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Chapter 2

MGCR 331 Chapter Notes - Chapter 2: Freshdirect, Human Resource Management, Customer Relationship Management

Management Core
Course Code
MGCR 331
Imad Mansour

of 8
Chapter 2: Strategy and Technology: Concepts and Frameworks for Understanding What
Separates Winners from Losers
Section 1: Introduction
- Learning objectives:
o Define operational effectiveness and understand the limitations of
technology-based competition leveraging this principle
o Define strategic positioning and the importance of grounding competitive
advantage in this concept
o Understand the resource-based view of competitive advantage
o List 4 characteristics of a resource that might possibly yield sustainable
competitive advantage
- How to achieve sustainable advantage:
o According to Michael Porter:
Why so many firms suffer aggressive, margin-eroding competition?
many firms defined themselves according to operational
effectiveness rather than strategic positioning
Operational effectiveness:
Performing the same tasks better than rivals perform them
Danger in this is “sameness”
This risk is particularly acute in firms that rely on technology
for competitiveness
Fast follower problem:
When savvy rivals watch a pioneer’s efforts, learn from their
successes and missteps, then enter the market quickly with a
comparable or superior product at a lower cost
- Since tech can be copied so quickly, followers can be fast
not a source of competitive advantage but not limited to the Web
- Firms must invest in techniques to improve quality, lower cost, and generate design-
efficient customer experiences
Therefore, operational effectiveness is not sufficient enough to yield sustainable
dominance over competition
In contrast to operational effectiveness, strategic positioning refers to
performing different activities from those of rivals, or the same activities in a
different way
- Technology helps creating and strengthening strategic
advantages that
rivals will struggle to match
- FreshDirect:
o Example of the relationship between technology and strategic positioning
o = The New York City-based grocery firm
o = (online grocery shopping web site)
o results:
higher inventory turns = the firm is selling product faster, so it
collects money quicker than its rivals do
traditional grocers can’t fully copy the firm’s delivery business
because this would leave them straddling 2 markets (low margin
storefront and high-margin deliver), unable to gain optimal benefits
from either
- Resource-based view of competitive advantage:
o If a firm is to maintain sustainable competitive advantage, it must control a
set of exploitable resources that have 4 critical characteristics:
1) Valuable
2) Rare
3) Imperfectly imitable (tough to imitate)
4) Nonsubstitutable
- Key points:
o Technology can be easy to copy, and alone rarely offers sustainable
o Firms that leverage technology for strategic positioning use technology to
create competitive assets or ways of doing business that are difficult for
others to copy
o True sustainable advantage comes from assets and business models that are
simultaneously valuable, rare, difficult to imitate, and for which there are no
Section 2: Powerful Resources:
- Learning objectives:
o Understand that technology is often critical to enabling competitive
advantage, and provide examples of firms that have used technology to
organize for sustained competitive advantage
o Understand the value chain concept and be able to examine and compare
how various firms organized to bring products and services to market
o Recognize the role tech can play in crafting an imitation-resistant value chain
as well as when technology choice may render potentially strategic assets
less effective
o Define the following concepts: brand, scale, data, and switching cost assets,
differentiation, network effects, and distribution channels
o Understand and provide examples of how technology can be used to create
or strengthen the resources mentioned above.
- Imitation-resistant value chain:
o A way of doing business that others will struggle to replicate, and technology
plays a key enabling role
- Value chain:
o = the set of activities through which a product or service is created and
delivered to customers
o There are 5 primary components + 4 supporting components:
5 primary components:
1) Inbound logistics:
a. Getting needed materials and other inputs into the firm
from suppliers
2) Operations:
a. Turning inputs into products or services
3) Outbound logistics:
a. Delivering products/services to consumers, distribution
centers, retailers or other partners
4) Marketing and sales:
a. Customer engagement, pricing, promotion, and transaction
5) Support:
a. Service, maintenance, and customer support
4 supporting components:
1) Firm infrastructure:
a. Functions that support the whole firm, including general
management, planning, IS, and finance
2) Human resource management:
a. Recruiting, hiring, training, and development
3) Technology / research and development:
a. New product and process design
4) Procurement:
a. Sourcing and purchasing functions
- Key source for competitive advantage: