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MGCR 331 (52)
Lecture 4

Lecture 4.docx

5 Pages

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 oftoday’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 range? o Using theconcept of valuechain, explain what is uniqueabout 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 thecompetitiveintensity 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 drivedownoverall profitability - Threat of new entrants o Thethreat of entry lowers theprices firms can charge o Some factors that lowerthethreat 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 thethreat 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 o 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 havepower, your can’t raise prices o 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  IT-administered loyalty programs foster “stickiness”  The Internet provides buyers with detailed information - Intra-industry rivalry o Intra-industry rivalry decreases prices o Some factors that increase intra industry rivalry:  Lots of firms in the industry (especially of similar size)  Competing firms offer similar products  Slow industry growth o Examples of how IT affects rivalry between firms  The Internet globalizes commerce, increasing # of firms  Web-based personalization can reduce product similarity - Threat of Substitutes o Lowers a firm’s ability to raise prices and may reduce demand o Some factors t
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