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Nowadays many markets are organized around platforms. It may be banking, retail, logistics and delivery services. The aim of the platform is to provide communication between buyers and sellers and contribute value-creation changes. Accenture indicates that 88% of the Fortune 500 companies are looking for opportunities to use platforms and actively invest in platforms. Despite, such interest from business side, platform use for business model innovations remain relatively unexplored (Gatautis, 2017).
To be more specific, all authors emphasize that platforms belong to digital markets, although platforms can designate markets generally. But the economics of markets and the economics of platforms are the same things. The platforms show the crucial role of intermediaries between sellers and buyers. The most common examples of platform business are Amazon, eBay, Uber, Alibaba, and PayPal.
As Daniel F. Spulber wrote in “The economics of markets and platforms” “Markets and platforms describe the same economic phenomena. A market is a place where economic actors transact with each other and a platform often refers to a market where digital technologies facilitate interaction. A traditional market often is a physical location, such as a geographic area, trading post, public square, private store, or organized exchange. A platform can be a virtual location where economic actors transact using information and communications technology, including Internet websites, online retailers and wholesalers, online financial firms, and mobile applications (apps). Markets and platforms can be hybrids of physical and virtual locations” (Spulber, 2019).
Platforms have the same ecosystem with similar structure incorporating the same players like in traditional business. Platforms also possess one typical market feature – two-sided market concept, which means that platform market combines sellers and buyers of a single commodity being intermediary. But in this case buyers can become sellers and vice versa, so it is difficult to categorize consumers and producers. For example, today you can be a driver of Uber and tomorrow – a passenger. So it is difficult to divide buyers from sellers, because their roles may change.
Platforms do not work exactly like traditional firms. In traditional understanding a firm obtains competitive advantage when it offers greater value for customers having lower costs. But in case of a platform this is not the same. A platform’s competitive advantage “is strongly dependent on the ability of platform firms to stimulate value co-creation with their network of complementors and exploit the ensuing positive feedback dynamics” (McIntyre & Srivastan, 2017).
That is why firm-platforms change the traditional notion of the competition. In order to understand the difference, we have to understand how the traditional way of business has changed with the platform introduction. Van Alstyne examines this issue on the example of traditional business pipeline.
In classic business cycle, value is created during the traditional value chain model. A company uses resource-based view models, controls precious materials and assets. Then traditional firms organize their performance in such a way to optimize the whole chain of production minimizing labor, material resources and sales costs. As a result, a firm is striving to maximize the life time value of the customer who is the final destination in the value chain.
But with a platform the critical asset is shifted from materials and final products to the network or client database and their resources. They are regarded as main unique assets which are hardly to copy. Firm-platforms focus on boosting interactions between sellers and buyers and they try to maximize the value of the whole ecosystem of the platform through positive feed-backs from customers. The focus of strategy shifts from controlling to orchestrating resources, from optimizing internal processes to facilitating external interactions, and from increasing customer value to maximizing ecosystem value (Van Alstyne et al., 2016) .
All of the mentioned above proves that the competition among companies-platform transforms into more complicated and dynamic issue. As Van Alstyne wrote in “Networks, platforms, and strategy: Emerging views and next steps”, in platform firms Porter’s forces are still valid but they behave in a new way adding new factors into play.
Business in platform highly depends from critical mass of users, this externality is called network effect: the more people use platform, the more new users join the platform and the bigger is output. As it is written in “Platforms without borders? The international strategies of digital platform firms” by Maximilian Stallkamp “a key characteristic of platforms is that the value they create for an individual user increases with the total number of users”. Network externalities can provide a competitive advantage to platforms with large user networks, often allowing them to gain dominant market shares. For example, food delivery platforms such as Yandex.eda experience within-country network externalities since customers in one city do not benefit from restaurants in another city joining the platform. But Airbnb experiences cross-country network externalities, as many people use the platform to find an apartment in foreign countries the better it is for everyone. The network effect can be illustrated through Alibaba, which accounts for more than 75% of China's e-Commerce transactions, Google, which accounts for 82% of mobile operating systems and 94% of mobile search, as well as Facebook, the world's main social network.
