INSY 2301 Study Guide - Spring 2018, Comprehensive Midterm Notes - Web 2.0, Outsourcing, Internet
12 Oct 2018
School
Course
Professor
INSY 2301
MIDTERM EXAM
STUDY GUIDE
Fall 2018
Key Concepts in Strategy
What is a BRAND?
The symbolic embodiment of all the information connected with a product/service
oCan be a very powerful resource for competitive advantage
A strong brand proxies quality and inspires trust
oFor consumers looking to lower search costs, positive brand recognition can be
the factor that makes a firm the first stop
Technology can play a role in rapidly and cost-effectively strengthening a brand
oViral marketing occurs when consumers are enlisted to promote a brand for
free (particularly through social media)
oViral marketing can be a threat when feedback is negative
What is SCALE?
Scale Advantages: Advantages related to a firm’s size
oExample: Increased bargaining power with suppliers/buyers
Economies of Scale: A specific benefit in which the cost of an investment can be
spread across increased production or an increasing customer base
oFirms that benefit from economies of scale are scalable
Scale advantages can act as barriers to entry when they discourage new, smaller firms
What are SWITCHING COSTS?
Expenses that consumers incur to move from one product/service to another
oInclude learning costs, information and data, financial commitment, contractual
commitments, search costs, loyalty programs
Tech firms often benefit from strong switching costs (think of the Apple ecosystem)
oSeemingly dominant firms that don’t have high switching costs are vulnerable
To capture customers, a new firm must offer value added that exceeds incumbents’
value PLUS any perceived switching costs
Data can be a particularly strong switching cost for firms leveraging technology
oMoving large amounts of data can be extremely costly
What are PATENTS?
Legal protections for the intellectual property of an inventor
oTechnology and business models can be patented, usually in 20-year increments
oPatents are meant to protect against copycats, but they don’t provide
bulletproof protection
Patent Trolls: Firms that hold intellectual property with the goal of suing or extorting
large settlements from other firms
Patent litigation can be very risky, particularly when powerful firms are involved
oRivals sometimes cooperate in patent portfolio acquisition in order to avoid
risky litigation
find more resources at oneclass.com
find more resources at oneclass.com
Strategy and Technology
Sustainable Competitive Advantage
Definition: Financial performance that consistently outperforms competitors
oWhat is Apple’s competitive advantage? The Apple “ecosystem” in which all
products (iPhones, Macs, iPads, etc.) are synced - a superior user experience
The goal of a firm is to establish a sustainable competitive advantage
Difficult to establish since technology helps firms keep track of and match competitors
Efficiency-Based Competition
Operational Effectiveness: Performing the same tasks better than rivals perform them
oOperational effectiveness is NOT a strategic position
Strategic Positioning: Performing different activities from those of rivals, or the same
activities in a different way
Without strategic positioning, the fast follow problem exists
oRivals watch a pioneer’s success/missteps, then enter the market with a
comparable or superior product at a lower cost
Technology is not an advantage
oRivals can match technology advancements step-by-step, eroding profits
Case Study: FreshDirect
NYC-based online grocer that sought to address two problems facing NYC shoppers:
limited selection and high prices
Virtual storefront, warehouse in low-rent industrial area in Queens
Superior system of logistics…high inventory turnover, artificial intelligence software
(leading to 99.9% accuracy), direct relationships with suppliers, low delivery costs, low
energy costs
Operational effectiveness leads to massive margins (~20%), compared to the industry’s
razor-thin margins of 1%
Resource-Based View of Competitive Advantage
In order to maintain a sustainable competitive advantage, a firm must control a set of
exploitable resources with four characteristics
oValuable: The resource must be worth something
oRare: Other firms must not have access to the resource
oImperfectly Imitable: Other firms must not be able to imitate the resource
oNonsubstitutable: Other firms must not be able to find a substitute
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
The symbolic embodiment of all the information connected with a product/service: can be a very powerful resource for competitive advantage. A strong brand proxies quality and inspires trust: for consumers looking to lower search costs, positive brand recognition can be the factor that makes a firm the first stop. Scale advantages: advantages related to a firm"s size: example: increased bargaining power with suppliers/buyers. Economies of scale: a specific benefit in which the cost of an investment can be spread across increased production or an increasing customer base: firms that benefit from economies of scale are scalable. Scale advantages can act as barriers to entry when they discourage new, smaller firms. Expenses that consumers incur to move from one product/service to another: include learning costs, information and data, financial commitment, contractual commitments, search costs, loyalty programs. Tech firms often benefit from strong switching costs (think of the apple ecosystem: seemingly dominant firms that don"t have high switching costs are vulnerable.
