APPLYING THE HYPERCUBE MODEL OF ELECTRONIC COMMERCE STRATEGIES TO THE CASE OF MP3

Abstract

This paper presents a framework for understanding and developing electronic commerce (EC) strategies. We argue that EC performance is not merely affected by appropriation of the technology, but is also highly dependent on the firm’s EC strategic focus, the technology cycle and its associated innovative activity development, and the cognitive orientation of key decision makers toward the market. This proposed hypercube model of EC strategies is applied to the case of MP3 in the U.S.$38 billion-a-year recording industry. The MP3 can be seen as a competing standard that builds on an Internet-initiated technological discontinuity, which offers opportunities to the nascent Internet-based recording companies and threatens the status quo of the incumbents. Building on this standard, competing innovative activities have developed over time. The model shows that a firm selects the strategy that best fits its cognition of these activities and its strategic focus. These findings suggest the feasibility of future validation and application of the hypercube model.