different features such as messaging services. It’s very difficult to try and figure out
how this contest will play out. Google is the biggest in terms of exposure in general and we
believe they will win due to the fact that they have more strings to play on. It is seen before
that websites such as Facebook die out (even though that is not very likely), and with the
exposure Google has in terms of mobile devices there is opportunity for a lot more social
engagement initiatives in the future. Therefore, we believe Google will win in the long run,
even though Facebook is currently the leader.
Online advertising is a contested boundary that is contested by all the big four, however we will
focus on Google and Facebook, since we believe they are the biggest players within this
4
boundary and that Amazon and Apple mostly advertise their own services, apps etc. through
their platforms. When looking at the raw numbers we see some immediate differences. Google
has 173,000,000 visitors monthly and the average amount of time a visitor spends monthly on
Google is 1 h 54 m / person. Facebook on the other hand has 153,000,000 visitors monthly and
the average amount of time a visitor spends monthly on Facebook is 6 h 66 m / person.
Google has the most visitors however the time spent on their platforms differs a lot. However,
it is important to keep in mind the type of services the companies provide. Most people when
visiting Google services already know what they are looking for and when they get their answer
they leave the site. Facebook visitors on the other hand use it as a way of killing time and
engaging socially. As mentioned earlier Facebook is much more personalized, which might
grant them a benefit in terms of targeting advertisements. We believe that people are also much
more immune to advertisements on Facebook as people are more turned off and just browsing
the website with less attention than people visiting Google. Google is run on advertisements
and they are very good at it. We believe the way Google platforms and services are used, and
the fact that Google has the greater exposure, is going to assure them the victory in terms of
online advertisement.
In terms of online retailing all of the companies compete. Some of the companies recently tried
going into this contested boundary. Amazon is the big player here (especially in the US). Most
Americans use Amazon and they have built a brand on their very smart online targeting
algorithms. This makes sure that based on your previous history, they suggest new products to
you. Furthermore, Amazon is the only out of the four that provide physical products and not
only digital media (like Google play and Apple app store). Google play and Apple’s app store
are very similar and provide digital media to be purchased and downloaded. The last contestant
Facebook recently introduced their marketplace. This service is quite interesting and provide
something we haven’t seen between these four. A C2C marketplace based on their social
network platform. This is similar to what is seen on eBay, craigslist etc., but much more
personalized and build on a trusted and known platform. We believe that this service provided
by Facebook has a lot of potential, but is still very new. Therefore, we still believe Amazon is
going to continue their strong hold on the boundary, as they are the only ones offering physical
products (apart from the new marketplace). However, it will be very interesting to see if Google
or Facebook would be able to utilize their platforms and exposure and possible compete more
directly with Amazon in terms of online retailing.
5
QUESTION 3: How will the complex e-business ecosystems, in
which e-businesses are built on top of other e-businesses and
third-party sellers that rely on platforms, evolve?
Author: Christoffer Stilbo
The ecosystems of e-businesses are the suite of interconnected products and services offered to
customers. The value of a strong ecosystem among major e-businesses such as Apple, Amazon,
Facebook, and Google is what will make customers keep returning to platforms within their
dominant ecosystem. To understand how the ecosystems will evolve in the future, firstly a
deeper insight into the current stages of the ecosystems is needed.
Current ecosystems
Like most companies each of these e-businesses have one area of their ecosystems, where they
are dominating. Apple’s strength is devices, Facebook’s is social engagement, Google has its
online advertising, and Amazon its e-retailing.
Apple has a long history of producing physical devices. While a large part of the overall
experience with these devices is also dependent on Apple’s software, the production and sales
of smartphones, tablets, and computers is a big source of income for the Silicon Valley giant.
As evidenced in Exhibit 1 from the case, Apple has the greatest revenue as well as a market
capitalization more than double the size of Google’s, largely caused by a line-up of high-end
products generating good margins. This provides Apple with the advantage of being physically
present in the home of its customers, and thereby introducing a higher switching cost than
between two digital platforms. The strength of Apple’s ecosystem is at the same time a
weakness, as it can be excluding other platforms and become isolated.
Facebook has established itself as the dominant platform on which we communicate and
interact with other people around the globe. This platform is also used to sell targeted
advertisement to businesses, serving as its main source of income. Similar to Apple above, the
strength is also a weakness, because the platform and revenue therefrom is dependent on the
users’ willingness to share and keep sharing information about themselves. The ecosystem of
Facebook is now as developed as Apple’s or Google’s, but it is worth taking into account the
markedly younger age of the company.