Platforms also allow firms to benefit from internalization or at least “avoid the uncertainties associated with imperfect external markets by exercising direct control over foreign activities” (Stallkamp & Schotter, 2019) . Platforms make it to outsource to control all resources on the external market and does not overload internal control of the company. For example, when Uber penetrates a new market, the company only coordinate taxi and drivers not internalizing them. But Uber still controls some crucial features such as the work of app or platform for drivers and passengers on order to gain value for the business.
Speaking about strategy of platforming business we need to remember that a platform is a virtual service which can be used from any place. For example, if we would like to watch video from YouTube, we can do so anywhere.
Traditional companies also try to use the same networking effect it their strategy. Previously firms use outsourcing for some activities. But now they try to shift some functions on their client base and use networking effect. For example, marketing is not created in a firm, a major part of content is created by buyers. Firms providing traveling services persuade clients to post photos and videos from their vacations with company’s hashtags. These actions make a wide advertising company for a firm which costs nothing. Clients gain bonuses, a firm – advertising.
Financial departments now publicly show some of their operations. BM, Intel and JPMorgan are moving to the blockchain technology, it allows anyone who has permission to use the registry of operations and make corrections in it. This allows firms, for example, to receive advice on abidance of accounting principles or the quality of financial management from a wide network of external professionals. By opening access to its documentation, the company gains access to collective knowledge, and at the same time shows that it is transparent.
Moreover, companies benefit even from using a platforms based on the principle “permissionless innovation” (Van Alstyne et al., 2016). They let producers invent things for the platform without approval but guarantee the producers will share in the value created. For instance, Rovio did not need permission to create the Angry Birds game on the Apple operating system. As a result, there was a great boom among audience. The game was extremely valuable for the whole Apple platform so it started to generate enormous profit both for the platform and for Rovio.
Other purpose to implement platform to traditional business model is to increase the revenue streams. Product produces the only one revenue stream, but the platform could generate many ones. If we look at the world most powerful companies we will see primarily firms with platforms – Google, Apple, Microsoft, Amazon and Facebook. However some of them were platforms from their launching, others started as a product-oriented firms: Amazon was launched as a retailer in 1994 and six years later introduced Amazon Marketplace, Google began with a search engine in 1990 and then introduced search advertising in 2000, and Apple created iPod in 2001 but then developed the iTunes Store in 2003 and the App Store in 2008 (Zhu et al., 2016).
Based on the analysis of more that 20 firms which strived to transform from traditional firm to platform provider, Zhu et al. (2016) define the strategy how to do so:
1)Start with a defensible product and a critical mass of users.
2)Apply a hybrid business model focused on creating and sharing new value.
3)Drive rapid conversion to the new platform.
4)Identify and act on opportunities to deter competitive imitation.
In traditional product-oriented model a company create value for the customers through the variety of goods which are suitable for some specific need. And the value of the product is exchanged with money for this product. “Platform models bring a shift in emphasis -- from meeting specific customer needs to encouraging mass-market adoption in order to maximize the number of interactions, or from product-related sources of competitive advantage (such as product differentiation) to network-related sources of competitive advantage (the network effects of connecting many users and third parties)”. So a combination of product an platform models starts to offer additional value through showing the client that benefits can be derived from the use of third-party products. Likewise, Amazon users derive significant value from third-party sellers, but what they prize most is being able to obtain products directly from Amazon.
So, starting to penetrate foreign market a firm faces a range of different factors which influence its entry mode strategy including transaction cost, cultural and institutional factors, firm’s resources and capabilities and possibilities of network externalities. Because if a rival platform successfully operates on market and has already had vast number of users, most likely it continues to benefit its “early-mover advantage” (Stallkamp & Schotter, 2019) so for new platform it is extremely hard to switch a part of a rival’s clients. For such situation many platforms choose to establish some partnership relations and not enter alone to the market. For instance, when payment solution service PayPal entered the market of Japan, the niche had been already possessed by Softbank, so PayPal make a partnership with Softbank in order to launch a mobile system payment in Japan. Using reputation and accessible client database of already performing platform a new platform has an opportunity to penetrate the market.
