CHAPTER 2

IDENTIFYING COMPETITIVE ADVANTAGES

WHAT IS COMPETITIVE ADVANTAGES ?

• Competitive Advantage - a product or service that an organization's customers place a greater value on than similar offerings from a competitor
• First-mover advantage - occurs when an organization can significantly impact its market share by being first to market with a competitive advantage

There are 3 common tools used in industry to analyze and develop :

1. Porter's Five Forces Model
2. Porter's 3 Generic Strategies
3. Value Chains

THE FIVE FORCES MODEL - Evaluating Business Segments

1. BUYER POWER

• Buyer Power - high when buyers have many choices of whom to buy from and low when their choices are few
• Way to reduce buyer power is through loyalty programs

             * Loyalty program - rewards customer based on the amount of business they do with a                                                          particular organization

             * Switching costs - costs that can make customers reluctant to switch to another product or                                                   service 

2. SUPPLIER POWER

• Supplier Power - high when buyers have few choices of whom to buy from and low when their  choices are many

              * Supply chain - consists of all parties involved in the procurement of a product or raw                                                   material

• Organizations that are buying goods and services in the supply chain can create a competitive advantage by locating alternative supply sources through B2B marketplace

               * Business-to-Business (B2B) marketplace - an internet-based service that brings together                                                                                           many buyers and sellers

• 2 types of B2B marketplace :

             # Private Exchange - a single buyer posts its needs and then opens the bidding to any                                                             supplier who would care to bid

             # Reverse Auction - an auction format in which increasingly lower bids are solicited from                                                    organizations willing to supply the desired product or service at an                                                        increasingly lower price

3. THREAT OF SUBSTITUTE PRODUCTS OR SERVICES 

• Threat of substitute products or services - high when there are many alternatives to a product   or service and low when there are few alternatives  from which to choose

              # Switching cost - costs that can make customers reluctant to switch to another product or                                                  service

4. THREAT OF NEW ENTRANTS

• Threat of new entrants - high when it is easy for new competitors to enter a market and low  when there are significant entry barriers to entering a market

             # Entry barrier - a product or service feature that customers have come to expect from                                                   organizations in particular industry and must be offered by an entering                                                   organization to compete and survive 

5. RIVALRY AMONG EXISTING COMPETITORS

• Rivalry among existing competitors - high when competition is fierce in a market and low                                                                       when competition is more complacent
• Although competition is always more intense in some industries than in others, the overall trend is toward increased competition in just about every industry

THE 3 GENERIC STRATEGIES - Creating a Business Focus

• Organizations typically follow one of Porter's 3 Generic Strategies when entering a new market

VALUE CREATION

• Once an organization chooses its strategy, it can use tools such as the value chain to determine the success or failure of its chosen strategy

                 * Business process - a standardized set of activities that accomplish a specific task, such                                                        as processing a customer's order

                 * Value chain - views an organization as a series of processes, each of which adds value

                                          to the product or service for each customer

• Value Chain

• Customers determine the extent to which each activity adds value to the product or service
• The competitive advantage is to : 

                * Target high value-adding activities to further enhance their value

                * Target low value-adding activities to increase their value

                * Perform some combination of the two

CHAPTER 1

BUSINESS DRIVEN TECHNOLOGY

Learning Outcomes:

•  Compare management information systems (MIS) and information technology (IT)
• Describe the relationships among people, information technology, and information 
• Identify 4 different departments in a typical business an explain how technology helps them to work together
• Compare the 4 different types of organizational information cultures and decide which culture applies to your school

INFORMATION TECHNOLOGY'S IMPACT ON BUSINESS OPERATIONS


Business Functions Receiving the Greatest Benefits from Information Technology

Information Technology's Project Goals

 
Common Departments In An Organization

• Organizations typically operate by functional areas or functional silos
• Functional areas are interdependent



Information Technology Basics

• Information Technology (IT) - a field concerned with the use of technology in managing and processing information
• Information technology is an important enabler of business success and innovation
• Management information systems (MIS) - a general name for the business function and academic discipline covering the application of people, technologies and procedures to solve business problems
• MIS is a business function, similar to Accounting, Finance, Operations, and Human Resources
• When beginning to learn about information technology it is important to understand 

                 * Data, Information, and Business Intelligence
                 * IT Resources
                 * IT Cultures


Data, Information, and BI

• Data - raw facts that describe the characteristics of an event

• Information - data converted into a meaningful and useful context

• Business Intelligence - applications and technologies that are used to support decision making efforts

• For example, if you were building a system to track students :

               * Data might include height, name, and hair color
              * Information might include student to professor ratio, percentage of marketing majors who                    are female, number of students who pass the course

• If you were building a system to track inventory :

               * Data might include chair manufacturer, chair color, and chair size
               * Information might include number of chairs required for students in each class, average                       number of chairs needed to be replaced each semester

• IT Resources
  

           # People use
           # Information Technology to work with
          # Information

• IT Cultures

         Organizational information cultures include: 

1. Information-Functional Culture

Employees use information as a means of exercising influence or power over others. 

2. Information-Sharing Cultures

Employees across departments trust each other to use information to improve performance. 

3. Information-Inquiring Culture

Employees across departments search for information to better understand the future and align themselves with current trends and new directions.

4. Information-Discovery Culture

Employees across departments are open to new insights about crisis and radical changes and seek ways to create competitive advantages.