Although not present with a physical device of its own in the home of its users, Google is present
through Android, the company’s mobile operating system, which is used on 72 % of the world’s
6
smartphones in 2012. This plus having the leading search engine, a strong enterprise segment,
a large entertainment platform, and a social networking platform, the only thing really missing
from Google’s ecosystem is physical devices. The approach Google has taken to build its
portfolio is by acquiring other e-businesses and integrating them into its own ecosystem, some
by adoption (DoubleClick), some not (YouTube).
Besides dominating online retailing, Amazon has a large revenue from its cloud computing
services for enterprise. Initially founded as an online book store, subsequently adding other
types of entertainment media, and finally launching their Kindle e-reader, Amazon’s ecosystem
is built for media consumption.
A shared observation regarding all of the above apart from Apple, is that they provide online
services, which introduces a dependency of a physical device that can be used to access these.
Future ecosystems
As discussed above, these four e-business giants all have their own ecosystem or are trying to
build one. In the following it will be attempted to predict the evolution of these ecosystems on
the basis of the analysis of the current ecosystems’ stages. Were the most and least indispensable
of the four giants to be rated by their ecosystem’s value for future consumers, this would provide
an insight into the success or failure of the respective e-business’ ecosystems and may serve as
a prediction of the future evolution of these as well.
As it was previously mentioned, Apple’s strong ecosystem, in which an important part is their
physical devices, can also be a disadvantage. Although there will be high switching costs
involved in the transition from Apple’s ecosystem to Google’s. There are enough non-Apple
computers and smartphones on the market, that Apple’s devices could be replaced, and without
devices to integrate with the online services Apple have, it’s ecosystem does not provide any
real value. This makes it the least vital of the ecosystems.
Contrary to Apple, Google has a very open ecosystem. The majority of its services are provided
free of charge to everyone and are accessible through practically any internet-enabled device.
It is safe to assume that this strategy has played a big part in market-dominating platforms of
Google’s ecosystem, such as Google Search, Android, and YouTube. Apart from the open accessstrategy,
Google’s acquisitions have also been crucial to build the ecosystem of the future.
Therefore, it is found to be the least indispensable ecosystem of the four giants.
7
The evolution of these e-business ecosystems is expected to continue expansion through firstly
acquisitions. Secondly, the open access-strategy and reliance on other giant’s platforms should
not be disregarded.
QUESTION 4: Identify an e-business company that you know
about. Which, if any, of the big four firms does it currently rely
on? Might that reliance change?
Author: Kalle Månsson
With more than 60 million paid subscribers, twice as much as Apple Music, Spotify is the global
market leader in the fast-growing music streaming industry. 1 They have made huge leaps to
become a solid player in the digital business world since founded in 2006. From May 2013 to
May 2017 they have made a total of 11 acquisitions, which have contributed to an improved
and more personalized user experience. 2 In some aspects Spotify relies a lot on some of the
“Big Four” in order to deliver their services to the end users. If we look at it from the users’
perspective, they need some kind of device in order to use the application. Before that they
need to download it from somewhere in order to install it on their devices. And before all this
can happen, the IT infrastructure of the application needs to run smoothly.
You can access music through Spotify through their native apps on smartphones and tablets,
web applications, and desktop applications. Since October 2016 it’s more common that people
in general access and utilize the internet through mobile devices instead of desktops. 3 It’s
the same case for Spotify’s users. Already in 2015 Spotify could confirm statistics that people
accessed their services more through applications on mobile devices than web and desktop
applications. 4
Over 99 % of the smartphones in the world are powered by Googles and Apples operating
systems Android and iOS. 5 Thus Spotify relies on them in order for the end-users to be able
to download the application and stream music. Furthermore, the IT infrastructure behind the
Spotify service used to run on Amazon CloudFront, but as of 2016, Spotify has moved over to
Google Cloud Platform to benefit from their Big Data capabilities and analytics platform. 6
Also, a lot of users login to their Spotify account via their Facebook credentials and are then
able to add their Facebook friends in Spotify. This has contributed to Spotify becoming more
interactive, enabling users to follow each other, share songs and playlists, and essentially
staying up to date with new music trends.
8
Due to competition being an important factor for businesses success, Spotify more or less relies
on all “Big Four”. Except for Apple Music being the main threat so to speak, Amazon’s Prime
Music and Google’s Google Play, are also fighting for market shares in the global music
streaming industry. 7
Might that reliance change?
