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Lecture 4

MGCR 331 Lecture Notes - Lecture 4: Ing Group, Walmart, Value Chain

Management Core
Course Code
MGCR 331
Imad Mansour

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Lecture 4 Zara
- Objectives:
o Start developing skills for strategic thinking about IT by providing
frameworks to guide the strategic analysis
o Apply concepts from RBV, value chain, and five forces
o Study Zara’s strategy
- Main focus of today’s class
o Frameworks for strategy:
Resource based view
Value chain competition
Five forces framework
o Zara :
The counterintuitive and successful strategy of Zara
The technology, which has made all of this possible
- Zara
o How does Zara differ from other clothing retailers in roughly the same price
o Using the concept of value chain, explain what is unique about Zara
o What resources contribute to Zara’s competitive advantage
o How is IT helping Zara sustain a competitive advantage?
- Porter’s five forces
o Another framework for strategic thinking
o Framework for industry analysis and strategy formulation
o Help determine the competitive intensity and therefore attractiveness of a
market (ie, overall industry profitability)
o An industry would not be attractive if the combination of these five forces acts
to drive down overall profitability
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- Threat of new entrants
o The threat of entry lowers the prices firms can charge
Some factors that lower the threat of new entrants:
Economies of scale, high fixed costs, access to capital
Learning/experience curves
Limited access to distribution channels
o Examples of how IT affects the threat of entry:
ATM networks increase costs of setting up retail banking
Internet-based channels permit direct customer access
(e.g., ING Direct)
- Bargaining power of suppliers
o When your suppliers have power, your costs are higher
Some factors that increase suppliers’ bargaining power:
If there are a few large suppliers
If your industry is a small part of these suppliers’ demand
If firms find it difficult to switch from their existing suppliers
o Examples of how IT affects supplier power
Internet-based B2B markets make switching suppliers easier
IT-based integration of supply chains increases supplier dependence
- Bargaining power of buyers
o When your buyers have power, your can’t raise prices
Some factors that increase buyers’ power:
If buyers purchase in large volumes
If buyers can easily switch to a competing firm
If buyers know a lot about your cost structure
o Examples of how IT affects buyer power
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