Online Business Strategy in Creating Lock-In Effect

Liu, T. H., Hung, S. C., and Hsiao, Y. C. 2019. Online Business Strategy in Creating Lock-In Effect. NTU Management Review, 29 (3): 167-192. doi:10.6226/NTUMR.201912_29(3).0005

Tzu-Hsin Liu, Department of Business and Management, National University of Tainan
Shih-Chang Hung, Institute of Technology Management, National Tsing Hua University
Yung-Chang Hsiao, Department of Business and Management, National University of Tainan

Abstract

Understanding how to sustain a long-term competitive advantage for online businesses by leveraging a lock-in effects is an up-and-coming strategic issue in internet innovations. However, prior research on the lock-in effect of online businesses has lacked an integrated analysis. The lock-in effect on the Internet is now considered an effective strategy. For example, social media platforms such as Facebook, YouTube, or LINE have generated and accumulated many loyal online users. The lock-in situation has erected a high entry barrier for new and potential businesses. We propose the following question: how do online businesses use the lock-in effect to form a strategic model for value creation? To answer this question, this paper uses bees and flowers to propose six sources of the lock-in effect: cost switching, network externalities, brand image, online service system, buyers' value perceptions, and core resources. Consequently, this study finds that for the purpose of reproduction, flowers use a series of strategies to facilitate the lock-in effect of bees. Conversely, bees perform honey dance and information sharing to entice other bees to take nectar from specific flowers. The interaction between flowers and bees is similar to that of an online business and its customers. We thus establish an integrated and systemic strategic analytic framework of creating lock-in effect through supporting, attracting, addicting, and diffusing strategies. We also suggest that online businesses consider adopting the attracting-addicting-diffusing-supporting strategy to develop lock-in models for value creation. In addition, online businesses should repeatedly use these strategic actions during the development of the lock-in effect. 


Keywords

lock-in effectonline businessmetaphor analysis


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