Platform Envelopment

Platform Envelopment Thomas Eisenmann, Geoffrey Parker, Marshall forefront Alstyne Revised, August 11, 2008 ABSTRACT ascribable to network effects and switching costs, chopine providers often become entrenched. To change them, entrants generally must offer revolutionary products. We explore a second path to platform leadership change that does non rely on Schumpeterian creative destruction: platform envelopment. By leveraging common components and shared user relationships, one platform provider can move into anothers market, feature its own functionality with the targets in a multi-platform bundle. Dominant firms otherwise render from entry by standalone rivals may be susceptible to an adjacent platform providers envelopment attack. We go conditions under which envelopment strategies are likely to succeed. Keywords: Platforms, network effects, bundling, double-faced markets, complements, convergence Platform-mediated networks encompass network users along with intermediaries who provide components and rules that facilitate users interactions (Gawer & Cusumano, 2002; Rochet & Tirole, 2003; Eisenmann, Parker & Van Alstyne, 2006; Evans & Schmalensee, 2007).

Examples are as diverse as video games, container shipping, credit cards, flash messaging, package delivery, web search, real estate brokerage, HMOs, shopping malls, DVDs, online date services, travel reservation systems, stock exchanges, and barcodes. Such businesses comprise a oversize and rapidly growing share of the global economy: rank by market value, 60 of the worlds coke largest corporations earn at least half of their revenue from platform-mediated networks (Eisenmann, 2007). complete platform intermediaries can be difficult to displace. They are sheltered by network effects (Farrell & Saloner, 1985; Katz & Shapiro, 1985; Economides, 1996), switching costs (Klemperer, 1987), and endogenous drop costs for R&D, infrastructure, and marketing (Sutton, 1991). To dislodge... If you want to get a full essay, order it on our website: Orderessay

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