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Management Core
MGCR 331
Fatou Bagayogo

Information Systems: Technology and Strategy  Key frameworks for examining a firm's competitive environment: Porter's Five Forces, also known as the Industry and Competitive Analysis. 1) The intensity of rivalry among existing competitors o Intra-industry Rivalry is high when competition is fierce in the market.  IT can be used to create personalized products and services, which can reduce product similarity among competitors in an industry, thus reducing competition. Firms also use IT to create loyalty programs (Provigo and Loblaw) 2) The threat of new entrants Threat of new entrants is high when it is easy for new competitors to enter a market o Example: IT enabled services such as ATM use, online bill paying and account monitoring, etc., create entry barriers to enter a banking market  First-Mover advantage o Internet provides direct consumer access to the banks. It eliminates the need for a bank to incur huge amounts in setting up retail branches and ATMs. This lowers entry barriers, leading to the entry of new firms. 3) The threat of substitute goods or services o Threat of substitute products or services is high when there are many alternatives to a product or service 4) The bargaining power of buyers o Buyer power is high when buyers have many choices on which firm to buy from.  IT: competitive advantage, reduce buyer power  Example: loyalty program of travel industry – free airline tickets, upgrades, hotel stays  The Internet provides buyers a multitude of choices to choose from, and as a result, buyer power has greatly increased. 5) The bargaining power of suppliers o Supplier power is high when buyers have fewer choices about which firm to buy from. Supplier power is the converse of buyer power.  Key frameworks: the value chain o The value chain is the set of activities through which a product or service is created and delivered to customers. o The primary components are:  Inbound logistics – get needed inputs into the firm from suppliers  Operations – turn inputs into products or services  Outbound logistics – delivering products or services to consumers  Marketing and Sales – customer engagement, pricing, promotion, transaction  Support – service, maintenance, and customer support o The secondary components are:  Firm infrastructure – functions that support the whole firm, including general management, planning, IS, and finance  Human resource management – recruiting, hiring, training, and development  Technology / Research & Development – new product and process design  Procurement – sourcing and purchasing functions *supply chain management (SCM: linking inbound and outbound logistics with operations), customer relationship management (CRM: supporting sales, marketing, and in some cases R&D), and enterprise resource planning software (ERP: software implemented in modules to automate the entire value chain)  Generic Strategies for competitive advantage o Cost leadership (or operational efficiency): providing the product or service at an unbeatable price point. o Differentiation (or strategic positioning): supermarkets – stocking a slightly differentiated brand.  Example: Provigo with President’s Choice Many firms develop an innovation that creates a unique market space.  Example: Apple with iPod innovation Many supermarket companies focus on improving the customer orientation and customer service to be able to track customer preferences, thereby providing them the information for re-stocking the inventory. o Segmentation (Focus or niche) Strategy: the firm concentrates on a select few target markets. Less vulnerable to substitutes, competition is weakest.  How to support cost leadership and differentiation strategy with IT? o Cost leadership strategy  Substitute information for physical goods – use demand information collected through their information systems to minimize the need for stocking large inventory, thereby reducing the inventory costs.  Substitute information technology for labour  Example: Canada Post use tracking numbers available online so that customers can query themselves the real-time status of their shipments.  Increase the output from the same “payroll”  Example: ERP implementations can be used to eliminate the inter-departmental boundaries and facilitate the flow of data and information within a firm. o Differentiation strategy  Increase product quality  Example: Amazon suggests other products that may be
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