- 1 - © Minder Chen, 1993-2011 IT/IS and Business Strategies / Competitiveness.

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Presentation transcript:

- 1 - © Minder Chen, IT/IS and Business Strategies / Competitiveness

- 2 - © Minder Chen, Strategy and IS Industry Structure (5 Competing Forces) Competitive Strategy Value Chain Analysis Business Process Design / Reengineering Information Systems

- 3 - © Minder Chen, Business Strategies The job of the strategist is to understand and cope with competition. Competition for profits goes beyond established industry rivals to include four other competitive forces: customers, suppliers, potential entrants, and substitute products. The extended rivalry that results from all five forces defines an industry’s structure and shapes the nature of competitive interaction within an industry.

- 4 - © Minder Chen, Industry Structure and Forces Forces are intense: airlines, textiles, and hotels, almost no company earns attractive returns on investment. Forces are benign: software, soft drinks, and toiletries, many companies are profitable Industry structure, manifested in the competitive forces, sets industry profitability & competitiveness in the medium and long run. Industry structure and a firm strategic positioning Identify the strongest competitive force or forces for strategy formulation.

- 5 - © Minder Chen, Rivalry is often fierce in commodity industries Photographic film industry: Kodak and Fuji –Key competing force –Polaroid  subsitutional products/services New entrants are diversifying from other markets, they can leverage existing capabilities –Pepsi did when it entered the bottled water industry, –Microsoft did when it began to offer Internet browsers –Apple did when it entered the music distribution business.

- 6 - © Minder Chen, Five Competing Forces YouTube Video: The Five Competitive Forces That Shape Strategy

- 7 - © Minder Chen, Analysis and Driving Forces Source:

- 8 - © Minder Chen, Barriers to Entry Supply-side economies of scale Demand-side benefits of scale (network effects) Customer switching costs: –Enterprise resource planning (ERP) software is an example of a product with very high switching costs. Capital requirements –Semiconductor foundry vs. corner coffee shop Incumbency advantages independent of size –Brand, experiences curve Unequal access to distribution channels –Using e-commerce for direct sales Restrictive government policy

- 9 - © Minder Chen, Sources of Switching Costs Learning costs : Switching technologies may require an investment in learning a new interface and commands. Information and data : Users may have to reenter data, convert files or databases, or may even lose earlier contributions on incompatible systems. Financial commitmen t : Can include investments in new equipment, the cost to acquire any new software, consulting, or expertise, and the devaluation of any investment in prior technologies no longer used. Contractual commitments : Breaking contracts can lead to compensatory damages and harm an organization’s reputation as a reliable partner. Search costs : Finding and evaluating a new alternative costs time and money. Loyalty programs : Switching can cause customers to lose out on program benefits. Think frequent purchaser programs that offer “miles” or “points” ( all enabled and driven by software ).

© Minder Chen, Porter Generic Strategies

© Minder Chen, Generic Strategies and Industry Forces

© Minder Chen,

© Minder Chen, An Example of Detail Value Chain Activities

© Minder Chen, Supply Chain Management Customer Relationship Management Enterprise Resource Planning

© Minder Chen, IT Permeates the Value Chain Source: How information gives you competitive advantage.

© Minder Chen, Industrial Value Chain

© Minder Chen, Industry Value Chain

© Minder Chen, Information Systems Components Source: Using MIS 3e

© Minder Chen, Characteristics of Good Information Figure 1-6 here Source: Using MIS 3e

© Minder Chen, Integration