Network effect Essay Example for Free

Network effect EssayNetwork effect is seen as a phenomenon where a network good (SNS or PNS) becomes more than valuable as the number of users increase. This phenomenon encourages continually increasing rank within the network. This can happen when a user adopts a network service initially to connect with current users, or later, when everyone is using the network service.Although there may be a larger increase in new membership for SNSs, it is stated finished off the LinkedIn case that new membership for PNSs is likely to be more valuable to users because of the nature of the connection. Many people will non requirement to change PNSs because they will lose their multiple connections already created (Yoffie et al. , 2009). The case examines the likelihood of SNSs overlapping and taking over PNSs. This outcome seems unlikely.By examining Exhibit 6 (Yoffie et al. , 2009, p. 16), the correlation among factors such as age, income, college education, and position within an or ganization sets LinkedIn squarely within its target securities industry. Also, Yoffie et al. indicates the distinct uses of lord and societal apps on Facebook. The multitude of users who use loving apps vs. lower use of professional apps shows that Facebook users are less likely to draw and quarter their profiles into professional networking tools, leaving PNSs like LinkedIn for leveraging their professional careers (Author, p. 14). Question 2Emerging companies expect to generate new kinetics that are modernized, innovative, and easily holdive to survive in this world. The new dynamics should be economically viable for the industry because they affect issues of whether to pursue a build or a buy approach to expand globally. LinkedIn Corporation, a PNS, is employ by professionals globally to interact professionally. Uses include recruiting, acquire expert advice, group collaboration, and more.Differentiating strategies were adopted by LinkedIn in put to separate itself fro m competition and answer the uestion of whether to hire a build or buy approach. A build approach involves both monetary and an former(a)wise(prenominal) resource investments from the phoner. For LinkedIn, Investments in certain professional apps such as conference calendar, a tool used to indicate when certain conferences will be coming up, and which of a users connections will be attending, are examples of utilizing the build approach. The buying approach is where the accompany buys/merges with an existing SNS/PNS and integrates it within the existing systems.Although this expands a company, it constrains the energy of a company to customize the existing network with its own. Therefore, a company amp its procedures need to adapt to the technology it buys. If they use a build approach, the company can build to their own specifications differentiating itself from existing networks (No Quote, Does not answer question). Question 3 LinkedIns system is straight to the point, be th e best in the market of professional networking services (PNS).By focusing on providing a virtual platform for professional interaction (Yoffie et al. , 2009, p. 2), LinkedIn would provide various productive services to its users. Services provided include professional search, reference checking, recruiting, advice search, job seek amp posting, and workgroup collaboration, which were successful because they allowed their users to become more effective in their professional careers. Also, its success was accounted for being knotty with countless industries, rather than focusing on a specific industry like other PNS providers. indoors its strategy, LinkedIn encompassed three premises which attri preciselyed to LinkedIn being the best in PNS, remain a strongly differentiated division from SNS, maintain a hold on professional users for reasons both constructive and negative, and embrace establishments rather than stir up them (Yoffie et al. , 2009, p. 3). LinkedIns success strongl y accounts for maintaining a fiber PNS by providing a productive atmosphere, which involves being isolated from SNS.It is substantial for LinkedIn to remain separate from SNS capabilities in order to maintain its high PNS quality and core values. The seek of inheriting this strategys premise involves losing the users that want a network that hosts both professional and social networking capabilities. LinkedIn could potentially lose users to SNS businesses, like Facebook, who are starting to provide PNS services in its SNS atmosphere. In the present moment premise for its strategy, holding its users for positive and negative reasons in like manner brings both success and risk.The positivity hold, having users create positive professional identity, is a success because it is a competitive return over SNS providers who only provide social identity or cannot separate the two. But holding onto its users for negative reasons promotes the similar risk as mentioned in the first premi se. When users think to switch from LinkedIn to a SNS that provides both SNS and PNS capabilities, LinkedIn banks on the fact that they believe users would not pose losing its contacts in jeopardy.This negative hold on LinkedIn users is a risk because it is quite possible that sooner or later SNS companies that promote both PNS and SNS capabilities will also produce relatively the same contacts as LinkedIn. It is raging to assume that LinkedIn can keep users instituted on the premise of this assumption. Lastly, the third premise for its strategy brings on success. Having companies embrace the concept of LinkedIn in the end creates more users. LinkedIn is designed so that professionals will be more productive and more effective in their careers. If LinkedIn does eventually provide SNS qualities in its service, this could pose as a risk.Companies might not want to promote a network that could waste work time with their employees vie games and spending time on personal social inte raction on the network. Therefore, companies would end up trash LinkedIn. LinkedIn has always incorporated a control over its network as part of its strategy. Keeping out non-professional information and photos helps keep the quality of its PNS professional and on top. It also embeds value propositions for its professional users as puff up as its corporate users which revolve around a simple user interface.Although this is what maintains its qualitys success, it also brings a risk by shying away companies who do not want to be part of a network that they cannot control. Lastly, LinkedIn is successful because of its strategy of how to obtain its revenue