MGCR 331 Chapter Notes -Freshdirect, Personalization, Walmart

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Five Forces Framework And Zara Case
Key points from last class:
Organizations can look for sustainable competitive advantage through operational
effectiveness or more likely through differentiation
Use IT to create or strengthen resources that can provide sustainable competitive
advantage
Resources have to be different (valuable, rare, imperfectly imitable, non-
substitutable)
Resources can be ways of doing things, assets, capabilities, skills, competencies, and
more
Discussed how FreshDirect gained advantage from its IT-enabled business model
Resources for Competitive Advantage
Imitation-resistant Value Chain
Brand (lowers search cost, inspire trust, viral mktg)
Scale (economies, bargaining power, entry barrier)
Switching cost and Data Differentiation Personalization
Network Effects
Distribution Channels ex: TiVo
Patents (Intellectual Property)
Porter’s Five Forces:
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Threat of new competition: Profitable markets that yield high returns will attract new
firms. This results in new entrants, which eventually will decrease profitability for all
firms in the industry.
Threat of substitute products or services: The existence of products outside of the realm
of the common product boundaries increases the propensity of customers to switch to
alternatives.
Bargaining power of customers (buyers): The ability of customers to put the firm under
pressure.
Bargaining power of suppliers:
Intensity of competitive rivalry: Major determinant of the competitiveness of the
industry
Thread of substitutes: ex: if you are in the gps industry, smartphones now have this
capacity. (they overlap the gps industry)
Bargaining power of buyers: In entertainment industry, apple is their client (itunes) ->
strong buyer.
Thread of the new entrants: market level. Rivalry with other industries.
Bargaining power of supplies:
Bargaining power of buyers:
When your buyers have power, you 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
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Document Summary

Organizations can look for sustainable competitive advantage through operational effectiveness or more likely through differentiation. Use it to create or strengthen resources that can provide sustainable competitive advantage. Resources have to be different (valuable, rare, imperfectly imitable, non- substitutable) Resources can be ways of doing things, assets, capabilities, skills, competencies, and more. Discussed how freshdirect gained advantage from its it-enabled business model. Brand (lowers search cost, inspire trust, viral mktg) Threat of new competition: profitable markets that yield high returns will attract new firms. This results in new entrants, which eventually will decrease profitability for all firms in the industry. Threat of substitute products or services: the existence of products outside of the realm of the common product boundaries increases the propensity of customers to switch to alternatives. Bargaining power of customers (buyers): the ability of customers to put the firm under pressure. Intensity of competitive rivalry: major determinant of the competitiveness of the industry.

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