MGCR 331 Study Guide - Midterm Guide: Competitive Advantage, Value Chain, Business Process
25 Sep 2020
School
Department
Course
Professor
Lecture 1: s
Competitive Advantage:
▪ What is the typical goal of business organizations?
– Maximize shareholders’ wealth?
– Maximize profit?
How IT affects the business:
▪ Automates, supports human information processing
– Has been a role of IT in business for many decades
– Expands the productivity of knowledge workers
▪ Facilitates new processes and strategy
– New business strategy (sell directly to customers)
– New product strategy (customize products for individual needs)
▪ Transforms existing markets
– Music, movies, cable television, long-distance telephony, books, news, consumer
electronics, retailing, stock trading, banking,…
Three Questions to be Asked:
▪ What industry should the company be in?
=> Industry Analysis => Five Forces Model
▪ How should the company compete?
=> Generic Competitive Strategies
▪ How can the company create value in the eye of customers?
=> Value Chain
Competitive Strategies:
▪ How could the company compete?
– by being better than competitors
– or avoid competition
– i.e., gaining competitive advantage
Cost leadership:
Using IT to lower price
▪ Substitute information for physical goods
– Info vs. parts inventory (Dell)
– Info vs. finished goods inventory (Dell, WalMart)
▪ Substitute IT for labor
– IT + customer vs. employees (FedEx, Amazon)
▪ Increase the output from the same “payroll”
– Enable employees to work faster
– Expand skills of employees
– Use employees in lower-cost areas/offices (e.g., “offshoring”)
Focus:
Using IT to find your customer:
▪ Now, you don’t have enough resources to fight other big corporations. How can you
survive?
▪ The answer is you “focus” on what you do best.
▪ You can focus as a low cost player in a narrow market segment.
– Jiffy Lube
▪ You can also focus using differentiation strategy in a narrow market segment.
– Teo Taxi, Just-eat
▪ How can IT/IS helps companies to focus?
Differentiation:
Using IT to create value:
▪ Increase product quality
– Create better products, enabled by IT (FedEx)
– Overlay better IT-enabled service on existing products (Amazon)
▪ Increase product “fit”
– Use local information about demand patterns (Zara)
– Find out what customers want and build it (Dell)
▪ Increase product variety
– Convert uniform products into differentiated ones (Dell, Nike)
How to be fundamentally different?
▪ If a firm is to maintain sustainable competitive advantage, it must control an exploitable
resource, or set of resources, that have four critical characteristics
– Valuable
▪ Does the asset yield value to the firm/customers?
– Rare
▪ Is the asset in limited supply or difficult to acquire?
– Imperfectly Imitable
▪ Is the asset impossible to imitate?
– Non-Substitutable
▪ Is the asset without comparable substitutes?
Key Resources for Competitive Advantage:
▪ Imitation-resistant Value Chain
▪ Brand (lowers search cost, inspire trust, viral mktg)
▪ Scale
▪ Switching Costs and Data
▪ Differentiation
▪ Network Effects
▪ Distribution Channels
▪ Patents (Intellectual Property)
The Value Chain:
Imitation-resistant Value Chains:
▪ Value chain: Set of interrelated activities that bring products or services to market
▪ Imitation-resistant value chains: A way of doing business that competitors struggle to
replicate and that frequently involves technology in a key enabling role
▪ Firms can buy software and tools
– Supply chain management (SCM)
– Customer relationship management (CRM)
– Enterprise resource planning software (ERP)
▪ Potential danger
– If a firm adopts software that changes a unique process into a generic one, it
may have co-opted a key source of competitive advantage particularly if other
firms can buy the same stuff
Document Summary
How it affects the business: automates, supports human information processing. Has been a role of it in business for many decades. Expands the productivity of knowledge workers: facilitates new processes and strategy. New business strategy (sell directly to customers) New product strategy (customize products for individual needs: transforms existing markets. Music, movies, cable television, long-distance telephony, books, news, consumer electronics, retailing, stock trading, banking, . Or avoid competition i. e. , gaining competitive advantage. Using it to lower price: substitute information for physical goods. Info vs. finished goods inventory (dell, walmart: substitute it for labor. Use employees in lower-cost areas/offices (e. g. , offshoring ) Using it to find your customer: now, you don"t have enough resources to fight other big corporations. How can you survive: the answer is you focus on what you do best, you can focus as a low cost player in a narrow market segment. Jiffy lube: you can also focus using differentiation strategy in a narrow market segment.
