1. Connected Activities for a Profitable Business Model5
Connected Activities for a Profitable Business Model

2. Business Systems (1 of 5) Defined:
The sequence of activities that firms perform to produce goods and services, deliver them to customers, and make or lose money doing so.

3. Business Systems (2 of 5) Value Chains Value Addition Options
Figure 5.1
Business System of a Manufacturing Company

4. Business Systems (3 of 5)
Value Network: value is created through coordination, or mediation, between multiple clients
Value Shop: value is created by providing a set of activities that satisfy different, but specific, needs of multiple customers

5. Business Systems (4 of 5)
Outsourcing: when a firm contracts out one of its value configuration activities to another firm for one or more of the following reasons:
1. Outsourcee’s capabilities
2. Market power of outsourcees
3. Outsourcer’s integrative or architectural capability
4. Criticalness of activity’s underpinning capability

6. Business Systems (5 of 5) Outsourcing (cont’d.) Advantages
Lower costs or more differentiation
Freedom to concentrate on competitive advantage
Disadvantages
Loss of control, may be held hostage by outsourcee
May lose sight of the “big picture”
Limits learning and innovation

7. Value Systems, Supply Chains, and Vertical Linkages (1 of 4)
Complementors,
Suppliers, other firms
Manufacturer, retailer
Customers,
clients, consumers
Value system: a system of business systems, a collage of suppliers, customers, complementors, and firms from other industries that, combined, provide a valuable good or service

8. Value Systems, Supply Chains, and Vertical Linkages (2 of 4)
Vertical Integration: backward, forward, tapered
Lower Cost
Differentiation
Better Positioning
Figure 5.2
Value System for Makers of PC Microprocessors

9. Value Systems, Supply Chains, and Vertical Linkages (3 of 4)
Strategic Alliances: two or more firms combine their resources
Advantages
Access to networks, markets, suppliers, raw materials, etc.
Pooled resources
Access to knowledge, technology, patents, etc.
Disadvantages
Partner may not fully commit resources or people
Clash of organizational cultures
Risk of losing proprietary information

10. Value Systems, Supply Chains, and Vertical Linkages (4 of 4)
Competitive Advantage and Connected Activities
Competitive advantage rests in those activities that allow a firm to earn a higher rate of profits than its rivals

11. Figure 5.3 Activities, Positions, Resources, and Industry Factors

12. Which Activities to Perform (1 of 3)
Options
Business System Activities – areas of competitive advantage and value building
Research and Development o Product Design
Manufacturing/Operations o Marketing/Sales
Customer Support/Services o Distribution
Value System Activities

13. Which Activities to Perform (2 of 3)
Deciding Which Activities to Perform
Attain and Maintain the Right Positions
Take Advantage of Industry Factors
Build and Exploit Resources and Capabilities
Keep Costs Low

14. Which Activities to Perform (3 of 3)
Deciding Which Activities Not to Perform – by not performing certain activities, a firm may be freeing up resources that can be used more beneficially elsewhere

15. How to Perform Activities
Options
Business System Activities
Research and Development o Product Design
Manufacturing/Operations o Marketing/Sales
Customer Support/Services o Distribution
Cross-Functional and Cross-Firm Processes
TQM
Benchmarking
Business Process Reengineering
Choosing How to Perform Activities

16. When to Perform Activities (1 of 2)
First Movers
Advantages
Build brand recognition
Control scare resources
Establish networks
Early Economies-of-Scale
Disadvantages
Newer technology
Higher development costs
Reverse engineering by competitors

17. When to Perform Activities (2 of 2)
Windows of Opportunities: periods within which some activities are best performed
Timing Options
Business System Activities
Research and Development o Product Design
Manufacturing/Operations o Marketing/Sales
Customer Support/Services o Distribution
Value System Activities
Coopetition
Industry Changes

18. Case Example: Wal-Mart
Analysis: Which, How, and When in Wal-Mart’s Success
Which:
moved into small towns that its competitors shunned
How:
Wal-Mart saturated contiguous towns and built distribution centers and logistics systems
When:
First mover advantage by capturing scarce resources, locations, and loyal employees and customers

19. Connected Activities for a Profitable Business Model?
Questions