CHAPTER 2 : IDENTIFYING COMPETITIVE ADVANTAGE

What is competitive advantage?

• A product or service that an organization’s customers place a greater value than similar offerings from a competitor.
• Unfortunately, CA is temporary because competitors keep duplicate the strategy.
• Then, the company should start the new competitive advantage.

THE PORTER’S FIVE FORCES MODEL

•  Michael Porter’s Five Forces Model is useful tool to aid organization in challenging decision whether to join a new industry or industry segment.
•  A model for industry analysis.

 

Buyer Power

·         High – when buyers have many choices of whom to buy.

·         Low – when their choices are few.

·         To reduce buyer power (and create competitive advantage), an organization produce attractive product compared the competitors.

·         Best practices of IT-base

Ø  Loyalty program in travel industry (e.g. rewards on free airline tickets or hotel stays)

-        

      Supplier Power

·         High – when buyers have few choices of whom to buy from.

·         Low – when their choices are many.

Ø  Best practices of IT to create competitive advantage.

Ø  E.g. B2B marketplace – private exchange allow a single buyer to post it needs and then open the bidding to any supplier who would care to bid.

Reverse auction is an auction format in which increasingly lower bids.

-        Threat of Substitute Products & Services

·         High – when there are many alternatives to a product or service.

·         Low – when there are few alternatives from which to choose.

·         Ideally, an organization would like to be on a market in which there are few substitutes of their product or services.

Ø  Best practices of IT

Ø  E.g. Electronic product – same function different brands.

-        Threat of new entrants

·         High – when it is easy for new competitors to enter a market.

·         Low – when there are significant entry barriers to entering a market.

·         Entry barriers is a product or service feature that customers have come to expect from organizations and must be offered by entering organization to compete and survive.

·         Best practices of IT

Ø  E,g. new bank must offers online paying bills, acc monitoring to compete.

-        Rivalry among existence competitors

·         High – when competition is fierce in a market.

·         Low – when competition is more complacent.

Rivalry Among Competitors

1. Threat of new entrants

2. Bargaining power of customers

3. Threat of substitutes

4. Bargaining power of suppliers

THE THREE GENERIC STRATEGIES

1                      Cost Leadership

·         Becoming a low-cost producer in the industry allows the company to lower prices to customers.

·         Competitors with higher costs cannot afford to compete with the low-cost leader on price.

·         Superior profits.

2                                     Differentiation

·         Create competitive advantage by distinguishing their products on one or more  features important to their customers.

·         Unique features or benefits may justify price differences and/or stimulate demand.

                              Focused strategy

·         Target to a niche market.

·         Concentrates on either cost leadership or differentiation.

RELATIONSHIP BETWEEN BUSINESS PROCESS AND VALUE CHAIN

• Supply chain – a chain or series of processes that adds value to product and service for customer.
• Add value to its products and services that support a profit margin for the firm.

CHAPTER 1 : BUSINESS DRIVEN TECHNOLOGY

Learning Outcomes :

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

INFORMATION TECHNOLOGY'S ROLE IN BUSINESS

• Information technology is everywhere in business.

INFORMATION TECHNOLOGY'S IMPACT ON BUSINESS OPERATIONS

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

Common departments in an organization

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 - 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.

IT RESOURCES

• People use
• Information technology to work with
• Information

IT CULTURES

Organizational information cultures include :

• Information-Functional Culture - Employees use information as a means of exercising influence or power over others.
• Information-Sharing Culture - Employees across departments trust each other to use information (especially about problems and failures) to improve performance.
• Information-Inquiring Culture - Employees across departments search for information to better understand the future and align themselves with current trends and new directions.
• Information-Discovery Culture - Employees across departments are open to new insights about crisis and radical changes and seek ways to create competitive advantages.