When in the market the leader exists, it has the “winner-take-all” (WTA) outcome. WTA suggests to use aggressive strategies to expand their influence in the market (Belleflamme & Peitz, 2019). To be more specific, this strategy called “get-big-fast” persuade platforms to do several steps:
1.Boost the number of platform users;
2.Hold these users and prevent their leakage to the rivals;
3.Undermine the ability of rival platforms to do the same.
These targets can be achieved by various means, for instance, price war.
Sometimes a firm-platform tries aggressively to conquer the market and in most cases, it connects with huge financial losses. Such competition should be very aggressive in order to switch the share of users. There was a well-known example, when Uber strived to penetrate the market of China and competed with Didi. These 2 rivals had price was and Uber lost $ 1 billion per year. In this competition the leading platform won because of positive feedbacks and captured greater market share. So if a firm fails to gain critical network size or a rival grows the user base quicker than the outsider has a risk to be side-tracked and is forced to leave the market. Or platforms can use licensing strategy and attract exclusive contracts to secure their position on the market, restricting the supply of similar services or goods to the rivals.
However, there is one more type of aggressive strategy – a firm can penetrate the market through acquisition of already operating platform. Such measure is used in order to get the client database and launch new platform of the base of the rivals.
But the situation is different when a platform operates worldwide, a firm-platform does not need to penetrate any new local market creating new local user net. Quite the opposite, it has to attract users from any local market to the global client’s database. In this condition every new user brings positive effect to the whole system. So the size of client’s network in any local market is not so important than their global network, so a new-entrant can penetrate the global market independently.
It also should be mentioned that expanding its performance a firm-platform will choose countries with similar cultural aspects. Cultural similarities may generate stronger interpersonal connections among users and attract new clients. So, a firm-platform would be more oriented on culturally similar countries in its expansion strategy since the benefit from the penetration would be higher.
Inside the platform a firm also uses different strategies in order to generate more profit from sellers (Belleflamme & Peitz, 2019): :
Effective pricing. A platform can become an aggregator or a monopolist for sellers like Alibaba or Taobao. The monopolist may use special fee to control the rivalry among sellers. This fee is used for the placement seller’s goods on the platform. Sellers also can promote their goods. Buyers see all options of selling the homogeneous product and may choose the best offer.
Making discriminatory offers. A firm may choose how many and what exactly sellers allow to operate on a platform. A firm may choose a seller who obtains distinct characteristics making discriminatory offers. For example, a shopping mall offers more beneficial conditions for some anchor shops which attracts other shops to the mall and generate revenue for them.
Quality control by the platforms. Platforms may control the quality of the goods or service and expel underperforming sellers creating more value for customers. For example, Uber fires taxi-drivers who have complains of bad car conditions.
In the current research we aim to identify how digitalization changes the business strategy of Russian energy firms in emerging markets and, more general, what is the impact of online platforms for emerging market multinational companies’ international strategies?

We pursue the following objectives:
-to explore e-platforms of energy firms operating in emerging markets;
-to reveal how digitalization affect business practices in emerging markets;
-to identify forms and factors of traditional business and e-platforms cooperation;
-to reveal how digitalization affect international strategies of Russian firms;
-to uncover the abilities of Russian firms to overcome obstacles and challenges created by institutional environment with the help of integration of strategy and digitalization
We will define the role of digitalization in the context of Russian energy firms’ global strategies. A research that focuses on the role of e-commerce of Russian global businesses for example, would provide valuable insights into the role of digitalization in the internationalization strategies of Russian firms and their abilities to overcome obstacles and challenges created by institutional differences or various institutional constraints. We will study this topic by using mixed quantitative and qualitative research methods.
We intend to critically rethink the international strategies of Russian companies and study them in the context of digitalization and co-opetition with internet platforms. The results of this study are of strategic importance in the context of shaping the state policy of the Russian Federation regarding the digitalization strategy of companies.

Короткий заголовокThe role of digitalization in the strategy change of energy firms in emerging markets
АббревиатураMNG_2019-2020_2
СтатусАктивный
Действительная дата начала/окончания21/11/1915/05/21

Ключевые слова

  • Business strategy
  • Digitalization
  • Online platforms
  • Multinational company
  • Emerging markets
  • Russia