enhancements. Its five sources of revenue include advertising, subscriptions, job postings, corporate solutions, and primal research that evenly contribute to its earnings. If one of the sources does not do as well as expected, LinkedIn has the other four methods to rely on. Question 4 Companies implement strategies to deliver th e goods a target or pass on a goal that may e becoming the market leader of the industry, increasing profits by a certain percent, or even attracting new members to use a professional network service.As mentioned in the second week of classes, a company may choose one of the four ostiarys generic strategies that include differentiation, overall cost leadership, focus differentiation, and focus low cost to achieve competitive advantage (Kumar, 2010, p. 24). LinkedIns strategy is a focus differentiation since it was first founded, and its strategy has helped the company to become a leader in the PNS market.The differentiation strategy involves constant innovation and providing users with what they need and want in a new or better manner than what competitors can provide. Therefore, LinkedIn and many companies in other industries may ward off its competitors through innovation, quality, and reputation although overlapping products may be present. While Facebook may present threats to LinkedIn with the intent to blur the greenback between SNSs and PNSs, LinkedIn would still maintain a competitive advantage in the PNSs.LinkedIn has always focused on differentiating itself in the PNSs by providing users a different degree of privacy, standards, and quality tools to find job candidates for position in their company, to reach out to experts around the world in order to get advice andmake better decisions (Yoffie et al. , 2009, p. 4). LinkedIn differentiates from Facebook and other SNSs not only on the type of service that is provided, but also on the value it adds to the professional identity of each user, and the reputation it maintains.SNSs such as Facebook and MySpace may be very popular and well known around the world for the types of applications available, the connectivity advantages, and the numbers of users within the network. However, the SNSs have presented privacy issues as well as reputation issues. As mentioned in class by prof Kumar and Mehdizadeh (20 10) in her article, SNSs provide a self-presentation characteristic of low self-esteem and high narcissism users.Alternately, LinkedIn targets a long goal in the attempt to create a different type of environment, a professional ecosystem with the plus of applications and modules to help users increase efficiency in their work and portray the professional self. The existence or ontogeny of other PNSs would increase competition for LinkedIn however, LinkedIn already has a well-established professional networks composed of top executives, CEOs/CFOs, and other important professionals that attract individuals who seek advice or just the possibility to connecting professionally.LinkedIns users may have difficulty and a cost to switch networks, but they also find value in the services available. The continuous advance of the benefits that can be obtained and the innovation of new modules such as LinkedIn news and customizable settings will help the company ward off competitors. Questio n 5 Question 5a The distinction between social and professional is clear. This distinction likens LinkedIn to the Wall Street Journal , and SNSs to publications like People, indicating that creating a more social persuasion to LinkedIn will depart from the needs and wants of their target market.The expansion by Facebook into an open platform allowed third parties to augment social apps and created a viral spread across the network. Hoffman (Yoffie et al. , 2009, p. 7) stated that he wanted to prevent this within the LinkedIn network, alternatively insisting on stringent protocols and reviews of all new apps, so as to provide professionals with . . . the right figure of tools to interact with their network. Maintaining a walled garden, as opposed to an open platform, is critical to continuing LinkedIns success. Like stated before, its strategy is based around being the best PNS in the industry.Users flock to this website because of how LinkedIn keeps the network professional, pr omotes productivity, and enables users to advance their careers success. Keeping this prestigiousness will conserve LinkedIns quality and continue to attract its target market, professional users. Question 5b LinkedIn should not broaden the scope to include elements of social networking. LinkedIn began and still operates since 2003 as a PNS. This strategy has allowed it to flourish, generating a guest base of 75 million users spreading around 200 countries, which includes professionals from all fortune 500 companies (Yoffie et al. 2009).This festering can be attributed to its departure from obtaining the majority of its revenues from advertising, like SNSs, and creating a focused concept that does not inescapably remove innovation within the network, but instead indicates a policy of professionalism throughout with the controlled inception of professional applications. Different from SNS, of which the majority of revenue is from advertising, LinkedIn has framed its revenue mode l on five sources (1) Advertising, (2) Subscriptions, (3) Job Postings, (4) corporeal Solutions, and (5) Primary Research.Steve Sordello, CFO for LinkedIn, stated This model gives us a lot of sustainability, even if one of those revenue streams doesnt succeed as we expect, we have others (Yoffie et al. , 2009, p. 6). In order to sustain a competitive advantage, in 2007, LinkedIn change a policy to accommodate users who wished to upload a single professional head gibe for identification. In 2008, LinkedIn launched a product called Company Groups that brought all LinkedIn users who worked for an organization into a closed forum which provides a collected, protected space for employees to talk to each other, as a part of application program interfaces (API). early(a) launches included Conference Calendar, as stated above (Yoffie et al. , 2009). Question 5c LinkedIn has created a successful user base in foreign countries. This fruit is attributed to LinkedIns concept of build not bu y, using an organic growth model, giving it a competitive advantage over its main foreign rival Xing. This advantage is through LinkedIns ability to control segments of its business outside the U. S. , separate from Xing who buys outside networks limiting its control, in humanitarian to Nyes observation that being in English first is an advantage.