A possible change in reliance might be future disruptive technologies that might interfere in
Spotify’s delivery process. For example, it could be VR or online headphones with voice
recognition where you don’t need an iPhone or an Android to access and listen to music. In this
case, Spotify might have their own VR or online headphone device which will decrease the
reliance and possibly eliminate it in the longer future.
However, in the near future we do not see Spotify moving away from Apple’s or Google’s mobile
app markets, as more than 99 % of mobile phones are powered by one of their operating
systems, and the accessibility to their users would suffer greatly. A possible short-term scenario
in which the Spotify app might be removed from either app market, would be an acquisition of
Spotify by one of these two. In this case one could argue that the company acquiring Spotify
would integrate Spotify exclusively into their own ecosystem. A contradicting fact to this
behaviour is Google’s acquisition of YouTube, which is still available on both iOS and Android.
The reliance with Google in regard to hosting its infrastructure we believe will remain as is due
to it being more cost efficient and also more logical in the sense that Spotify can focus on their
core business. We have also identified Spotify’s reliance on Facebook as a crucial factor to their
success. Without utilizing Facebook for authentication and thereby connecting your Spotify
experience with your social network from Facebook, enabling ‘social listening’. This greatly
decreases the possibility of the ending integration.
If not acquired we believe competition will play a key factor to Spotify’s as well as the music
streaming industry’s success. Even though Spotify has a strong foothold in the global market,
with Apple breathing down its neck, there’s still a lot of untouched markets to approach.
Amazon for instance are making moves launching Amazon prime in Canada together with other
compatible products. This is in our opinion healthy for the industry and might be crucial for it
to grow in to a well-functioning mature global industry in the near future.
9
References
1 “Apple Music, Spotify, Tidal: A Guide to Music Streaming | Fortune.” Online.
Available: http://fortune.com/2017/09/11/spotify-apple-music-tidal-streaming/.
Accessed: 30-Nov-2017.
2 “Acquisitions | Crunchbase.” Online. Available:
https://www.crunchbase.com/search/acquisitions/field/organizations/num_acquisitio
ns/spotify. Accessed: 30-Nov-2017.
3 “Mobile internet use passes desktop for the first time, study finds | TechCrunch.”
Online. Available: https://techcrunch.com/2016/11/01/mobile-internet-use-passesdesktop-
for-the-first-time-study-finds/. Accessed: 30-Nov-2017.
4 “Spotify Makes The Shift To Mobile With 52% Of Listening Now On Phones And
Tablets | TechCrunch.” Online. Available:
https://techcrunch.com/2015/01/10/music-is-a-mobile-linchpin/. Accessed: 30-Nov-
2017.
5 “iOS and Android Combined for Record 99% of Smartphone Sales Last Quarter – Mac
Rumors.” Online. Available: https://www.macrumors.com/2016/08/18/ios-android-
99-percent-market-share/. Accessed: 30-Nov-2017.
6 “Spotify dumpar Amazon – satsar på Googles molnlösning.” Online. Available:
https://digital.di.se/artikel/spotify-dumpar-amazon–satsar-pa-googles-molnlosning.
Accessed: 30-Nov-2017.
7 “Announcing MIDiA’s Streaming Services Market Shares Report | Music Industry Blog.”
Online. Available:
https://musicindustryblog.wordpress.com/2017/11/03/announcing-midias-streamingservices-
market-shares-report/. Accessed: 30-Nov-2017.
10
Appendix
Contested Area: Interface Devices
Companies Apple (iOS) Google (Android)
Contested boundary:
Mobile device marked
Apple only held about 12.9%
in the same market. Apple led
in mobile e-commerce though,
with their app-store taking
60% of all app downloads.
Android operating system
occupied 72% of international
mobile devices 3rd quarter of
2012.
Contested Area: Social Engagement
Companies Facebook Google (Google+)
Contested boundary:
Social networking
Facebook accounted for about
70% and had 400 minutes /
month per user. Also,
Facebook had about 1 billion
users by September 2012.
Google only had 20 % unique
monthly visits and users only
stayed for 3 minutes / month,
and about 400 million users in
2012.
Contested Area: Online advertising
Companies Facebook Ads Google (AdWords etc.)
Contested boundary:
Online advertising
153,000,000 visitors monthly
and 6 h 66 m / person – In
2012, Facebook had a
revenue of $5,089 million of
which advertising accounted
for 84% of the revenue, and
“they weren’t even trying”.
173,000,000 visitors monthly
and 1 h 54 m / person – In 2012,
Google had a revenue of
$50,175 million of which only
37.3% of the revenue came
from advertisement.

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