organizational strategy and competitive advantage
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Organizational Strategy and Competitive AdvantageBSAD 141Dave Novak
BDIS: 1.2 (13-26)
Lecture Outline Business Strategy Competitive Advantage Goals versus Objectives Porter’s 5 Forces Model Value Chains How do information systems fit in?
Business Strategy
What is a “business strategy”?
Business Strategy
Is it important for employees to know the organizational “business strategy”?
Business Strategy
Difference between goals and objectives
Examples of Goals
Developing new products or services Entering new markets Increasing customer loyalty Attracting new customers Increasing sales
Examples of Objectives
First, identify a particular goal For example, increasing customer loyalty
Second, identify measurable, focused indicators of customer loyalty that can be used to determine whether you are actually meeting your goalExamples?
Competitive Advantage A feature of a product or service that
customers value very highly or more highly than they do for similar features provided by their competitors Could be a unique product or service but
doesn’t have to be uniqueHow do you determine “better”?
Identifying Competitive Advantages
Competitive intelligence –The process of gathering information about the competitive environment to improve the company’s ability to succeed
First-mover advantage – Occurs when an organization can significantly impact its market share by being first to market with a competitive advantage
Competitive Strategy
Competitive Strategy
Source: Kroenke, Experiencing MIS, 2008
Porter’s 5 Forces Model
A framework for analyzing the competitive forces in the environment in which an organization operatesEvaluate the attractiveness in terms of
entering into a particular industryAssess potential for profit
Porter’s 5 Forces Model
1) Buyer/Customer Power The ability of buyers to influence
the price of an itemHigh when customers have
ability/power to (lower) prices Switching cost – Manipulating costs
that make customers reluctant to switch to another product
Loyalty program – Rewards customers based on the amount of business they do with a particular organization
2) Supplier Power The suppliers’ ability to influence the prices
they charge for their product/serviceHigh when supplier can set their own price with
little risk of losing customers
For example, a monopolistic firm has high supplier power
3) Threat of Substitute Products or Services
How difficult it is for a customer to switch from your product / service to one of your competitor’s (or an alternative) Threat is high when it is easy for customers to
switch (there are many alternatives and switching costs are low) between different products and services and low when there are few alternatives
4) Threat of New Entrants
How difficult it is for an organization to enter into the same industry as youHigh when it is easy for new competitors to
enter a market and low when there are significant barriers to entry
Entry barrier – A feature of a product or service that customers have come to expect and entering competitors must offer the same for survival
5) Rivalry Among Existing Competitors To what extent is your market
position challenged? High when competition is fierce in a
market and low when competitors are more complacent
Product differentiation – Occurs when a company develops unique differences in its products or services with the intent to influence demand
Value Chain Analysis: Executing Business Strategies
What is a business process?
Value Chain Analysis: Executing Business Strategies
Value chain analysis – Viewing an organization as a series of connected business processes that each add value to the product or service
Value Chain Analysis: Executing Business Strategies
Porter’s Value Chain
Value Chain Analysis: Executing Business Strategies Primary value activities
Inbound logistics - Acquires raw materials and resources, and distributes
Operations - Transforms raw materials or inputs into goods and services
Outbound logistics - Distributes goods and services to customers
Marketing and sales - Promotes, prices, and sells products to customers
Service - Provides customer support
Value Chain Analysis: Executing Business Strategies
Support value activities Firm infrastructure – Includes the company format or
departmental structures, environment, and systems
Human resource management – Provides employee training, hiring, and compensation
Technology development – Applies MIS to processes to add value
Procurement – Purchases inputs such as raw materials, resources, equipment, and supplies
Value Chain Analysis: Executing Business Strategies
Value Chain and Porter’s Five Forces ModelThe organization’s goals and value-chain structure directly impact rivalry
Value Chain Analysis: Executing Business Strategies
The necessity of linking ALL activities is what allows the organization to realize a profitThese linkages are essential for success
The various profits, functions, and functional areas of the organization cannot operate in isolation
Concept of “whole” is greater than the sum of the individual parts
Value Chain Analysis: Executing Business Strategies
The profit margin is determined by the organization’s ability to successfully manage linkages between different processes and functions in the organization
Links are flows of information, goods, and services including the systems and processes needed to perform these activities and assist in flow
Value Chain Analysis: Executing Business Strategies
Only if the Marketing & Sales function delivers sales forecasts for the next period to all other departments in time and in reliable accuracy, procurement will be able to order the necessary material for the correct date
And only if procurement does a good job and forwards order information to inbound logistics, operations will be able to schedule production in a way that guarantees the delivery of products in a timely and effective manner – as pre-determined by marketing
In the result, the linkages are about seamless cooperation and information flow between the value chain activities
Source: Recklies, (2001) http://www.fao.org/fileadmin/user_upload/fisheries/docs/ValueChain.pdf
Value Chain and Information Systems How might the introduction of new
technologies impact different parts of the value chain and integration of components?
How might technology impact buyers? How might the introduction of new
technologies impact costs? Value chain components might change
based on new technologies and IS
Value Chain and Information Systems Supply chain – Consists of all parties
involved in the procurement, creation, and delivery of a product or raw material
Value chain –versus- supply chain?
Summary of lecture Discussion of business strategy and why is it
important Defining competitive advantage
Cost-based matrix Differentiating between goals & objectives Discuss Porter’s 5 Forces Model
Name 5 forces Value Chains
Name 5 primary and 4 support activities The role of IS
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